Contracts Case Briefs - Owen v. Tunison and Others

Owen v. Tunison Supreme Judicial Court of Maine 131 Me. 42, 158 A. 926. Facts: P, buyer, wrote a letter to D, seller and resident of New Jersey, asking D to sell P D’s property in Bucksport, Maine for $6,000. D responded by letter stating that he wouldn’t be able to sell the property unless he was to receive $16,000 cash. P responded saying that he accepted D’s offer to sell. 4 days later D informed P that he did not wish to sell the property. Issue: Was D’s letter to P an enforceable contract to sell the property? Holding: No. Judgment for D, seller. Reasoning: D’s letter could have just been an opening into negotiations, but it was not an offer or proposal to sell. Recent court president had held that “would not consider less than half” was not taken to mean an outright offer to sell for half. The language used was general and not an offer to sell. There has to be an offer or proposal of sale. Fairmount Glass Works v. Crunden-Martin Woodenware Co. Court of Appeals of Kentucky, 1899, 106 Ky. 659, 51 S.W. 196. Facts: P wrote a letter to D asking D to name the lowest price D could make on P’s order of ten car loads of Mason green jars. The letter also asked D to state terms and cash discounts. D replied to P in a letter that gave the requested prices “for immediate acceptance,” among other terms. P then sent a letter entering said order per the terms of D’s letter. D then responded saying they had already sold all of their jars. Procedural History: Trial court entered a judgment for P. D appealed that decision. Issue: Is a seller’s response to a buyer’s request for prices and terms of sale to an order a valid offer for contract consideration when the seller’s response includes the requested prices and terms? Holding: Yes. Trial court’s ruling affirmed. Reasoning: The seller’s letter was not merely a quotation of prices when viewed in the context of the letters exchanged between the parties. The court found it especially convincing that D’s first letter included the statement “for immediate acceptance.” In the context of the letter, the prices could be read by P as an offer to sell the jars at the stated prices if the offer was accepted immediately. P’s acceptance of that offer was enough to close the contract. Lefkowitz v. Great Minneapolis Surplus Store Supreme Court of Minnesota, 1957. 86 N.W. 2d 689 Facts: D, on two occasions, put an ad in the newspaper advertising a number of fur stoles valued at $139.50 were to be sold for $1 on a first-come-first-served basis. On both occasions, P was the first person to present himself to purchase the stoles, but D refused to sell them both times. The first time, D stated that there was a house rule that they would not sell the stoles to men, this being despite the fact that the ad made no reference to such a rule. The second time D told P that P already knew the rule. Procedural History: Trial Court found for P, issuing an award of $138.50. Trial court denied D’s motion for amended findings and for a new trial. D appeals that decision. Issue: Can an advertisement serve as a valid offer in the formation of a contract of sale? Was D’s stated house rule of not selling the stoles to men a valid reason to refuse sale? Holding: Generally no, but when the offer is clear, definite, and explicit, and leaves nothing open for negotiation, it constitutes an offer. Judgment of the lower court affirmed. Reasoning: Based on the language of the advertisement P was reasonable in his belief that if he was the first person there he would be entitled to buy the stated stole for the stated price. The offer was clear, definite, and explicit. As to D’s argument about the house rule, the ad made no mention of such a restriction. A seller has every right to modify an offer before acceptance, but he cannot do so after the offer has already been accepted. Wucherpfennig v. Dooley Supreme Court of North Dakota, 1984. 351 N.W.2d 443. Facts: P, brother/appellant, and D, sister/appellee, are two of three siblings who inherited a farm farm after their parents died. D sent a letter to P stating that if P wanted to buy her share of the property, she would sell it to him for $200/acre if it was a cash deal done promptly. The probate attorney responded to D’s letter 13 days later stating P’s interest in purchasing. Slightly over a month later, the attorney wrote to D again stating that P had made arrangements to procure funding and was ready to proceed. A few weeks later, D revoked her offer to sell. Procedural History: P sued to enforce the contact, or in the alternative to partition the property. The district court held that there was no acceptance on P’s part to D’s offer, and that even if there had been acceptance the resulting contract could not be specifically enforced. Issue: Was there a valid contract between the parties? Holding: No. The SCoND affirmed the lower court’s ruling. Reasoning: There was no acceptance to D’s offer to sell. The court held that an acceptance must be “absolute, unequivocal, and unconditional, and it may not introduce additional terms or conditions.” The court reasoned that P’s second letter was more akin to an opening of negotiations with an intent to create a contract in the future. Simply stating that P was “ready to proceed” and asking for an exact dollar amount does not communicate to D an unequivocal acceptance of the terms. The court also uses D’s testimony from trial to establish that both parties were not mutually assenting to the same terms. P admits that if he had included an exact dollar amount, it would have been for an amount less than D was expecting, and one that P expected her to reject. International Filter Co. v. Conroe Gin, Ice & Light Co. Commission of Appeals of Texas, 1925. 