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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

CHAPTER 4 INDEFINITENESS AND MISTAKE IN EXPRESSION

1-4 Corbin on Contracts § 4.7

§ 4.7 Effect of Subsequent Verbal Clarification or Action by the Parties

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Even though the parties have expressed an agreement in terms so vague and indefinite as to be incapable of interpretation with a reasonable degree of certainty, they may cure this defect by later verbal clarificationn1 or their subsequent conduct that indicates their own practical interpretation.n2 If the parties have used such indefinite language as to leave it uncertain whether or not they intend to close the deal and make a contract, subsequently proceeding with or accepting performance under it may remove the uncertainty. If the expressions used leave the subject matter, or the price or the time or any other element of the performance incapable of determination, the rendition of a part or all of the performance may make clear the meaning that should be given to those expressions.n3

This section is cited in Bohman v. Berg, 54 Cal.2d 787, 8 Cal.Rptr. 441, 356 P.2d 185 (1960) . A written instrument was executed by the parties whereby the plaintiff agreed to turn a Greyhound Bus into a luxurious ''land yacht'' for the defendant for a total cost not to exceed $25,000. The plans and specifications were numerous and detailed, and in some matters were cryptic and indefinite. The parties understood that the undertaking was experimental and that variations and additions would be required as work proceeded. In the course of performance, many such variations and additions occurred. The defendant paid the agreed $25,000 and $6,820 in addition. The plaintiff then sued for the reasonable value of the total performance, asserting that to be $46,004. The trial court and the District Court of Appeal sustained the plaintiff's claim, holding that the terms of the writing, with the numerous variations later made therein, were too indefinite for enforcement, and that the obligation resulting from the actual performance was to pay reasonable value. This was reversed by the Supreme Court. The court said: ''This is not a case where specific performance is involved, nor is this an action for damages caused by the failure to perform. It is well-settled law that, although an agreement may be indefinite and uncertain in its inception, subsequent performance by the parties under the agreement will cure this defect and render it enforceable.'' The plaintiff himself testified that when he signed the agreement he fully understood what was intended by each provision, and he enumerated the work that was extra. The court said that this showed that the parties had ''entered into an agreement which they understood, by which they intended to be bound and which was eventually performed.'' Each item of the specifications described a result, with some leeway and variation in the exact manner of producing that result. Actual performance of these items, acquiesced in as such, was the agreed performance. The fact that one manner rather than another was adopted did not make it an ''extra.'' Therefore, for all the specified items, so performed, the plaintiff was bound by the agreed maximum of $25,000. The court remanded the case with directions to determine what ''extras'' were performed and to award their reasonable value. The plaintiff's proposal to build the experimental ''land yacht'' for a maximum of $25,000 was not, as the lower court had held, too uncertain and indefinite for acceptance as a valid contract.

Even if the subsequent conduct of the parties does not make clear the meaning of their original expressions, it may be such as to create a new and definite tacit contract. This new tacit contract may be enforceable in itself without regard to whether it is identical with the earlier expressions of agreement. If it is identical, well and good; if it is not identical, it is nevertheless enforceable, and the earlier inconsistent agreement is discharged by a substituted agreement. Just as parties may replace a definite verbal contract with another and different verbal contract, so may they replace one with another and different tacit contract.n4 Actual performances under a general indefinite arrangement may amount to no more than a series of separate transactions, valid in themselves, but not clearing up the indefiniteness as to time, price, or amount so as to make the general arrangement an enforceable contract.n5

In very many cases, however, the subsequent performance does not create a new contract. It is instead merely a new and more definite expression of the agreement they have already made but have defectively expressed. The distinction here indicated is a matter of some importance, especially where the agreement is one that is required by statute to be in writing. If the subsequent conduct is regarded as the making of a new tacit contract, the statute may make it unenforceable. If, however, the subsequent conduct is merely the clarification of a previous agreement, reduced to a writing that is capable of more than one interpretation, that writing as now interpreted may be a sufficient fulfillment of the requirements of the statute.n6

It must be remembered, however, that a new tacit contract, differing materially from a former agreement, may be made enforceable by reason of its part performance and without any writing whatever even though it is clearly within the statute of frauds.

Even in the case of a fully ''integrated'' contract, the parties may use language the exact application of which they know to be uncertain and to which they are too indifferent at the time the contract is executed to try to make clear. This does not prevent the existence of a valid contract. It makes necessary the introduction of testimony as to the property, persons, and events to which the language is related, and it causes much greater weight to be put upon the subsequent practical interpretation and construction of the parties themselves.n7

The Sales Article of the Uniform Commercial Code is in general agreement with the views herein. Section 2-208(1) of the Code provides:

''Where the contract for sale involves repeated occasions for performance by either party with knowledge of the nature of the performance and opportunity for objection to it by the other, any course of performance accepted or acquiesced in without objection shall be relevant to determine the meaning of the agreement.''

