124 Of 174 documents

Corbin on Contracts

Copyright 2007, Matthew Bender & Company, Inc., a member of the LexisNexis Group.

PART I FORMATION OF CONTRACTS

TOPIC A OFFER AND ACCEPTANCE

Supp. To CHAPTER 3 ACCEPTANCE AND REJECTION OF OFFER

1-3 Corbin on Contracts Supp. to § 3.8

Supp. to § 3.8 Acceptance by Overt Act

[Go To Main]

(A) The following cases are noteworthy:

(1) Young v. Glaze, 66 Ohio Misc. 2d 74, 643 N.E.2d 186 (Mun. 1994) . A collector and seller of antique toys had his father bring some toys and their boxes to defendant for shipment. Defendant's employee showed the father a shipping form used by defendant for shipping packages via UPS. The form, which was preprinted, had a clause exculpating the defendant from any liability. The father did not read the form, nor was the exculpatory clause pointed out to him by the employee. The father filled out the top part of the form indicating the names and addresses of the shipper and the recipient, declared that the contents had a value of $1,000, and paid the charge of $13.52. Though the form had a place for the signature of the shipper and/or his agent, the father did not sign it. The toys and boxes were shipped, and the boxes, which are often more valuable in this business than the toys themselves, were damaged. The buyer rejected, and plaintiff sued defendant for the reasonable value of the toys and boxes. The defendant pleaded exculpation.

The court found that the plaintiff accepted defendant's offer to perform shipping services by paying the fee. The contract was unilateral. A signature is not necessary to show acceptance of the terms of a contract, said the court, absent a requirement that the contract be signed. The presence of a signature line did not by itself indicate that the contract was one that requires a signature, and defendant's employee accepted the fee. Plaintiff was bound under Ohio law whether or not he knew the terms of the contract, so long as he or his agent had the opportunity to read it.

(2) Arenberg v. Central United Insurance Co., 18 F. Supp. 2d 1167 (D. Colo. 1998) . Dr. Arenberg specialized in otologic and neurotologic surgery, known to lay-persons as ''microsurgery.'' He purchased an Injury and Sickness Income Replacement Policy from Central United's predecessor. On January 24, 1995, Dr. Arenberg sent a letter to Central United asking them to cancel his policy effective February 1 and stop automatic withdrawal. Central United received the letter on January 30 and entered it into its computer system on February 2. Also on February 2, Central United withdrew the February premium from Dr. Arenberg's account. Central United kept the February payment and did not respond to the January 24 letter.

On February 7 Dr. Arenberg learned that he had suffered a stroke in December 1994. The stroke severely reduced his ability to continue microsurgery, and on February 21 he discontinued his practice. On March 16 Dr. Arenberg sent a second letter to Central United, advising them that he wished to discontinue automatic withdrawal and enclosing a check for the March premium. Central United returned the check and told him that effective February 28 his policy was canceled. Dr. Arenberg then submitted a proof of claim, which Central United rejected. He sued for breach of contract, amongst other claims. Central United moved for summary judgment, and Dr. Arenberg moved for partial summary judgment on his contract claim. The court denied both motions.

The court began its analysis by noting that a policy can be canceled only by compliance with the cancellation mechanism in the policy, by operation of law, or by mutual agreement of the parties. Dr. Arenberg's January 24 letter did not qualify as a cancellation under the terms of the policy; nor was the policy canceled by operation of law. Hence, the policy was canceled only if the parties agreed to cancel it. The court analyzed the January 24 letter as an offer by Dr. Arenberg to cancel the policy on February 1. Under Colorado law, Central United had a choice whether to accept by a return promise to cancel, creating a bilateral executory contract, or by performance-canceling the policy on February 1. In Colorado, an offer to enter into a unilateral contract is accepted when ''substantial performance'' has been rendered by the offeree. '' 'Substantial performance' occurs when, 'although the conditions of the contract have been deviated from in trifling particulars not materially detracting from the benefit the other party would derive from a literal performance, [the offeror] has received substantially the benefit he expected, and is, therefore, bound ...'. [quoting Western Distributing Co. v. Diodosio, 841 P.2d 1053 (Colo. 1992)] .'' Central United did not, in fact, cancel the policy on February 1 as Dr. Arenberg requested, but on February 28. Nevertheless, the court denied Dr. Arenberg's motion for summary judgment, leaving over the issue of ''substantial performance'' for trial.

(3) Naimie v. Cytozyme Laboratories, Inc., 174 F.3d 1104 (10th Cir. 1999) (applying Utah law) (finding a verbal licensing agreement calling for royalties in exchange for product formulations on the strength of conversations coupled with three letters from the licensor to the licensee referring to the deal and the licensee's subsequent development and delivery of the formulations). This case is also noted in §§ 582 and 67.8 of this supplement.