277 S.W. 631. Facts: A traveling solicitor for P presented D with a proposal to sell them a steel tank water filter for $1,230.00. The proposal included the terms, “this proposal … becomes a contract when accepted by the purchaser and approved by an executive officer of [P], at its office in Chicago,” and, “this proposal is submitted for prompt acceptance, and unless so accepted is subject to change without notice.” On the same day, the manager of D accepted the offer by writing accepted on the paper. When that paper made its way back to the Chicago office, the President of P wrote “O.K.” The next day the President wrote a letter to D to acknowledge the acceptance and to arrange to receive a water sample. Two weeks later D sought to countermand the order. Procedural History: P filed a suit for breach of contract. D’s defense was that there was no contract (no acceptance) because (1) neither Engel’s endorsement of O.K. on the paper nor the subsequent acknowledgment letter counted as approval by an executive officer of P, and (2) that the terms of the agreement inhered the requirement on P’s part to notify D of its approval, and that that was not done through the Feb. 14 letter. Trial court found for D. The appellate court affirmed. Issue: Was P required to communicate to D its approval in order to form an enforceable contract? Holding: No. The holdings of the lower court were reversed and remanded. Reasoning: The court reasoned that the language of the contract was unambiguous in its statement that a contract would be created upon P’s prompt acceptance of the order, it never stated that that acceptance had to be communicated to D. White v. Corlies & Tift Court of Appeals of New York, 1871. 16 N.Y. 467. Facts: P, a builder/White, had entered into negotiations with D, Corlies, for P to outfit a suite of offices for D. D requested an estimate, which P provided on Sept. 28. The same day D changed a specification, which P agreed to under his original estimate. The next day, D’s bookkeeper sent a letter to P stating that “upon agreement to finish within two weeks, P could begin at once.” P did not respond to this letter in any way, but went ahead and purchased materials for the project. The next day, D countermanded the agreement. Procedural History: Upon receipt of the countermand, P filed suit for breach of contract. The trial judge put to the jury the question of whether or not P had to notify D of his acceptance to the Sept 29 note, but he also told them that he didn’t think so. The jury found for P. D appealed to that jury instruction. The lower appellate court affirmed the verdict. Appealed to the Court of Appeals of New York (highest appellate court). Issue: Does the acceptance of an offer have to be manifested in some way to the offeror? Holding: Yes. Lower courts’ rulings reversed and new trial ordered. Reasoning: The Sept 29 note did not make a contract, it was an offer that P had to accept. The rule is that the manifestation of assent has to be done in such a way that it will be known/discovered by the offeror. The offeror may be bound under the contract before they become aware of the acceptance, so long as the manifestation of acceptance was performed such that they would eventually become aware. The court uses the example of mailing a letter. The court reasoned that the only action taken by P was the purchasing of materials and the start of building. They reasoned that these activities were not unique enough to communicate to D that he had accepted, it was too much like any other work that P would do. Ever-Tite Roofing Corporation v. Green Court of Appeal of Louisiana, Second Circuit. 1955 83 So.2d. 449 Facts: D, Green, an instrument/contract on June 10, 1953 for the purpose of having P, Ever-Tite, perform re-roofing services on D’s residence. The contract included the term that it would only become legally binding upon written acceptance by P, or authorized officer, or upon commencement of work. Following the signing, D’s had to undergo a credit check process, which they understood. The day after the approval of credit P loaded trucks with work materials and proceeded to D’s residence. When P arrived there was already another crew there doing the work and D forbade them from doing the work. Procedural History: P sued for breach of contract. D argued that P never accepted the agreement as stipulated. Trial court held for D. P appealed. Issue: Was there acceptance on Plaintiff’s part? Holding: Yes. The lower court’s ruling was reversed. Reasoning: The court cites as a general rule, that when an offer does not specify the period of time in which it must be accepted, the offeror must allow the offeree a reasonable amount of time in which to accept the offer. In the case at hand, the court reasoned that D knew that there was this credit check process and evidence shows that P had proceeded with due diligence. D had a right to withdraw the offer before it was accepted, but would have had to allow a reasonable amount of time to pass. The court states that what constitutes a reasonable amount of time is a question of fact dependent upon the circumstances of the contract in each case. P’s loading of the truck was considered to be the commencement of work, which happened before they were notified of D backing out of the contract. Corinthian Pharmaceutical Systems, Inc. v. Lederle Laboratories United States District Court, S.D. Indiana, Indianapolis Division, 1989. 