Although the basic purpose of the provision is to provide guidance on the interpretation of what are conceded contracts, it is equally applicable to determine whether a particular relationship is contractual.n8

It is no doubt possible that an indefinitely expressed agreement may later be made clear and enforceable by the action of one party alone. Usually, however, such a result requires some interpretative conduct by both parties, consisting either of the rendition of some performance by each one or by the willing acceptance by one of them of such a performance rendered by the other. After an agreement has already been made, neither party acting alone has power to change it by self-serving declarations or interpretations, or by proceeding with a performance other than as agreed. So, too, neither party can by subsequent action mould an insufficiently expressed agreement to his will by self-serving action or interpretation.n9 There may be cases in which a party's subsequent action is not self-serving. It may be an interpretative admission against interest, one that removes all doubt as to the terms of the previous agreement that was not sufficiently expressed.

There are many cases in which an agreement fixes no time limit and provides that it shall be terminable at the will of either party. This is not an enforceable contract when made. Nevertheless, if performance as specified is rendered under it, a valid obligation to pay the specified compensation is created.n10 The rendition of the service is the exercise of a power, and creates a contract, that may be either unilateral or bilateral. Previously, it is clear, there was no contract and nothing to be made clear and definite by any process of interpretation.

Legal Topics:

For related research and practice materials, see the following legal topics:

Commercial Law (UCC)Sales (Article 2)Form, Formation & ReadjustmentParol EvidenceGap-Filler ProvisionsContracts LawFormationDefinite TermsContracts LawPerformanceTender & DeliveryCommercial Law (UCC)Sales (Article 2)Form, Formation & ReadjustmentGeneral Overview

FOOTNOTES:

(n1)Footnote 1. Perreault v. Hall, 94 N.H. 191, 49 A.2d 812 (1946) . The defendant promised to pay plaintiff ''well and enough.'' Upon plaintiff's retirement, defendant promised to pay her $20 a week, a promise to which she acquiesced. The indefiniteness had been cured.

(n2)Footnote 2.

U.S. - United States v. New York, 131 F.2d 909 (2d Cir.1942) , cert. denied, 318 U.S. 781 .

Conn. - Roessler v. Burwell, 119 Conn. 289, 176 A. 126 (1934) ; Strang v. Witkowski, 138 Conn. 94, 82 A.2d 624 (1951) ; Palumbo v. George A. Fuller Co., 99 Conn. 353, 362, 122 A. 63, 67 (1923) .

Ga. -In Pine Valley Apartments Limited Partnership v. First State Bank, 143 Ga.App. 242, 237 S.E.2d 716 (1977) , there was a blank left in a note for the amount of a future advance for construction. Held, recovery can be had for the amount actually advanced. In Self v. Smith, 98 Ga.App. 876, 107 S.E.2d 721 (1959) , the court held that indefiniteness of terms of a contract would not prevent enforcement of one specific assumption of certain debts by the defendant, when the contract had in all other respects been fully performed. In Breed v. National Credit Ass'n, 211 Ga. 629, 88 S.E.2d 15 (1955) , a salesman under an existing employment became sales manager. The parties then executed a written agreement whereby ''In consideration of $1 and his employment'' the defendant promised to serve faithfully and not to enter a competing business for three years after termination of service. It was agreed that either party might terminate employment by one week's notice. Neither the compensation nor the place and character of the services were stated. Employment at a salary and commissions continued for two years, whereupon the defendant gave the required notice to terminate and set up a competing business. A demurrer to the employer's complaint for ''lack of mutuality'' and indefiniteness was overruled, the court holding that even though the contract when made may have been invalid, full performance under it for two years eliminated those defects. Also, the terms of restraint were reasonable and lawful. See also § 170, 1185, 1394.

Ill. - Smithereen Co. v. Renfroe, 325 Ill.App. 229, 59 N.E.2d 545 (1945) .

Ind. - Jackson v. First Nat. Bank & Trust Co., 115 Ind.App. 313, 57 N.E.2d 946 (1944) . A promise to convey property in return for ''taking care'' of promisor as long as he lives is made sufficiently definite by actual performance rendered and received.

Kan. - Nelson v. Schippel, 143 Kan. 546, 56 P.2d 469 (1936) .