(4) New Asset Subsidiary, LLC v. Zelms, 331 B. R. 907 (D. Ariz. 2005) . New Church Credit Corporation extended an $800,000 line of credit to Desert Diamond Estates to use in developing a parcel of land into a residential subdivision. To secure the loan, Desert Diamond executed a deed of trust on 78 lots in the parcel naming New Church as the beneficiary. The deed had no provision for release of individual lots. The Arizona Department of Real Estate required provision for the release of lots encumbered by the New Church deed before it would permit the subdivision to proceed. New Church sent a letter offering to release any of the encumbered lots for a release price of $12,500. Desert Diamond used this letter to gain subdivision approval from the Arizona Department of Real Estate. New Church then filed for bankruptcy and the court appointed the appellant in the instant case, New Asset Subsidiary, as trustee, which succeeded to New Church's beneficial interest in the New Church deed. The Desert Diamond note was in default though Desert Diamond was selling individual lots in the subdivision. Only one lot, however, was sold at $12,500 while others were sold at prices ranging from $4,200 to $29,000. None of these payments had been remitted to New Church. The trustee filed a notice of trustee's sales of the lots and the purchasers of the lots filed this adversary proceeding. The purchasers claimed a breach of contract formed between New Church and Desert Diamond, releasing New Church's rights in the sold lots. The Bankruptcy Court enjoined the trustee's sale and required the trustee to release 22 lots from the New Church deed upon the payment of $12,500 for each lot. On appeal, the trustee argued that no contract existed between New Church and Diamond on the footing that New Church's offer was never accepted. The instant court recognized that, unless an offer specifies a manner of acceptance or excludes certain manners of acceptance, an offer may be accepted in any reasonable manner including conduct (Restatement (Second) of Contracts, § 30). Conduct is not a reasonable manner of acceptance unless the offeror may infer from the conduct that the offeree is assenting to the terms of the offer (Restatement (Second) of Contracts, § 19(2)). The court found that seeking government approval of a property development plan may be a reasonable manner of acceptance when coupled with negotiation between the parties and later conduct demonstrating that the parties have formed an agreement. The court analogized the instant case to cases in which parties negotiated a building contract, the builder applied for a building permit and began preparing the site for construction. After receiving government approval, Desert Diamond subdivided the lots and began selling them which it could not have done absent the New Church release of the lots from the New Church deed. Thus, Desert Diamond assented to the terms of the New Church offer and the parties were bound by that contract. The court further concluded that the New Church deed was not real property subject to the trustee's avoidance powers under the Bankruptcy Act and the purchasers could exercise the partial release even after Diamond's default.

(5) Armstrong v. Capstone Development Corp., 2006 U.S. Dist. LEXIS 48039 (W. D. Wash. 2006) . The defendant manages on and off-campus housing at colleges and universities throughout the country. The plaintiff was employed as a manager of two of the defendant's off-campus units in Florida when she applied for and received a position managing on-campus housing in the State of Washington. She relocated to Washington where she was housed in an apartment awaiting the completion of campus housing which she presumed she would manage. A few months later, she was visited by the defendant's president who announced the termination of her employment and offered her a month's salary and a month's additional health insurance, an airline ticket and a right to remain in her apartment until the end of the lease. The agreement required her to release the defendant from all legal claims including claims arising out of violations of the Age Employment Discrimination Act (ADEA, 29 U.S.C. § 621 et. seq.) related to her employment with the defendant. The waiver also acknowledged that the plaintiff had 21 days to read and consider the document and seven days to revoke it after signing it. The president told the plaintiff that he was ''in a hurry'' and would not discuss the reasons for her termination. Without any further questions or complaint of anyone, the plaintiff signed the waiver and accepted the benefits promised in the waiver. Two months later, she filed this lawsuit alleging age discrimination. The plaintiff claimed that the waiver was ineffective because the defendant never signed it. The court held that it is not necessary that a party sign a contract to be bound by it. The waiver was a written offer creating a power of acceptance in the plaintiff (offeree) that required a particular manner of acceptance, i.e., signing the written waiver (Restatement (Second) of Contracts, § 50(1)). The plaintiff accepted the offer by signing the waiver which bound the defendant to honor its terms. The court also noted that the statute under which the plaintiff brought her lawsuit only required such an agreement to be in writing. It did not require the writing to be signed by an agent of the employer.

(B) The following case cites this section:

(1) In re Orion Refining Corporation, 2007 Bankr. LEXIS 2458 (Bankr. D. Del. 2007) . The court cited Corbin in stating that, ''If one offers a promise to pay for specified construction or for service over a period of time, the beginning of the work so that it is known by the offeror may be a sufficient acceptance to bind both parties by mutual promises." This case is also noted at § 55.3 and fully discussed at § 57.18 of this supplement.

Supplement to Notes in Main Volume

4. Pleines v. Franklin Constr. Co., 30 Conn. App. 612, 621 A.2d 759 (1993) (by requesting contractor to perform and by accepting without objection an invoice stating the price and specifying the work to be done, contractor and contractor's agents led subcontractor, a stone and brick mason, reasonably to conclude that they had accepted his offer to construct a patio at $2.50 per square foot, despite absence of express acceptance).

24. U.S.- Salt Lake City Corp. v. Kasler Corp., 842 F. Supp. 1380 (D. Utah 1994) , amended and superseded, 855 F. Supp. 1560 (1994) . Buyer had reasonable opportunity to inspect defective concrete aggregate, delivered in lots, and actually inspected it on a regular basis. Buyer notified seller of its desire to reject the aggregate only after buyer had incorporated it into concrete, an act inconsistent with seller's ownership. Hence, buyer failed to make an effective rejection, and under U.C.C. § 2-606 accepted the aggregate.

Wyo.- Ford v. Starr Fireworks, Inc., 874 P.2d 230 (Wyo. 1994) . A buyer properly rejected fireworks, but took actions inconsistent with the claim that the fireworks were rejected by placing the rejected fireworks in inventory at his retail outlets, holding them at his retail outlets for at least two months after providing the notice of rejection, indicating a desire to return only part of the entire order, and signing an acknowledgment of his remaining debt to the seller. Hence, under U.C.C. § 2-602(b)(i) the buyer wrongfully exercised ownership of the rejected fireworks.