68 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 2 OFFERS: CREATION AND DURATION OF POWER OF ACCEPTANCE

1-2 Corbin on Contracts Supp. to § 2.19

Supp. to § 2.19 Notice of Revocation Necessary

[Go To Main]

(A) The following case cites this section:

(1) Inverworld, Ltd. v. United States, 2001-1 U.S. Tax Cas. P50350, 87 A.F.T.R.2d 1245, 2001 U.S. Dist. LEXIS 3087 (D.D.C. 2001) . Withdrawal of an offer is not effective unless it reaches the offeree prior to acceptance of the offer. The plaintiff's letter to the Department of Justice was not properly addressed and did not constitute a valid revocation of an offer of compromise.

(B) The following case cited the predecessor to this section:

(1) State of Ohio Bureau of Workers' Compensation v. Plumb, 2003 Ohio App. LEXIS 4779 (Ohio Ct. App. Oct. 6, 2003) . The plaintiff-employee received benefits and compensation from the Bureau of Workers' Compensation (''Bureau'') after sustaining bodily injuries in an accident involving a trucking company. The employee filed suit against the trucking company and the Bureau joined in the suit as a plaintiff, claiming subrogation rights. The employee proposed a settlement of the Bureau's subrogation rights by forwarding a check for $17,552.71 accompanied by a letter stating ''If this payment is acceptable please sign the enclosed entry [of dismissal] and forward it to'' the attorney for the trucking company. Sometime between June 25 and June 28, 2001, the Bureau's attorney signed the entry of dismissal and forwarded it to the trucking company's attorney. However, at 9 a.m. on June 27, 2001, the Supreme Court of Ohio filed a decision in a separate, unrelated case (Holeton) holding that it was unconstitutional for the Bureau to assert subrogation rights. In light of that decision, the employee stopped payment on the settlement check and notified the Bureau that the settlement offer was revoked. In the Bureau's action to enforce the settlement agreement, the trial court held for the Bureau on the footing that the employee's settlement offer required actual dismissal of the subrogation claim and not the mere promise of dismissal. On appeal, the instant court cited Corbin in support of the rule that an offeror may restrict or limit the offeree's power of acceptance as the offeror sees fit. Here, the employee's offer did not require actual dismissal. It required only signing and forwarding, both of which had occurred. A material question of fact, however, remained: when did the offeree complete the exercise of the power of acceptance? If he forwarded the signed document before 9 a.m. July 27, 2001, when the Holeton decision was filed, the contract was formed when the Bureau still had the right to subrogation which constituted consideration for the employee's promise. If, however, the signed document was not forwarded until after the Holeton decision was filed, there was no consideration to support the employee's promise since the Bureau would have no subrogation right to surrender. There would be no detriment to the promisee-Bureau and no benefit to the employee-promisor. Since the exact time of signing and mailing the letter was in dispute, a material issue of fact remained. The court reversed the judgment below and remanded the matter for further proceedings consistent with its opinion.

(2) American Anglian Environmental Technologies, L.P. v. Environmental Management Corporation, 2006 U.S. Dist. LEXIS 25959 (E.D. Mo. 2006) . The defendant made a settlement offer to the plaintiff who requested the defendant to clarify the terms of the offer. The defendant responded by modifying the terms of the offer. The plaintiff then accepted the original offer and not the modified version. The court relied upon Corbin in noting that where an offeror substantive alters the offer, the offer is revoked. Since the original offer no longer existed, the plaintiff had no power of acceptance. The plaintiff's motion to enforce a settlement based on the original offer was denied.

(3) Bascetta vs. Advantage Equipment Leasing, L.L.C., 2006 Wash. App. LEXIS 700 (2006) . Where a proposal stated a proposed lease transaction may or may not be ''approved'' and that the proposed lessee's deposit will either ''be applied'' or ''returned'' or ''retained,'' and the identity of the actual lessor was unclear, the proposal was nothing but an invitation for the proposed lessee to make an offer. Citing Corbin, the court explained that a purported offer that reserves the power to withdraw at will even after an acceptance is not an offer. It is an invitation to submit an offer.

(C) The following cases are noteworthy:

(1) CPI Builders, Inc. v. Impco Techs., Inc., 94 Cal. App. 4th 1167, 114 Cal. Rptr. 2d 851 (App. 2001) . A builder sued a technology company for breach of a construction contract. The lawyers for the parties discussed the possibility of binding arbitration and the builder's lawyer recommended arbitration to his client, who reluctantly agreed. The lawyer offered binding arbitration to defense counsel. Before the offer was accepted, the builder directed its counsel to revoke the offer but the offer was accepted before notification of revocation was communicated to the defendant's lawyer. The court recognized that, absent express authority, an attorney does not have implied plenary authority to enter into contracts on behalf of his client. In this case, however, the builder's lawyer had such express authority. The client's communication of revocation of that consent to her lawyer before the offer was accepted was ineffective since the revocation was not communicated to the offeree prior to acceptance.

(2) United States v. Donovan, 348 F.3d 509 (6th Cir. 2003) . The defendant faxed a withdrawal of its compromise offer of a tax dispute on an IRS form on April 18. On April 28, the IRS replied with a letter stating that the withdrawal was considered effective as of April 18. The IRS form, however, stated that the offer of compromise remained ''pending'' until the acknowledgment of the withdrawal by an authorized IRS official (which occurred on April 28) and that the statute of limitations was suspended while the offer was pending. The government filed this action for recovery of the tax in the amount of $466,936.21 on June 13, which would have been beyond the statute of limitations if the statute had begun to run again on April 18. The government argued that, under the unambiguous terms of the IRS form that evidenced the compromise offer, the suspension of the statute of limitations continued to apply while the offer was ''pending.'' If the statute had not resumed until April 28, it would not have expired until June 14. The district court granted the defendant's motion for summary judgment, but the instant court reversed. Recognizing that a withdrawal of an offer in compromise is effective like any other revocation of an offer when it is received by the offeree (Restatement (Second) of Contracts, § 42), the court accepted the government's distinction between the withdrawal of the offer and the IRS definition of when an offer ceases to be ''pending,'' i.e., only upon IRS acknowledgment of the withdrawal, which did not occur until the date of the IRS letter of April 28. Since the statute of limitations remained suspended while the offer was ''pending,'' it did not resume until April 28. The court remanded the case to the district court with instructions to enter summary judgment for the government.

[Editor's Note: On September 8, 2003, the IRS issued a revised revenue procedure (2003-71), which, in Section 7.02 (''Withdrawing and Offer to Compromise''), states that (1) if the taxpayer withdraws an offer to compromise by personal delivery, the offer will be considered withdrawn when written notification of the withdrawal is received by the Service; (2) if the taxpayer withdraws an offer to compromise by mailing written notification of the withdrawal via U.S. certified mail, the offer will be considered withdrawn on the date the Service receives the certified mail; and (3) in all other cases, including withdrawal by non-certified mail, fax, or phone, the offer will be considered withdrawn on the date the Service mails, or personally delivers, a written letter to the taxpayer acknowledging the withdrawal.]