Ky. -A promise in exchange for shares ''to pay, or properly secure the payment, of $18,000,'' even though indefinite as to the alternative in form of security, was held to be sufficient to justify specific enforcement of the return promise to sell the shares, if the buyer tendered full payment in cash. Talamini v. Rosa, 257 Ky. 228, 77 S.W.2d 627 (1934) .

Md. - Eastern Woodworks v. Vance, 206 Md. 419, 112 A.2d 231 (1955) , uncertainty of meaning of the phrase ''contract value,'' as the measure of commissions to be paid for services in procuring contracts, was eliminated by the subsequent ''practical construction'' of the term by the parties.

Mich. - Berry v. Dalman, 335 Mich. 646, 56 N.W.2d 209 (1953) . Facts appearing subsequently to the time of agreement, not known to the parties at that time, are not relevant on the issue of what the terms agreed on were.

Minn. - Johnson v. Quaal, 250 Minn. 154, 83 N.W.2d 796 (1957) , specifically enforcing an oral contract by a lessor to sell the land to the lessee, citing this section.

N.Y. - Rubin v. Dairymen's League Co-op. Ass'n, 284 N.Y. 32, 29 N.E.2d 458 (1940) , reh'g denied, 284 N.Y. 816, 31 N.E.2d 927 . This section is cited in Koleinimport ''Rotterdam'' N.V. v. Foreston Coal Export Corp., 283 F.Supp. 184 (S.D.N.Y.1968) , where it was held that summary judgment should not be granted on the question of whether a series of cables and discussions, whose meaning and significance was disputed, constituted a contract.

Pa. - Widmer v. Widmer, 176 Pa.Super. 264, 106 A.2d 875 (1954) , an employee was promised a bonus of not less than $500 for extra work while the employer was absent. After the employer's return, the employer fixed the amount at $2,000 for the services performed. The court held that there was a sufficient consideration for the promise to pay $2,000. See § 233, dealing with promises to pay for services rendered at request.

Wash. -In Platts v. Arney, 46 Wash.2d 122, 278 P.2d 657 (1955) , a written agreement for the exchange of properties left many details unexpressed and was too indefinite to satisfy the statute of frauds. But the court held that subsequent instruments executed by the parties cured the indefiniteness. The court said: ''The defense of uncertainty in the terms of a contract is not applicable in an action based upon the contract when performance has made it certain in every respect in which it might have been regarded as uncertain.'' See also note herein under § 512.

Wis. - Woodward v. Vegetable Packing House, Inc., 4 Wis.2d 310, 90 N.W.2d 586 (1958) , uncertainty of terms and as to which of two corporations was a party to the contract was cured by the subsequent actual performance that was rendered; Nelsen v. Farmers Mutual Auto. Ins. Co., 4 Wis.2d 36, 90 N.W.2d 123 (1958) . An oral contract whereby the defendant made the plaintiff its district supervisor contained no provision as to rates of commission. This defect was cured and the contract became enforceable because the parties performed for some years, paying and accepting a definite commission, quoting this section. See also notes under § 2.29; § 3.16; § 446.

Wyo.-This section is cited in Wheatland Irrigation District v. Dodge, 387 P.2d 679 (Wyo.1963) , evidence of an oral contract made some 50 years ago, between plaintiff's predecessor and defendant's grandfather was somewhat indefinite, but it was confirmed by the conduct of the parties through the years.

But see Bengimina v. Allen, 375 S.W.2d 199 (Mo.App.1964) where an agreement for installation of vending machines which failed to list the machines to be supplied was held not cured by subsequent installation of the machines. See § 152.

(n3)Footnote 3.

Okl. - Harlow Pub. Co. v. Patrick, 181 Okl. 83, 72 P.2d 511 (1937) .

Wyo. - Casper Nat. Bank v. Curry, 51 Wyo. 284, 65 P.2d 1116, 110 A.L.R. 360 (1937) .

In Memphis Furniture Mfg. Co. v. Wemyss Furniture Co., 2 F.2d 428 (6th Cir.1924) , although the seller accepted the buyer's order ''subject to prices in effect on shipping date and our ability to ship,'' the buyer made no objection, knowingly permitted manufacture to begin, and asked and obtained delay in the time of delivery.

In Dayton v. Gibbons & Reed Co., 12 Utah 2d 296, 365 P.2d 801 (1961) , the plaintiff subcontractor understood that the sales tax on goods supplied by him to the prime contractor would be paid by the latter. After he was specifically informed that the contract required him to pay the tax, he continued to make delivery of the goods. The court held that even if the contract when made was unenforceable for mistake, the plaintiff had by his continued performance assented to its terms and was bound thereby.

