TEXACO, INC., Appellant, v. PENNZOIL, CO., Appellee.

Facts

• Consequently, Petterson had to pay the third party the full price of the mortgage.
• The executrix of Petterson’s will (plaintiff) brought suit against the defendant for the $780 lost.
• The trial court found in favor of the executrix and the appellate court affirmed. The defendant appealed.

Dissent (Lehman, J.)

The only reason the money was not tendered in this case is because the defendant refused to accept the payment. By its very terms, a promise to accept payment must become binding when an offer to pay is made. Thus the defendant’s revocation was too late.

Holding and Reasoning (Kellogg, J.) Yes. An offer to enter into a unilateral contract may be withdrawn before the act requested to be done has been performed, even if the offeror knows of the offeree’s intention to accept and revokes at the very last second before acceptance. The defendant’s offer to Petterson was an offer to enter into a unilateral contract because the defendant conditionally promised to reduce the mortgage payment upon Petterson’s payment in full. And, because the offer to enter into a unilateral contract could be withdrawn at any time before the payment was made, the defendant properly revoked his offer when Petterson showed up at his house.

Quimbee Link

Holding and Reasoning (Conford, J.) No. A continuing guaranty is a reoccurring offer that is accepted by the offeree each time the offeree does a specific act. In order to automatically revoke the offer, the offeree must have knowledge of the offeror’s legal incompetency at the time of each acceptance of the offeree. Here, Swift was not given any notice by Erwin that Smigel was adjudicated legally incompetent. Thus, the continuing guaranty is valid for the entire time period despite Smigel’s legal incompetency. This court reverses the entire judgment, including the third-party complaint, and remands the action to the lower court for further proceedings.

Rule of Law An offeree must have knowledge of an offeror’s incompetency at the time of acceptance for an offer to be automatically revoked.

Issue Is an offer automatically revoked if an offeree does not have knowledge of an offeror’s incompetency at the time of acceptance?

Facts Swift & Company (Swift) (plaintiff) brought an action against Erwin Smigel (defendant), executor of the estate of Joseph Smigel (Smigel), for the amount of $8,500 in unpaid merchandise it supplied to a nursing home. In 1962, Swift and Smigel entered into an agreement of “continuing guaranty” where Smigel would pay at maturity all indebtedness of the nursing home for goods delivered by Swift. Smigel was adjudicated incompetent in 1966, and his son, Erwin Smigel, was given guardianship. Neither Smigel nor his son paid for any delivered merchandise by Swift for most of 1967. The trial court granted Smigel’s motion for summary judgment, and entered judgment dismissing Swift’s complaint. Swift appealed.

Swift & Co. v. Smigel New Jersey Supreme Court 115 N.J. Super. 391, 279 A.2d 895 (1972)

Quimbee Link

holding

rule

Rule

Issue Issue Where an offer that does not specify any particular manner of acceptance is delivered by a means other than mail, may the offeree accept such offer by mail?

Facts Maria Cantu (plaintiff) was under contract to teach special education for the San Benito Consolidated Independent School District (defendant) during the 1990–91 school year. Shortly before the beginning of the school year, on Saturday, August 18, 1990, Cantu hand-delivered a letter of resignation dated August 17 to her supervisor. In it, Cantu requested that her final paycheck be sent to an address 50 miles away. The superintendent of schools, who was the sole person authorized to accept resignations, received Cantu’s resignation on Monday, August 20. That same day, he wrote a letter accepting the resignation and deposited it, properly stamped and addressed, in the mail at approximately 5:15 p.m. On Tuesday, August 21, Cantu hand-delivered to the superintendent’s office a letter, which bore a local return address, withdrawing her resignation. The superintendent then hand-delivered a copy of the letter mailed the previous day, thereby advising Cantu of the acceptance of her resignation and the impossibility of its withdrawal. Cantu filed a claim for breach of her employment agreement. The State Commissioner of Education ruled that Cantu’s resignation was accepted, and her employment agreement terminated, upon the mailing of the superintendent’s letter accepting the resignation. Cantu appealed.