724 F.Supp. 605. Facts: D, manufacturer of DTP vaccine, regularly sold vials of its vaccine to P, a distributor of medicines and supplies to health care providers. The way the sales normally worked was that D would circulate a price sheet to its customers, but the sheet stated that the prices were not listed as offers and that once a customer submitted an order it would be charged the price at the time of shipment. For about a year P made a number of purchases from D, the largest of which was for 100 vials. Around 1986 it became harder for D to procure insurance for the vaccine due to an uptick in litigation, so it decided to self-insure, which meant that it had to raise its prices ($64.32/vial to $171/vial. P found out about the price increase before it went into effect, and ordered 1000 vials the day before. Some days later D sent an invoice for only 50 vials at the earlier price, and invited P to purchase the rest at the newer, higher price after explaining the need for its price increase. The invoice also stated that its selling of the 50 vials was an exception to its policy of attaching price at time of shipment. Procedural History: P sued for specific performance to get D to sell the remaining 950 vials at the earlier price. D moved for summary judgment on the grounds that there was no contract for the 1000 vials. Applicable Law: UCC Section 2-206(1)(b): “[A]n order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by prompt promise to ship or by the prompt or current shipment of conforming or non-conforming goods, but such a shipment of non-conforming goods does not constitute acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer.” Issue: Was D’s shipment of a partial order acceptance of P’s order? Holding: No. No acceptance on D’s part, SJ granted to D. Reasoning: The court starts by establishing that the only possible conclusion as to the offer in this case was P’s order of 1000 vials at $64.32 each. The court then turned on whether or not D had done anything to convey acceptance prior to shipping the 50 vials. It found that D had not, the automated reply to P’s order cannot constitute acceptance. Therefore, the only remaining question (as a MOL) is whether or not D’s shipment of the 50 vials was acceptance. It was not because it was exactly the kind of circumstance that UCC 2-206(1)(b) says is not acceptance. Dorton v. Collins & Aikman Corp. United States Court of Appeals, Sixth Circuit, 1972. 453 F.2d 1161 Facts: Dorton, P, ran a company with a few partners selling rugs as The Carpet Mart in Tennessee. D was a Delaware corporation with a principal place of business in New York that acted as P’s distributor of carpets. One day P discovers that the carpets are not good quality because they’re made from an inferior fiber than originally thought, so P sues D. D makes a motion for stay on the grounds that P assented to an arbitration clause found on the reverse of D’s sales acknowledgement forms. The way their business worked is that P would submit an order to D. D would then sign an acknowledgment form which (1) specified when the order would become a contract (upon signing and returning to P) and (2) included an arbitration clause on the reverse side stating that “acceptance subject to all … terms and conditions.” P always accepted the carpets from D without objecting to the terms of the form. Procedural History: The District Court held that the new terms were not binding, for P. The court held that UCC 2-207(3) applied to the case. Issue: Were the additional terms included in D’s acknowledgment form binding? Holding: Maybe. Remanded back for further proceedings in line with the court’s reasoning. Reasoning: The court reasoned that UCC 2-207(1) created a binding contract. The inclusion of the language “subject to” did not “clearly reveal that D (the offeree) was unwilling to proceed with the transaction” without assurance of assent to the terms, that language was not enough. Since 2-207(1) applies, the court reasoned that 207(2) would govern whether or not the new terms would be binding. The only prong at issue was whether the new terms “materially altered” the original agreement between the two parties. This was a determination that was left for the District Court to decide upon remand. Takeaway: Under U.C.C. § 2-207, an acceptance containing different or additional terms is effective, and when between merchants, the additional terms are deemed accepted. C. Itoh & Co. (America) Inc. v. Jordan Int’l Co. United States Court of Appeals, Seventh Circuit, 1977. 