196 Va. 493 (1954)

W. O. LUCY AND J. C. LUCY v. A. H. ZEHMER AND IDA S. ZEHMER.

Record No. 4272.

Supreme Court of Virginia.

November 22, 1954.

A. S. Harrison, Jr. and Emerson D. Baugh, for the appellants.

Morton G. Goode and William Earle White, for the appellees.

Present, Eggleston, Buchanan, Miller, Smith and Whittle, JJ.

1. In suit by Lucy against Zehmer and his wife for specific performance of a contract requiring the latter to convey a farm to Lucy for a stated price, the evidence contradicted Zehmer's contention that he was too drunk to make a valid contract, since he clearly was able to comprehend the nature and consequence of the instrument he executed.

2. There was no merit to defendants' position that the instrument sought to be enforced was signed in jest and was not intended by either party to be a binding contract. The appearance and terms of the contract and the circumstances of its execution indicated clearly that the transaction was one of serious business.

3. Even if defendants entered into the contract in jest, they were bound by it since Lucy believed, and from the acts and statements of the Zehmers was warranted in believing, that the contract represented a serious and good faith sale and purchase. Mental assent is not essential for the formation of a contract; if the words and acts of a party, reasonably interpreted, manifest an intention to agree, his contrary but unexpressed state of mind is immaterial.

4. Specific performance is not a matter of absolute right, but rests in sound judicial discretion. Yet where, as in the instant case, there is no circumstance of fraud, misrepresentation, sharp dealing or other inequity, specific performance should be ordered.

Appeal from a decree of the Circuit Court of Dinwiddie county. Hon J. G. Jefferson, Jr., judge presiding. The opinion states the case.

BUCHANAN, J., delivered the opinion of the court.

This suit was instituted by W. O. Lucy and J. C. Lucy, complainants, against A. H. Zehmer and Ida S. Zehmer, his wife, defendants, to have specific performance of a contract by which it was alleged the Zehmers had sold to W. O. Lucy a tract of land owned by A. H. Zehmer in Dinwiddie county containing 471.6 acres, more or less, known as the Ferguson farm, for $50,000. J. C. Lucy, the other complainant, is a brother of W. O. Lucy, to whom W. O. Lucy transferred a half interest in his alleged purchase.

The instrument sought to be enforced was written by A. H. Zehmer on December 20, 1952, in these words: "We hereby agree to sell to W. O. Lucy the Ferguson Farm complete for $50,000.00, title satisfactory to buyer," and signed by the defendants, A. H. Zehmer and Ida S. Zehmer.

The answer of A. H. Zehmer admitted that at the time mentioned W. O. Lucy offered him $50,000 cash for the farm, but that he, Zehmer, considered that the offer was made in jest; that so thinking, and both he and Lucy having had several drinks, he wrote out "the memorandum" quoted above and induced his wife to sign it; that he did not deliver the memorandum to Lucy, but that Lucy picked it up, read it, put it in his pocket, attempted to offer Zehmer $5 to bind the bargain, which Zehmer refused to accept, and realizing for the first time that Lucy was serious, Zehmer assured him that he had no intention of selling the farm and that the whole matter was a joke. Lucy left the premises insisting that he had purchased the farm.

Depositions were taken and the decree appealed from was entered holding that the complainants had failed to establish their right to specific performance, and dismissing their bill. The assignment of error is to this action of the court.

W. O. Lucy, a lumberman and farmer, thus testified in substance: He had known Zehmer for fifteen or twenty years and had been familiar with the Ferguson farm for ten years. Seven or eight years ago he had offered Zehmer $20,000 for the farm which Zehmer had accepted, but the agreement was verbal and Zehmer backed out. On the night of December 20, 1952, around eight o'clock, he took an employee to McKenney, where Zehmer lived and operated a restaurant, filling station and motor court. While there he decided to see Zehmer and again try to buy the Ferguson farm. He entered the restaurant and talked to Mrs. Zehmer until Zehmer came in. He asked Zehmer if he had sold the Ferguson farm. Zehmer replied that he had not. Lucy said, "I bet you wouldn't take $50,000.00 for that place." Zehmer replied, "Yes, I would too; you wouldn't give fifty." Lucy said he would and told Zehmer to write up an agreement to that effect. Zehmer took a restaurant check and wrote on the back of it, "I do hereby agree to sell to W. O. Lucy the Ferguson Farm for $50,000 complete." Lucy told him he had better change it to "We" because Mrs. Zehmer would have to sign it too. Zehmer then tore up what he had written, wrote the agreement quoted above and asked Mrs. Zehmer, who was at the other end of the counter ten or twelve feet away, to sign it. Mrs. Zehmer said she would for $50,000 and signed it. Zehmer brought it back and gave it to Lucy, who offered him $5 which Zehmer refused, saying, "You don't need to give me any money, you got the agreement there signed by both of us."