Issue Where an offer that does not specify any particular manner of acceptance is delivered by a means other than mail, may the offeree accept such offer by mail?

Holding and Reasoning (Smith, J.) Yes. The “mailbox rule” provides that a properly addressed letter accepting an offer becomes effective when deposited in the mail unless an alternative method of acceptance is otherwise required. The fact that an offer is given by a particular method does not imply that the offer must be accepted by the same method. Here, Cantu’s letter of resignation did not specify any particular means of acceptance. Because the address designated for her final paycheck was not local and given the time constraints imposed by the proximity to the start of the new school year, it was reasonable for the superintendent to accept her resignation by a letter deposited in the mail. The superintendent’s letter was properly addressed and deposited prior to Cantu’s attempt to withdraw her resignation. Consequently, Cantu’s employment contract was effectively terminated. Her suit for breach of contract is without merit. The judgment of the trial court is affirmed.

Rule of Law An offer that does not specify any particular manner of acceptance may be accepted by a properly addressed letter, effective at the time such letter is deposited in the mail, unless facts and circumstances suggest that acceptance by mail is unreasonable.

Cantu v. Central Education Agency Court of Appeals of Texas, Austin 884 S.W.2d 565 (1994)

Mail Box Rule

Quimbee Link

Holding and Reasoning (Goldberg, J.) Yes. When an offer fails to provide a preferred mode of acceptance, all that is required is that the offeree effectively makes it known to the offeror that his offer has been accepted. Actual knowledge on the part of the offeror that the offer has been accepted is sufficient to form a contract. Here, the contract was offered by Rio Grande to keep Fujimoto and Bravo employed after they threatened to quit without an increase in compensation. The offer was clearly accepted because Fujimoto and Bravo continued to work for Rio Grande for 14 months after the offer was made. Since the contract did not specify a mode of acceptance, it was not necessary that the contract be returned to Rio Grande, only that Rio Grande be aware that the contract had been accepted. Because Rio Grande knew that the offer had been accepted, a valid contract was formed and Fujimoto and Bravo are entitled to their bonuses. However, the district court miscomputed the ten percent bonus. This court affirms the district court’s judgment in part regarding Fujimoto and Bravo’s acceptance of the bonus contracts and reverses in part regarding the computation of damages.

Holding

holding

Rule

Rule

Rule

Issue Is an offer considered accepted when the offeree clearly communicates his intention to accept to the offeror where no mode of acceptance is provided by the offer?

Fujimoto v. Rio Grande Pickle Co. United States Court of Appeals for the Fifth Circuit 414 F.2d 648 (1969)

Quimbee Link

Appellate court

note from professor

Jury instructions

394 A.2d 786 Supreme Judicial Court of Maine.

Holding and Reasoning (Cornish, C.J.) No. A unilateral contract is a promise in exchange for performance, and that performance is deemed proper acceptance. Once the act is performed, the promise becomes binding. In this case, Mrs. Hodgkin made an undisputed offer to the Brackenburys which they clearly accepted by moving to Mrs. Hodgkin’s home and caring for her. As soon as the Brackenburys began performing under the contract, the contract became binding and an equitable interest in the home was created in their favor. The letter offering the home to the Brackenburys was sufficient to constitute a trust in their favor, and they are entitled to have their interest in the home protected. The trial court is affirmed.

Rule of Law In a unilateral contract, once the requested act is performed, the promise becomes binding.

Supreme Judicial Court of Maine.

Even though Petterson had money in hand and the defendant knew he was going to perform his end of the agreement, the revocation was still done before Petterson tendered the money and so is valid. The judgments of the lower courts are reversed and the executrix’s suit is dismissed.

Rule of Law Any offer to enter into a unilateral contract may be withdrawn before the act requested to be done has been performed.

Issue May an offer for a unilateral contract be revoked if the offeror knows of the offeree’s imminent intention to accept?

