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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 2 OFFERS; CREATION AND DURATION OF POWER OF ACCEPTANCE

1-2 Corbin on Contracts § 2.28

§ 2.28 Irrevocable Offers Under Seal

The sealing and delivery of a writing has no legal effect unless the writing contains a promise or verbalizes some other legal transaction; but sealing and delivery cause a promise to be an enforceable contract, without the necessity of a consideration or of any action in reliance. At least, this has been the common law, handed down and approved for centuries, although in a considerable number of states it has been affected by statutes or decisions limiting or abolishing the legal efficacy of a seal.n1 It is indeed a rare offer in writing that does not contain some kind of a promise, either express or implied. By the common law, sealing and delivery make that promise binding and the power of acceptance as safe from any revocation as would the payment of a consideration. Usually, the offer contains a promise to render the performance that is offered in exchange for some return performance, conditional on the rendition of that return within a specified time.n2 On delivery of such a promise under seal, there exists at once a conditional unilateral contract to perform as stated. The offeree is not bound by anything but has a binding option, an irrevocable offer.n3

On refusal of the offeror to perform, because of the attempted revocation, the offeree can get judgment for damages. If the offeror's sealed promise was to make a conveyance of land, the better doctrine is that the offeree has a right to a decree for specific performance in the absence of other factors making such a decree inequitable. Some courts have thought that the absence of a consideration for the option is a sufficient reason for refusing specific enforcement, sealing and delivery not having the meritorious appeal that consideration has.n4 It is believed that that is erroneous. The better decisions hold otherwise.n5 In such cases, the decree is not one that compels the offeror to give something for nothing. Even though it is only a seal that makes the offer irrevocable, there is an agreed exchange that the offeree will be compelled to make in return for the land. The promise to convey is conditional upon the giving of this return performance. If it is not so grossly inadequate as to shock the chancellor's conscience, specific enforcement seems to be equitable and just.

A surety bond under seal, given to induce the appointment or qualification of an officer, or given to qualify a bank as a depository of funds, is a valid contract on delivery or on the qualification of the officer or the bank. It may be given solely for the protection of the employer or appointing party or for that of individuals who may thereafter entrust their money or other property to the officer or depository. In the latter case, the bond is a contract creating rights in them as third party beneficiaries.n6 It has been regarded as a standing offer to such third parties, one that may lapse or be revoked before they have acted in reliance upon it.n7 This seems not to be a reasonable interpretation of the terms of such a bond. Under the prevailing law of suretyship, the surety may or may not have a power of terminating liability, both to the immediate obligee and to third parties, by giving notice to that effect, and the surety's liability may terminate by death or lapse of time. This depends on the law applicable to such suretyship contracts and to their termination by notice, a notice that often should be regarded as a repudiation requiring avoidance of further loss. It should seldom be governed by the law as to revocation of offers.n8

Legal Topics:

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

Contracts LawFormationOffersGeneral OverviewContracts LawFormationOffersIrrevocable OffersContracts LawTypes of ContractsContracts Under Seal

FOOTNOTES:

(n1)Footnote 1. See Chapter 10, Contracts Under Seal. A table of statutes affecting the seal is compiled and published as an Introductory Note to § 95ff of the Restatement (Second) of Contracts.

(n2)Footnote 2. Thus, in McMillan v. Ames, 33 Minn. 257, 22 N.W. 612 (1885) , Ames promised under seal to convey land to McMillan at any time prior to a specified date, for the sum of $3,500 to be paid on delivery of the deed. No consideration was given for this option. Before the period expired and before McMillan gave any notice of acceptance, Ames gave notice of revocation. Within the period, McMillan accepted and his tender of the price was refused. The court held the notice of revocation to be ineffective and held the contract enforceable. The court used the following language:

''If, however, his promise is binding upon the defendant, because contained in an instrument under seal, then it is not a mere offer, but a valid promise to convey the land upon the condition of payment. All that remained was performance by plaintiff within the time specified to entitle him to a fulfillment of the covenant to convey. As respects the validity or obligation of such unilateral contracts, the distinction between covenants and simple contracts is well defined and established...

''It is true that equity will not lend its auxiliary remedies to aid in the enforcement of a contract which is inequitable, or is not supported by a substantial consideration, but at the same time it will not on such grounds interfere to set it aside. But no reason appears why equity might not have decreed specific performance in this case, (had the land not been sold,) because the substantial and meritorious consideration required by the court in such cases would consist in that stipulated in the instrument as the condition of a conveyance, performance of which by the plaintiff would have been exacted as a prerequisite to relief, so as to secure to defendant mutuality in the remedy, and all his rights under the contract.''

In complete accord with this, see Cochran v. Taylor, 273 N.Y. 172, 7 N.E.2d 89 (1937) .

In Borst v. Simpson, 90 Ala. 373, 7 So. 814 (1890) , a deed of conveyance, making title conditional on payment by a fixed date, was held to be revocable. This is believed to be erroneous, unless the effect of seals had been changed by statute. The deed created in the grantee an irrevocable option to buy.

(n3)Footnote 3. See Restatement (Second) of Contracts § 25 comment c.

(n4)Footnote 4. See:

Conn. - Hartford-Connecticut Trust Co. v. Divine, 97 Conn. 193, 116 A. 239 (1922) .

Ill. - Corbett v. Cronkhite, 239 Ill. 9, 87 N.E. 874 (1909) .

Va. - Graybill v. Braugh, 89 Va. 895, 17 S.E. 558 (1893) .

(n5)Footnote 5.

Minn. - McMillan v. Ames, supra.

N.Y. - Cochran v. Taylor, supra.

(n6)Footnote 6. See Chapter 43, Beneficiaries of Surety Bonds.

(n7)Footnote 7.

U.S. - Chain v. Wilhelm, 84 F.2d 138 (4th Cir.1936) , properly rev'd, 300 U.S. 31, 57 S.Ct. 394, 81 L.Ed. 487 .

(n8)Footnote 8. A standing offer to guarantee a series of advances or credits to be given to a named third party, or a letter of credit to secure advances made to the holder by many third persons, is quite different from the surety bond considered in the text.