The discussion leading to the signing of the agreement, said Lucy, lasted thirty or forty minutes, during which Zehmer seemed to doubt that Lucy could raise $50,000. Lucy suggested the provision for having the title examined and Zehmer made the suggestion that he would sell it "complete, everything there," and stated that all he had on the farm was three heifers.

Lucy took a partly filled bottle of whiskey into the restaurant with him for the purpose of giving Zehmer a drink if he wanted it. Zehmer did, and he and Lucy had one or two drinks together. Lucy said that while he felt the drinks he took he was not intoxicated, and from the way Zehmer handled the transaction he did not think he was either.

December 20 was on Saturday. Next day Lucy telephoned to J. C. Lucy and arranged with the latter to take a half interest in the purchase and pay half of the consideration. On Monday he engaged an attorney to examine the title. The attorney reported favorably on December 31 and on January 2 Lucy wrote Zehmer stating that the title was satisfactory, that he was ready to pay the purchase price in cash and asking when Zehmer would be ready to close the deal. Zehmer replied by letter, mailed on January 13, asserting that he had never agreed or intended to sell.

Mr. and Mrs. Zehmer were called by the complainants as adverse witnesses. Zehmer testified in substance as follows:

He bought this farm more than ten years ago for $11,000. He had had twenty-five offers, more or less, to buy it, including several from Lucy, who had never offered any specific sum of money. He had given them all the same answer, that he was not interested in selling it. On this Saturday night before Christmas it looked like everybody and his brother came by there to have a drink. He took a good many drinks during the afternoon and had a pint of his own. When he entered the restaurant around eight-thirty Lucy was there and he could see that he was "pretty high." He said to Lucy, "Boy, you got some good liquor, drinking, ain't you?" Lucy then offered him a drink. "I was already high as a Georgia pine, and didn't have any more better sense than to pour another great big slug out and gulp it down, and he took one too."

After they had talked a while Lucy asked whether he still had the Ferguson farm. He replied that he had not sold it and Lucy said, "I bet you wouldn't take $50,000.00 for it." Zehmer asked him if he would give $50,000 and Lucy said yes. Zehmer replied, "You haven't got $50,000 in cash." Lucy said he did and Zehmer replied that he did not believe it. They argued "pro and con for a long time," mainly about "whether he had $50,000 in cash that he could put up right then and buy that farm."

Finally, said Zehmer, Lucy told him if he didn't believe he had $50,000, "you sign that piece of paper here and say you will take $50,000.00 for the farm." He, Zehmer, "just grabbed the back off of a guest check there" and wrote on the back of it. At that point in his testimony Zehmer asked to see what he had written to "see if I recognize my own handwriting." He examined the paper and exclaimed, "Great balls of fire, I got 'Firgerson' for Ferguson. I have got satisfactory spelled wrong. I don't recognize that writing if I would see it, wouldn't know it was mine."

After Zehmer had, as he described it, "scribbled this thing off," Lucy said, "Get your wife to sign it." Zehmer walked over to where she was and she at first refused to sign but did so after he told her that he "was just needling him [Lucy], and didn't mean a thing in the world, that I was not selling the farm." Zehmer then "took it back over there * * * and I was still looking at the dern thing. I had the drink right there by my hand, and I reached over to get a drink, and he said, 'Let me see it.' He reached and picked it up, and when I looked back again he had it in his pocket and he dropped a five dollar bill over there, and he said, 'Here is five dollars payment on it.' * * * I said, 'Hell no, that is beer and liquor talking. I am not going to sell you the farm. I have told you that too many times before.'"

Mrs. Zehmer testified that when Lucy came into the restaurant he looked as if he had had a drink. When Zehmer came in he took a drink out of a bottle that Lucy handed him. She went back to help the waitress who was getting things ready for next day. Lucy and Zehmer were talking but she did not pay too much attention to what they were saying. She heard Lucy ask Zehmer if he had sold the Ferguson farm, and Zehmer replied that he had not and did not want to sell it. Lucy said, "I bet you wouldn't take $50,000 cash for that farm," and Zehmer replied, "You haven't got $50,000 cash." Lucy said, "I can get it." Zehmer said he might form a company and get it, "but you haven't got $50,000.00 cash to pay me tonight." Lucy asked him if he would put it in writing that he would sell him this farm. Zehmer then wrote on the back of a pad, "I agree to sell the Ferguson Place to W. O. Lucy for $50,000.00 cash." Lucy said, "All right, get your wife to sign it." Zehmer came back to where she was standing and said, "You want to put your name to this?" She said "No," but he said in an undertone, "It is nothing but a joke," and she signed it.

