131 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 § 3.19

Supp. to § 3.19 Can Offeror Make Silence Operate as Acceptance?

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(A) The following case cites this section:

(1) E & A Northeast Limited Partnership v. Music City Record Distributors, Inc., 2007 Tenn. App. LEXIS 145 (Tenn. 2007) . The defendant, Music City, leased space to operate a retail store from E & A. Music City asked E & A to either modify the lease agreement or send it a notice to vacate the premises. E & A did neither and Music City began paying a lesser rent. When E & A was granted summary judgment in its action to enforce the original lease payments, Music City appealed on the basis that the lease contract had been modified. The instant court noted that E & A was not required to respond to Music City's initial request for a modification of the lease or notice to vacate the premises. E & A had a third option not mentioned in the letter: to reject both of the alternatives. The court noted that Music City structured its letter to enable Music City to construe inaction by E & A as acceptance of the contract modification it proposed. Under general contract law, however, a party is under no duty to respond to an unsolicited offer, and a contract cannot be formed unless and until the offeree performs some overt act to signify its unequivocal acceptance of the offer. Citing Corbin, the court further explained that an offeror cannot, merely by saying that the offeree's silence will be taken as an acceptance, cause it to be operative as such. Music City's letter attempted to turn this normal understanding of the contract process on its head by imposing a duty on the landlord to act if it wished to reject the offer. The judgment of the trial court was affirmed.

132 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 § 3.20

Supp. to § 3.20 Belated or Conditional Acceptance Followed by Offeror's Silence

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(A) The following case cites this section:

(1) Childs v. Adams, 322 Ark. 424, 909 S.W.2d 641 (Ark. 1995) . A real estate purchase contract called for the offeree to accept it by signing and delivering the document by noon on a specified date. The offeree testified at trial that he signed the contract after that hour. The offer had therefore terminated and the signing and delivery of the contract amounted to a counteroffer. That counteroffer was accepted by the original offeror's subsequent objective manifestations of assent: visiting the property with his contractor to discuss renovations, receiving a key to the property during the offeree's absence, purchasing additional household furnishings, and selling securities to fund the purchase price.

(2) Blackburne & Brown Mortgage Co., Inc. v. Karam, 2004 Cal. App. Unpub. LEXIS 10170 (2004) . The defendant Karam was an attorney and the managing member of company that owned real estate. Karam decided to refinance certain properties and contacted Blackburne & Brown Mortgage Co., Inc. ('Blackburne''). Blackburne sent Karam a loan approval letter advising that the loan application had been approved but would have no force or effect unless it was accepted by the borrower no later than January 15, 2001 and countersigned by an officer of Blackburne and Brown, after January 15, 2001.'' The 2001 date was erroneous, as it was actually 2002. Karam and his wife signed the loan approval letter on January 28, 2002, and the vice president of Blackburne signed on January 29. On February 28, 2002, the vice president wrote to the Karams advising that pursuant to the letter agreement they had promised to pay certain specified costs associated with the loan. Karam responded by stating that the loan approval letter was signed after the deadline, and it had no effect. Further, he advised that he felt that he had been dealt with in a fraudulent manner and wanted no further dealings with Blackburne. Blackburne requested arbitration, as mandated in the letter agreement. The Karams did not respond to the arbitration demand nor did they appear at the arbitration. The arbitrator awarded Blackburne damages plus interest. Blackburne filed a petition with the court to confirm the arbitration award, and the Karams filed a petition to vacate the award. The court vacated the award, ruling that the agreement was void on its face due to the letter being signed after the specified date. Blackburne appealed. The instant court recognized that where an offeror requires an acceptance within a specified time, the power of acceptance ''ordinarily terminates'' if he fails to accept within that time. The court, however, added that a party can waive conditions that are placed in a contract solely for his benefit (citing the Sabo case criticized in the text of the main volume at note 10). The court continued the flawed analysis of Sabo by insisting that where there is a belated acceptance the original offeror may ''waive'' the lateness and treat it as an acceptance. As the main volume indicates, where an offer requires acceptance by a stated date, it is difficult to view any purported acceptance after that date as anything other than a counter offer that the original offeror may choose to accept or reject. Waiving the terms of a contract is different from a purported waiver of a deadline in which to exercise a power of acceptance. The counter offer analysis is clear in this case since the belated acceptance on the 28[th] was a counter offer that was accepted on the 29[th]. Damages to Blackburne were properly awarded. As for the letter erroneously being dated 2001 rather that 2002, the court concluded that it was nothing more that a typographical error and Karams' alleged reliance on the 2001 date was misplaced.

(B) The following case is noteworthy:

(1) Ellefson v. Megadeth, Inc., 2005 U.S. Dist. LEXIS 545 (S.D.N.Y. Jan. 12, 2005) . David Ellefson and David Mustaine were original members of the rock band known as Megadeth. They formed a corporation, Megadeth, Inc., with Mustaine (the lead guitarist and vocalist) owning 80 percent of the stock while Ellefson (the bassist) owned 20 percent. When Ellefson claimed that he had been defrauded out of his share of corporation profits, the parties pursued the creation of a settlement agreement. Negotiations were unsuccessful until the defendant insisted on a settlement agreement no later than 5 P.M. (PST) on Friday, May 14, 2004. Lawyers for the parties proceeded in earnest to facilitate a final agreement by that deadline. At 4:45 P.M. on May 14, the defendant's lawyer e-mailed a final executed copy of the agreement to the plaintiff's lawyer. At 5:16 P.M., the plaintiff's lawyer e-mailed the defendant's lawyer that ''Dave Ellefson told me he signed and faxed the signature page to you.'' Ellefson did send such a signed signature page, but there was great dispute over whether the fax was sent prior to the 5 P.M. deadline. The following Thursday, May 20, the defendant's lawyer mailed executed copies of the agreement to all parties. On May 24, the defendant's lawyer received an e-mail from the plaintiff's lawyer stating that Ellefson ''withdraws from these negotiations.'' The defendant's lawyer replied that he was confused since ''there is a signed agreement in place.'' Ellefson brought this action for fraud, violation of copyright and trademark laws and other claims. The defendant answered that a final settlement of all of Ellefson's claims had been reached. Since the significant contacts of the transaction were with California, the court applied California law. It reviewed basic offer and acceptance law including the fundamental principle that an offeror may condition acceptance on whatever terms the offeror deems appropriate including the length of time the offer will remain open. The court viewed Ellefson's fax as a late acceptance, finding that a late acceptance does not conform to the terms of the offer and is, therefore, a counter offer. It cannot be an acceptance because there is no offer to accept. The court considered a variation of this analysis in California, to wit, the waiver doctrine, which allows an offeror to either waive or enforce the deadline since the offeror created the offer with the deadline. That doctrine, however, implies that the offeror may make such a choice absent any communication to the offeree. The court, therefore, viewed the waiver alternative as defective and proceeded with the counter offer analysis. It held that the counter offer was accepted by the mailing of the completed contract on May 20 that was a clear manifestation of the defendant's intention to assent to the counter offer. The court found the use of the mail as a reasonable medium of acceptance, notwithstanding the prior use of e-mails. The acceptance was effective when it was mailed under the ''mailbox'' rule. Ellefson's May 24 attempt to withdraw the offer was ineffective since the contract was formed on May 20. The court granted the defendant's motion to enforce the settlement agreement.