Where the proposal is uncertain as to the amount of goods to be sold, but the buyer makes it clear that he understands the amount to be ''1,000 cords,'' the seller is bound by that amount if he says nothing to the contrary. Allen v. Wolf River Lumber Co., 169 Wis. 253, 172 N.W. 158, 9 A.L.R. 271 (1919) .

In Amicizia Societa Navegazione v. Chilean Nitrate & Iodine Sales Corp., 184 F.Supp. 116 (S.D.N.Y.1959) , aff'd, 274 F.2d 805 (2d Cir.) , cert. denied, 363 U.S. 843 , there may have been a misunderstanding of important words in a ship construction contract, but with knowledge of the fact that the ship was built in accordance with the understanding of the ship builder, the other party received and used the ship for some months. The court held that it was then too late to assert that no contract was made on the ground that there was no meeting of the minds.

In Paullus v. Fowler, 59 Wash.2d 204, 367 P.2d 130 (1961) , a lessor and lessee executed a lease with an option to purchase on an installment plan. The option agreement provided that, on exercise of the option by the lessee, the lessor would ''execute a real estate contract providing for payments of not less than $200 per month ... with interest at 6% per annum on deferred balances from date of exercise of option.'' The lessee's assignee gave proper notice exercising the option and sent to the lessor a draft of a contract of sale. The lessor made no reply. The lessee's assignee then continued to make payments of $200 per month to the lessor's escrow agent. At the expiration of the leasehold term, the lessor sued to recover possession. The assignee counterclaimed for specific performance. The court held that the terms of purchase, as to the installment payment with interest, were not too uncertain or indefinite for specific enforcement. The court said that the lessor, after receiving the notice exercising the option, ''was obligated to execute an installment contract, within the purview of the option agreement. Had he performed his obligation in this respect, the alleged uncertainties would have been resolved to appellant's [lessor's] satisfaction.'' The decision is well justified by reason of the lessor's silence and the acceptance of many installments by his escrow agent. The lessor might in the beginning have insisted on a larger monthly payment (perhaps limited to a ''reasonable'' one). The court said that the option did not require a monthly payment of $200 plus accrued interest, because the phrase ''with interest at 6%'' might mean ''not less than $200 including'' the interest, instead of $200 ''in addition to'' the interest. The little word ''with'' is ''ambiguous'', a quality possessed by other words. See also § 1174.

This section is quoted in Hallinan Mackin Lumber Co. v. Esquire Lumber Co., 231 Or. 341, 372 P.2d 781 (1962) . A purchase order of lumber provided that it should be ''thoroughly dry''; the written acceptance said ''thoroughly AD'' [air dried]. Evidence was admissible to show that by telephone the parties had agreed that the moisture content should not exceed 12 percent. Immediately after receiving the acceptance, the buyer had sent a ''Change Order. To read AD to 12% or less moisture content.'' The seller, without further comment, made delivery. The evidence of the telephone conversation explained but did not contradict the writing. The subsequent ''Change Order'' showed the buyer's understanding of the terms of agreement, known to the seller. The latter's shipment without comment was an assent to the terms thus understood. See also § 582; § 583.

In Associated Hardware Supply Co. v. Big Wheel Distributing Co., 355 F.2d 114, 17 A.L.R.3d 998 (3d Cir.1965) , actual receipt and payment for goods as per seller's price quotation was held to establish the contract price as to subsequent deliveries despite preliminary correspondence in which buyer refused to agree to that price.

(n4)Footnote 4. In Weston Paper Mfg. Co. v. Downing Box Co., 293 Fed. 725 (7th Cir.1923) , a bargain thought to be void because it left the price to be fixed by the seller was at least a basis for a more definite bargain made by giving orders after the seller had named a definite price. Here the later contract should be described as ''express.''

In Noel v. Dumont Builders, Inc., 178 Cal.App.2d 691, 3 Cal.Rptr. 220 (1960) , the plaintiff executed a written document expressing a desire to buy a specified lot and authorizing the defendant vendor to begin construction of a house according to certain plans. It provided, however: ''Exact price of lot and house to be determined before final papers are signed,'' and also that ''the sale of the property [plaintiff's then existing home] will have to be consummated before contract relating to the Knollwood property [now in suit] becomes binding and valid.'' This instrument was merely an agreement to make a contract on terms not specified and had no validity, even though a deposit of $2,000 was made and construction begun. But the court held that the plaintiff's subsequent conduct, including another payment of $8,500, constant supervision and alteration of plans until full completion of the house, and the purchase of furnishings, was sufficient evidence of an oral contract to pay a reasonable price, one that was not conditional on sale of the other property. Even though this contract was within the statute of frauds, the plaintiff's attempted rescission and suit for restitution of the money paid must fail because the defendant tenders actual delivery as agreed and is holding possession only for plaintiff's account.