248 N.Y. 86 Court of Appeals of New York.

Holding and Reasoning (Faulconer, J.) Yes. Where goods and services are provided between members of a household who live as a family, there is a presumption that such provisions are given gratuitously unless an express contract to the contrary exists or the facts and circumstances indicate that the goods and services were not provided gratuitously and that compensation was intended. Here, the fact that Lawrence and Beck were distant cousins is not sufficient, in itself, to prove that Beck provided service to Lawrence gratuitously. Based on the evidence in the record, and applying the standard of review that an appellate court should consider presumptions in favor of the trial court’s findings, a reasonable person could conclude that Beck’s provisions to Lawrence were not intended to be gratuitous. Evidence was put forth that Lawrence was an extremely independent woman who did not want charity, that she was employed most of the time, and that she did not want or expect to be treated as a member of Beck’s family. The fact that Lawrence made Beck a beneficiary of her will is not dispositive because it is not clear that Lawrence intended such bequest to compensate Beck for the goods and services Beck provided to her.

Objective Theory

Conclusion: There is no general rule regarding when an implied contract should be deemed to exist but the evidence in this case, combined with the inferences reasonably drawn by the trial court, lead to the conclusion that the judgment should be affirmed.

Holding and Reasoning (Faulconer, J.) Yes. Where goods and services are provided between members of a household who live as a family, there is a presumption that such provisions are given gratuitously unless an express contract to the contrary exists or the facts and circumstances indicate that the goods and services were not provided gratuitously and that compensation was intended. Here, the fact that Lawrence and Beck were distant cousins is not sufficient, in itself, to prove that Beck provided service to Lawrence gratuitously. Based on the evidence in the record, and applying the standard of review that an appellate court should consider presumptions in favor of the trial court’s findings, a reasonable person could conclude that Beck’s provisions to Lawrence were not intended to be gratuitous. Evidence was put forth that Lawrence was an extremely independent woman who did not want charity, that she was employed most of the time, and that she did not want or expect to be treated as a member of Beck’s family. The fact that Lawrence made Beck a beneficiary of her will is not dispositive because it is not clear that Lawrence intended such bequest to compensate Beck for the goods and services Beck provided to her.

Issue Where related parties live together and one provides service to the other without any contract between them but evidence exists that the service was not intended to be provided or received gratuitously, is the recipient liable to compensate the provider pursuant to an implied contract?

Rule of Law Where one party provides service to another without any contract and evidence exists that the service was not intended to be provided or received gratuitously, the recipient is liable to compensate the provider pursuant to an implied contract, notwithstanding the fact that the parties are related and living together.

Notes from Professor

Appellate Court of Indiana

CONCLUSION: It would be inappropriate for a witness to testify as to what the decedent did, said, or intended where the decedent is obviously unable to speak up on his or her own behalf.

Holding and Reasoning No. In accordance with what is commonly referred to as the “Dead Man’s Statute,” a necessary party to a legal proceeding involving a decedent’s estate may not bear witness against the estate with respect to an occurrence during the decedent’s lifetime that is at issue. The prevention of fraud underlies this rule.

Issue In a legal proceeding in which a decedent’s estate is a party with an interest in the outcome, and in which affairs that occurred during the decedent’s lifetime are at issue, may a necessary party to the proceeding whose interest is adverse to the decedent’s estate, serve as a witness against the estate with respect to such issue?

Rule of Law Where a decedent’s estate is a party to a legal proceeding in which the estate has an interest in the outcome, and where affairs that occurred during the decedent’s lifetime are at issue in the proceeding, a necessary party to the proceeding whose interest is adverse to the decedent’s estate, may not serve as a witness against the estate with respect to such issue.

Note From Professor

Court of Appeals of Indiana.

CONCLUSION: The jet was included in the commercial as a tongue-in-cheek joke, even though there was no distinction in the commercial between it and the other merchandise and no Pepsico promotional material explicitly stated the jet was a joke. Accordingly, Pepsico’s motion for summary judgment is granted.

