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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

Supp. To CHAPTER 2 OFFERS: CREATION AND DURATION OF POWER OF ACCEPTANCE

1-2 Corbin on Contracts Supp. to § 2.18

Supp. to § 2.18 Offers Are Usually Revocable

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(A) The following cases cite this section:

(1) MD Drilling and Blasting, Inc. v. MLS Construction, LLC, 93 Conn. App. 451, 2006 Conn. App. LEXIS 48 (2005) . In 2002, the parties entered into a contract whereby plaintiff was to perform rock drilling and blasting on a project. Defendant failed to pay plaintiff in full for the job. In 2003, defendant asked plaintiff to perform similar work on another job. Plaintiff agreed but only if defendant made a substantial payment on the outstanding balance of the other job. Defendant agreed and gave plaintiff a check for $15,000. The parties adopted essentially the same terms and conditions on the second job as the first. However, a written contract was never signed, although a contract was faxed to the defendant on the same date that the plaintiff commenced work on the second job. Shortly thereafter, the plaintiff was notified by its bank that the defendant had stopped payment on the $15,000 check. After unsuccessfully trying to contact the defendant, the plaintiff stopped working on the second job and filed this action for breach of contract. The defendant attempted to argue that the unsigned written agreement sent by plaintiff to defendant revoked the original offer and acceptance and invalidated the oral contract. The court disagreed. The court explained that an offer must be revoked before it has been accepted. Quoting Corbin, ''after an acceptance has become effective, there is no power in either party to revoke or withdraw.'' Thus, even if the plaintiff had intended to revoke its offer, the fact that the defendant had accepted the offer by tendering the check terminated any possible revocation. Thus, the oral contract was binding, and the defendant breached it.

(2) Wing Shing Products (BVI), Ltd., v. Simatelex Manufactory Co., Ltd., 479 F.Supp. 2d 388 (S.D.N.Y. 2007) .Wing Shing sued Simatelex asserting, inter alia, a claim of patent infringement in violation of 35 U.S.C. Section 271(a). The parties did not dispute that the design of the coffeemakers manufactured by Simatelex for Sunbeam were covered by Wing Shing's design patent. Rather, the parties disputed whether any infringing action took place in the United States. Simatelex manufactured the coffeemakers in China, and payment was made to Simatelex's bank in Hong Kong. Wing Shing argued that Simatelex directly infringed the design patent within the United States by offering to sell infringing products in the United States in violation of the statute. Wing Shing was required to show that the activities constituting the unlawful ''offer'' occurred within the United States. It could point to no activity preceding Simatelex's supply agreement with the Sunbeam corporation that occurred within the United States. The supply agreement was negotiated and executed entirely in Hong Kong, and the offer made by Simatelex to Sunbeam was done outside of the United States. Wing Shing, however, relied on a section of the supply agreement which stated: ''This Agreement shall be deemed to have been made in Boca Raton, Palm Beach County, Florida, USA.'' It argued that the offer to sell embodied by the supply agreement was made in Florida. The court disagreed in stating that, assuming arguendo that the supply agreement in fact constituted an offer to sell rather than the formation of a contract created when an offer to sell was accepted, or alternatively an offer to buy, any such offer did not take place in the United States. To conclude that the supply agreement's ''deemed executed'' provision rendered a defendant's activities United States-based for purposes of imposing liability for patent infringement under Section 271(a) ''would be to exalt form over substance.'' The court explained that the supply agreement's governing law provisions served only the commonplace contractual purposes of creating jurisdiction in Florida for purposes of adjudicating any disagreement that might arise between the contracting parties and selecting the applicable governing law. It could not be read to render wholly extraterritorial conduct territorial and therefore create ''offer to sell'' liability under Section 271(a). Citing Corbin, the court explained that acceptance of an offer forms a contract and extinguishes the offeror's powers of revocation or withdrawal; implicit in this is a formal distinction between an offer, as such, and a contract.'' Even if the ''deemed executed'' clause did suggest a United States-based offer, it was the court's view that Wing Shing's ''offer to sell'' theory must fail because the sales contemplated by the offer to sell ultimately embodied in the supply agreement were intended to occur outside the United States, and did occur outside the United Sates.

This case was subsequently distinguished in Fellowes v. Michlin Prosperity Co., 2007 U. S. Dist. LEXIS 45545 (E.D. Va. 2007) , which is discussed in § 1.11 of this supplement, where the court stated, ''In sum, this is not a case in which a foreign manufacturer operating exclusively overseas merely contemplates that its products will ultimately be imported into the United States'' [citing Wing Shing as holding that there was no ''offer to sell'' where the supply agreement was negotiated and executed entirely in Hong Kong and any offer by Simaltex to Sunbeam was made was certainly done outside the United States].

Supplement to Notes in Main Volume

5. Ga.- Amwest Surety Ins. Co. v. RA-LIN & Assocs., Inc., 216 Ga. App. 526, 455 S.E.2d 106 (1995) (contractor's bid was an offer, revocable at will prior to acceptance because no consideration existed for it, even though invitation for bid required bids to be available for acceptance during 60 calendar days from bid date).

6. In Zysk v. Baker, 2006 Mass Super. LEXIS 591 , the court presented a curious analysis. An offer of $150,000 was made to purchase a residential lot on which the plaintiff intended to construct a house. The offer was contingent on the results of a percolation test which proved satisfactory. The seller's broker told the buyer that the price would be increased to $189,900 because the percolation test results allowed a two-bedroom home to be constructed instead of only a one-bedroom home to which the seller previously thought the lot had been limited. The offeror then submitted a purchase and sale agreement together with a $1000 check (to bind the offer) and a $5000 check as a deposit on the purchase price of $150,000, leaving a balance due of $144,000. The offeror argued that his $150,000 offer was binding on the seller on the authority of McCarthy v. Tobin, 429 Mass. 84, 706 N. E. 2d 629 (1999) which the court described as a holding by the Supreme Judicial Court of Massachusetts that an offer to purchase real estate was binding, essentially because the parties intended to be bound and the offer contained the material terms of the transaction. It is possible to read the opinion in the instant case as holding that offers to purchase real estate in Massachusetts are binding. The offer to purchase (OTP) in McCarthy, however, was on a pre-printed form generated by the Greater Boston Real Estate Board. The McCarthy court noted that the ''binding obligation'' created by the OTP was more than a mere obligation to bargain in good faith. The buyer's name was filled in prior to the phrase, ''hereby offer[s] to buy'' the property and the seller's signature indicated ''this Offer is hereby accepted.'' In the instant case, the court felt compelled to distinguish McCarthy on the ground that the buyer in McCarthy accompanied his offer with a deposit while the buyer the instant case did not pay a deposit with its offer. Thus, the offer was revocable since it was not supported by consideration. The language of the OTP reported in McCarthy, however, clearly suggests an offer and acceptance as well as a mutual intention to be bound that can be recognized as evidence of a contract. The instant case simply reveals a revocable offer that was revoked. The confusion may stem from the local use of the OTP in Boston. If a document contains all of the material terms of a transaction and recognizes an offer by one party and a signed acceptance by the other, perhaps the confusion could be avoided if the Greater Boston Real Estate Board would change the name of its prefabricated from Offer to Purchase (OTP) to ''Contract to Purchase'' (CTP). This case is also discussed at § 28.41.