(n5)Footnote 5. In Mobil Oil Corp. v. Schlumberger, 598 So.2d 1341 (Ala.1992) , the parties entered into a ''master pricing agreement'' defining the terms and conditions for the rental of oil-well drilling equipment. As no particular equipment was rented, it was not a binding contract. Once an order was sent and accepted, the terms of the formerly non-binding agreement bound the parties, including an indemnity clause.

Red Wing Shoe Co. v. Shepherd Safety Shoe Corp., 164 F.2d 415 (7th Cir.1947) . Thus a continuing offer is not made an irrevocable contract by a purported acceptance that is so worded as to be wholly ''illusory.'' A specific order subsequently given, definite in all respects, may consummate a valid contract with respect to the content of the order, without making the standing offer irrevocable and binding. See § 3.22, Multiple Acceptances.

(n6)Footnote 6. Thus, in Harlow Pub. Co. v. Patrick, 181 Okl. 83, 72 P.2d 511 (1937) , the court held that the contract was a written contract, so that a statute limiting actions on unwritten contracts to three years was not applicable, even though the indefinite writing was supplemented by oral testimony as to the actual performance.

In United States v. New York, 131 F.2d 909 (2d Cir.1942) , cert. denied, 318 U.S. 781 , a long series of letters of negotiation were held to satisfy the statute of frauds, even though the subsequent action of the parties under the agreement was necessary to make sure that they had consummated the contract and to fill gaps as to a few ''minor details.''

Going beyond this case, is Murphree v. Henson, 289 Ala. 340, 267 So.2d 414 (1972) , holding an oral indefinite contract with respect to real property can be made definite by the acts of the parties which clarify the description of the property, the price, and the time for performance. This definiteness not only supplies the substantive need for sufficient certainty, but also satisfies the writing requirement.

(n7)Footnote 7. Nolte v. Hudson Nav. Co., 16 F.2d 182 (2d Cir.1926) is an excellent illustration.

(n8)Footnote 8. In Smith-Scharff Paper Co. v. P.N. Hirsch & Co. Stores, Inc., 754 S.W.2d 928 (Mo.App.1988) , for thirty-six years (with one exception), seller sold to buyer specially imprinted bags with buyer's logo on the bags. To facilitate deliveries, seller maintained an inventory of these bags for the buyer. It was held that a course of dealing had been established that buyer could cease purchasing only after notifying seller of this intent and accepting all of the seller's inventory of bags specially printed for buyer.

A similar result may have been available under U.C.C. § 2-309, not discussed by the court. Although the provision talks of ''repeated occasions for performance,'' official comment 4 states: ''A single occasion of conduct does not fall within the language of this section but other sections such as the ones on silence after acceptance and failure to specify particular defects can affect the parties' rights on a single occasion (see Sections 2-605 and 2-607).''

(n9)Footnote 9. This passage was quoted, perhaps inappropriately, in Nodolf v. Nelson, 103 Wis.2d 656, 309 N.W.2d 397 (App.1981) . This was a contract to purchase real property ''subject to financing.'' There was no statement of what the terms of the financing might be, thus making the contract too indefinite. The buyer announced that he had secured financing satisfactory to himself. The court, relying on this passage of the text, held that the purchaser could not unilaterally clarify the meaning of the agreement by conduct not acquiesced in by the other. However, if, as is usually the case, the financing contingency was for the sole benefit of the buyer, it may freely be waived by the buyer. See Ch. 40 of this treatise.

(n10)Footnote 10. General Paint Corp. v. Kramer, 57 F.2d 698 (10th Cir.1932) , cert. denied, 287 U.S. 605 . In this case, the court held that after performance rendered for a period the contract so made was a written contract, since its terms were fixed by a previously made written agreement. It therefore applied a statute that provided that a written contract could not be altered by oral agreement. Such a statute is not a beneficial one. Its application in the instant case was not necessary and indeed, may be regarded as erroneous. Even though the writing fixed the terms of the contract to pay for service rendered, it neither created nor evidenced any obligation with respect to future service. A new oral agreement for further service on different terms did not alter any contract for that service. The statute should not have been held applicable to it. It would be applicable to a new oral agreement altering the obligation to pay for the service already rendered.