Advertisements offering rewards

Issue Can accepting the terms of an advertisement that is not clear and intended to be a joke create an enforceable contract?

Advertisements to negotiate

FACTS: Pepsico (defendant) began a promotional campaign that encouraged its customers to collect “Pepsi points” and trade them in for merchandise. As a part of this campaign, Pepsico created a commercial that showed some of the available merchandise along with the number of points it would take to acquire it. One item in the commercial was a Harrier Jet, which was said to require seven million points. Pepsico also released a catalog containing the promotional merchandise. Pepsico provided an order form with the catalog, which listed items that could be redeemed with Pepsi points. The jet was not listed in the catalog or on the order form. Leonard (plaintiff) wanted to redeem the jet, which he was aware at the time cost approximately 23 million dollars. He consulted the catalog, which contained directions for claiming merchandise. These directions included that, in the event someone does not have enough Pepsi points for an item, the additional points could be purchased for ten cents each so long as at least 15 Pepsi points are sent in with the order. Leonard was not able to collect seven million points through purchasing Pepsico products. He raised enough money to purchase the requisite number of points for the jet (i.e. $700,000) and submitted his order, which included 15 points and the money. Leonard sent a letter with his submission explaining that the money was for the purpose of buying additional Pepsi points to be used to redeem the jet shown in the commercial. Pepsico rejected the submission, stating that only items in the catalog or on the order form could be redeemed. Leonard exchanged demand letters with both Pepsico and the advertising company responsible for the commercial. Pepsico filed suit in the United States District Court for the Southern District of New York for declaratory judgment that it was not required to provide the jet under the campaign.

Carlill v. Carbolic Smoke Ball Co., 1 Q.B. 256 (Court of Appeal, 1892)

United States District Court, S.D. New York.

HOLDING- 3: MCC provided evidence through affidavits, which discuss Monzon's intent as MCC's representative and the intent of D'Agostino's representatives and their knowledge that Monzon did not intend to agree to the terms on the reverse of the form contract. The CISG bars application of the parol evidence rule, which would otherwise prohibit consideration of the MCC affidavits. Thus the trial court’s grant of summary judgment is reversed.

RULE: Subjective intent of parties to a contract may be considered as long as the other party was aware of that intent.

HOLDING- 2:The parties agreed that the case was governed by the United Nations Convention on Contracts for the International Sale of Goods ("CISG"), which requires an inquiry into a party's subjective intent if the other party to the contract was aware of that intent.

HOLDING- 1: Yes. MCC argued that the parties never intended the terms and conditions printed on the reverse of the order form to apply to their agreements

ISSUE: Whether subjective intent and affidavits in support thereof may be considered under the United Nations Convention on Contracts for the International Sale of Goods.

Case outline- Professors Notes: This case involves the terms that are captured by acceptance. Specifically, it demonstrates both the importance of being clear what you are agreeing to when you accept, and the need to include the terms you are agreeing to in the writing.

Conclusion- Final Sentence- Because the plaintiff in this case did not demonstrate knowledge of the reward, he was not legally entitled to receive it.

Holding Point 4: the offeror of a reward has no legal obligation to give the reward to someone who never knew about—and therefore never accepted—the offer.

Holding Point 3: A mere offer, standing alone, does not create a legal obligation. The offer must be accepted. In order for the offer to be accepted, the offeree must know about the offer. Accordingly, the offeror of a reward

Holding Point 2: After considering the various arguments, the court concludes that a person does not merit a reward where he acted without knowledge of it. The obligation triggered by an offer of reward must be contractual in nature, which means that there must be a meeting of the minds between the offeror and the offeree.

No. There is a conflict among states as to whether a person who lacks knowledge of a reward is nevertheless entitled to it after performing the act called for.

Issue: If a reward is offered for the performance of some act and a person performs such act without having notice or knowledge of the reward, is that person entitled to the reward?

Last fact: On appeal, the Court of Civil Appeals of the Third Supreme Judicial Circuit certified the present issue to the Supreme Court of Texas.

Appellate Court of TX

Professors Notes