Today, we're going to learn about a case where starting the performance of a contract constituted acceptance. As you already know, it's possible to accept a contract without verbally saying, "I accept," or signing your name on the dotted line. We have already encountered this when we discussed implied in fact contracts, because performance, say a restaurant server bringing you your food, is one way to show that a restaurant was agreeing to the deal. More generally, explicit offers by default can be accepted by any reasonable means. An offeree's performance is one important way that an offeree can accept an offer. Ever-Tite Roofing Corporation versus Green was decided by the Court of Appeals in Louisiana in 1955. You might have noticed that a judge with the last name Heirs wrote the opinion. In case you're wondering he has no relation to me. The Defendant Appellee Green, wanted someone to re-roof his house, and Green offered to hire the Plaintiff and the appellant Ever-Tite. The agreement was to become binding only upon acceptance or signature by an officer of the Plaintiff or by the Plaintiff's commencement of the work. After receiving a satisfactory credit report, the Plaintiff loaded it's truck and drove to the Defendant's house to begin the work. To his surprise the Plaintiff found that another company has already started doing the repair work, and the Defendant told the Plaintiff to go home and not to perform the contract. The Plaintiff sued and the trial court found for the Defendant, but the ensuing court reversed. So, let's begin simply. In this case, who is the relevant offeror? Who is the offeree? Well, the Defendant Green is surprisingly the offeror, the Plaintiff Ever-Tite is the offeree. You might have noticed that Ever-Tite supplied the standard form on which Green made the offer. The Ever-Tite salesman filled out the form and Green by signing it, became the offeror. Don't get confused by this fact. It's possible to be the offeror, but not the drafter of the contractual offer. This happens whenever the offeror uses a form prepared by the offeree. Before we get to the holding of the case, let's take a moment to understand the terms of the offer. Green's offer specified that it could be accepted by a home officer's signature. Instead of empowering the salesperson to accept the offer, this mode of acceptance gave the home office time to check the credit, or to give the Plaintiff a chance to make sure that the price offered by the salesman for the work was sufficiently remunerative. Another big benefit of delaying acceptance until the Green's offer was brought back to the home office, is that it avoids the possibility that 10 sales people will enter into conflicting contracts at the same time. But Green's offer again, drafted by the Plaintiff also stated that the offer could be accepted by Plaintiff Ever-Tite "commencing work". This is largely done because mistakes sometimes get made of the procedural kind, that sometimes the home office officers screw up and forget to sign the offers. The Plaintiff wanted to be sure that it didn't ever start work on a construction contract without a valid contract in place. There are two major issues raised by this case. The first is whether the Defendants offer terminated due to the passage of time, and the second is whether the Plaintiff's action constituted sufficient performance to accept the agreement. Let's take a look at each of these questions. So, you'll recall from the case that the Plaintiff showed up about eight or nine days after he heard the offer from Green. Was the offer still good by the time the Plaintiff showed up? Well, the court held that, yes Green's offer was still good, it was still operative when the Plaintiff loaded his truck. There are two ways to determine when an offer has terminated. First, the contract can specify a time. For instance, you can say this offer will expire in five days. Most residential real estate offers include this kind of drop dead provision. Second, if no time is specified, then the offer ends after a reasonable time. In this case, the Defendant knew that some delay would ensue before commencement of the work, and the court held that the Plaintiff's action occurred within a reasonable time. So, with regard to the first issue, the offer was still effective at the time the Plaintiff loaded its truck. Section 36 of the second restatement notes four different events that can terminate an offeree's power of acceptance. In a sense four different things that can blow up the effectiveness of an offer. An offer is terminated if the offeree makes a counteroffer. The reasonable time limitation protects offerees from having their offers hanging out there forever. The offeror could also revoke the offer, and of course, the offer expires if the offeror or the offeree dies or becomes incapacitated. In some ways the most interesting rule is that an offer is terminated if the offer makes a counter-offer. This also helps limit the number of outstanding offers in a negotiation. In the midst of bargaining where each side makes a series of counter-offers, and then acceptance then occurs, it's as a matter of accounting, the acceptance only applies to the last offer from the other side, because each counteroffer blows up all previous offers. So, let's turn to the second issue. Did the Plaintiff's action of loading its truck with materials constitute sufficient performance to accept the agreement? The court held that, yes, the Plaintiff did enough to accept the agreement. Performance began when the trucks were loaded. At this point, Plaintiff commenced work, and this constituted a promise- this constituted a sufficient performance to accept the offer. As you can probably imagine allowing the Plaintiff to accept by performance creates a lot of ambiguity. For one thing, it's debatable when work really starts. Comment F to section 45 of the restatement notes that beginning preparations is not enough of performance to accept an offer. The Plaintiff argues his work started when he loaded the trucks, but the Defendants argued that the work really wouldn't have begun until after the trucks arrived at the Defendant's property. At that point, Green clearly revoked his offer by telling the Plaintiff to go home, and that revocation under Section 36 would have ended the Plaintiff's power of acceptance. So, you can see that timing is crucial here. You can also imagine that the court's ruling that work began back at the office, might make it harder for the Defendant offeror to know what's happening, when his offer was accepted. The Plaintiff in this case drafted the contract, and can keep the Defendant in the dark by not accepting and can commence the work without prompt notice. If a promissory acceptance by conduct, commencing performance is invited, there may be some obligation to communicate that fact to the offeror in a reasonable time. So, let's explore the implications of the court reasoning further. Suppose that back at the factory, Ever-Tite loads the truck and starts driving toward the Green's. But on the way Ever-Tite suddenly decides that it would prefer to go fishing. Under the court's reasoning Ever-Tite would be breaching the contract, but it would be hard for Green to ever know this because it never found out that the truck had ever been loaded. It's important to note that the offer in this contract, in this case could be accepted by either promise or performance. In this case, because the offer gave Ever-Tite the option of accepting by promise or performance, the beginning of performance is interpreted as a promise to complete. In other words, once Ever-Tite started performing, once it loaded the truck, it was making a promise to finish the project. That's why under the earlier going fishing hypothetical, loading the truck and then changing your mind would constitute a breach. You can see this effect in Section 62 of the restatement. When offer invites an offeree to choose between acceptance by promise and acceptance by performance, the tender or beginning of the invited performance is an acceptance by performance. On the other hand, if the contract said that acceptance could only be by performance, beginning performance would have only created an option contract giving Ever-Tite the option to discontinue performance without breaching a contract. Again, if the contract had said that Ever-Tite could only perform, could only accept by performance, then if Ever-Tite had changed its mind after loading the truck and decided to go fishing, that would not have been a breach. Section 45 makes clear for offers that can only be accepted by performance, that beginning of performance takes away the offerer's right to revoke the offer, but preserves the offeree's rights to reject the offeror. Section 45 says, when an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance, an option contract is created when the offeree tenders or begins the invited performance or tenders of beginning of it. By including the option of acceptance by performance or signature, return promise, Ever-Tite actually wrote a contract that was friendlier to the customer than the contract had said that acceptance had to be made only by tendering performance. So, what were the damages in this case? The answer is expectation for breach of a bilateral contract. The Plaintiff was awarded the profit lost on the job, plus reliance expenses in loading the trucks. So, today we have examined a case that touched on two important issues. First, an offer expires at the time specified in the contract, and if no time is specified, then by default the offer expires after a reasonable amount of time has elapsed. Second, offers can invite acceptance by the beginning of performance. To be valid acceptance, the performance usually has to be more than mere preparation, but it has to be at least the beginning of performance.