552 F.2d 1228 Facts: P, buyer, sent D, seller, a purchase order for coins. D sent back a letter stating that their acceptance was expressly conditional on P’s acceptance of an arbitration clause. The letter also requested prompt response from P if they did not accept. The coins were sent and paid for. P then sued D stating that the metal used to make the coins was defective. Procedural History: D motioned for stay pending arbitration, claiming that the terms of its letter were binding. D’s motion was denied. D appealed. Issue: When a contract is formed through 2-207(3) (in other words through parties’ conduct and not their words) can terms that they have not agreed to be binding? Holding: No. Judgment of the lower court affirmed. Reasoning: The court reasoned that in this case a contract was formed by 2-207(3), because it was the conduct of the party that formed the contract, not their words. D’s letter made acceptance expressly conditional on P’s acceptance of the arbitration clause, P’s silence cannot be taken as acceptance, therefore, no contract was made under 2-207(1). That being said, the party’s still engaged in the activities of the contract, so their conduct created the contract under the language of 2-207(3). The court then reasoned that the rest of that section would govern if the new terms were binding. The terms clearly were not agreed upon, so the court then had to interpret “supplementary terms.” The court held that supplementary terms cannot be used as a catch all to add in terms that were not otherwise agreed to. That language can only be used as a gap-filler (missing necessary terms of the agreement). The court states that D should not have delivered the coins until it had P’s acceptance of the counter offer. Takeaway: When a contract is formed by parties’ conduct, rather than by their words, the binding terms shall be only those that have been agreed to by both parties (unless the new terms are missing and necessary to the contract). Bayway Refining Co. v. Oxygenated Marketing & Trading A.G. United States Court of Appeals, Second Circuit, 2000. 215 F.3d 219 Facts: In this case D, buyer, faxed to P, seller, an offer to buy 60,000 barrels of oil. P responded by accepting, the acceptance contained an additional Tax Clause. This clause stated that D would pay for any and all taxes related to the sale. D did not object to this, and accepted the barrels in question. When P demanded reimbursement for the tax costs ($464,035.12, D refused to pay. Procedural History: P sued D. The District Court granted P’s motion for SJ, rejecting D’s claims that the Tax Clause was not binding. Issue: Can new terms that do not materially affect the contract be binding if they were not objected to? Holding: Yes. Judgment affirmed. Reasoning: The court reasoned that a contract had been formed under 2-207(1) because P’s acceptance of the offer was not made expressly conditional of D’s acceptance of the new terms. Therefore, 2-207(2) applied to determine if the new terms can be considered binding. The court reasons that the burden of proof lies on the party who seeks to exclude the new terms on the basis of one of the prongs of 207(2). In this case, D failed to meet their burden to show that the new terms materially altered the agreement. A new term is considered a material alteration when it “results in surprise or hardship” upon being incorporated against the other party. On surprise, D failed to show that there should have been any objective surprise on their part to the inclusion of the tax clause. On the other side, P was able to have multiple experts testify that such clauses were routine in that business, furthermore, as a matter of law, it is a buyer’s status that determines tax liability, so it should have come as no surprise to D. Absent any evidence to the contrary on D’s part, there is no dispute of material fact, so SJ motion was dispositive. D was also unable to prove that there would be any hardships faced by having to pay the taxes. All of this together, the new terms were binding. Takeaway: New terms that materially alter a contract are not binding. A court looks to any hardship or surprise that they would impose on the party challenging, but that party also has the burden to prove it. Northrop Corp. V. Litronic Industries United States Court of Appeals, Seventh Circuit, 1994. 29 F.3d 1173 Facts: D, seller, offer to sell P, buyer, printed wire boards. The offer contained a provision that allowed for a 90-day warranty in lieu of any other warranties (??? Can’t this be interpreted under 207(2)(a) as expressly limiting acceptance to the terms of the offer, in this case the warranty???). P’s acceptance included a provision for a warranty period that had no time frame. P attempted to return the boards after 90 days, and D refused. Procedural History: P sued D for breach of contract, arguing that the 90 day time frame was binding. Judgment for P. Issue: How are different terms treated under 207(2) when those terms are not additional? Holding: It depends. Judgment affirmed. Reasoning: There are three competing views here, the court reasoned that Illinois (the state whose law governed the case) would likely adopt the majority rule. The majority rule was the knock-out rule, which states that when terms are different, and not additional, you knock out the differing terms and replace them with a filler from the UCC. In this case, that filler was “within a reasonable time,” so the judgment was affirmed.