She said that only one paper was written and it said: "I hereby agree to sell," but the "I" had been changed to "We". However, she said she read what she signed and was then asked, "When you read 'We hereby agree to sell to W. O. Lucy,' what did you interpret that to mean, that particular phrase?" She said she thought that was a cash sale that night; but she also said that when she read that part about "title satisfactory to buyer" she understood that if the title was good Lucy would pay $50,000 but if the title was bad he would have a right to reject it, and that that was her understanding at the time she signed her name.

On examination by her own counsel she said that her husband laid this piece of paper down after it was signed; that Lucy said to let him see it, took it, folded it and put it in his wallet, then said to Zehmer, "Let me give you $5.00," but Zehmer said, "No, this is liquor talking. I don't want to sell the farm, I have told you that I want my son to have it. This is all a joke." Lucy then said at least twice, "Zehmer, you have sold your farm," wheeled around and started for the door. He paused at the door and said, "I will bring you $50,000.00 tomorrow. * * * No, tomorrow is Sunday. I will bring it to you Monday." She said you could tell definitely that he was drinking and she said to her husband, "You should have taken him home," but he said, "Well, I am just about as bad off as he is."

The waitress referred to by Mrs. Zehmer testified that when Lucy first came in "he was mouthy." When Zehmer came in they were laughing and joking and she thought they took a drink or two. She was sweeping and cleaning up for next day. She said she heard Lucy tell Zehmer, "I will give you so much for the farm," and Zehmer said, "You haven't got that much." Lucy answered, "Oh, yes, I will give you that much." Then "they jotted down something on paper * * * and Mr. Lucy reached over and took it, said let me see it." He looked at it, put it in his pocket and in about a minute he left. She was asked whether she saw Lucy offer Zehmer any money and replied, "He had five dollars laying up there, they didn't take it." She said Zehmer told Lucy he didn't want his money "because he didn't have enough money to pay for his property, and wasn't going to sell his farm." Both of them appeared to be drinking right much, she said.

She repeated on cross-examination that she was busy and paying no attention to what was going on. She was some distance away and did not see either of them sign the paper. She was asked whether she saw Zehmer put the agreement down on the table in front of Lucy, and her answer was this: "Time he got through writing whatever it was on the paper, Mr. Lucy reached over and said, 'Let's see it.' He took it and put it in his pocket," before showing it to Mrs. Zehmer. Her version was that Lucy kept raising his offer until it got to $50,000.

The defendants insist that the evidence was ample to support their contention that the writing sought to be enforced was prepared as a bluff or dare to force Lucy to admit that he did not have $50,000; that the whole matter was a joke; that the writing was not delivered to Lucy and no binding contract was ever made between the parties.

It is an unusual, if not bizarre, defense. When made to the writing admittedly prepared by one of the defendants and signed by both, clear evidence is required to sustain it.

In his testimony Zehmer claimed that he "was high as a Georgia pine," and that the transaction "was just a bunch of two doggoned drunks bluffing to see who could talk the biggest and say the most." That claim is inconsistent with his attempt to testify in great detail as to what was said and what was done. It is contradicted by other evidence as to the condition of both parties, and rendered of no weight by the testimony of his wife that when Lucy left the restaurant she suggested that Zehmer drive him home. The record is convincing that Zehmer was not intoxicated to the extent of being unable to comprehend the nature and consequences of the instrument he executed, and hence that instrument is not to be invalidated on that ground. 17 C.J.S., Contracts, | 133 b., p. 483; Taliaferro Emery, 124 Va. 674, 98 S.E. 627. It was in fact conceded by defendants' counsel in oral argument that under the evidence Zehmer was not too drunk to make a valid contract.

The evidence is convincing also that Zehmer wrote two agreements, the first one beginning "I hereby agree to sell." Zehmer first said he could not remember about that, then that "I don't think I wrote but one out." Mrs. Zehmer said that what he wrote was "I hereby agree," but that the "I" was changed to "We" after that night. The agreement that was written and signed is in the record and indicates no such change. Neither are the mistakes in spelling that Zehmer sought to point out readily apparent. 

The appearance of the contract, the fact that it was under discussion for forty minutes or more before it was signed; Lucy's objection to the first draft because it was written in the singular, and he wanted Mrs. Zehmer to sign it also; the rewriting to meet that objection and the signing by Mrs. Zehmer; the discussion of what was to be included in the sale, the provision for the examination of the title, the completeness of the instrument that was executed, the taking possession of it by Lucy with no request or suggestion by either of the defendants that he give it back, are facts which furnish persuasive evidence that the execution of the contract was a serious business transaction rather than a casual, jesting matter as defendants now contend.

On Sunday, the day after the instrument was signed on Saturday night, there was a social gathering in a home in the town of McKenney at which there were general comments that the sale had been made. Mrs. Zehmer testified that on that occasion as she passed by a group of people, including Lucy, who were talking about the transaction, $50,000 was mentioned, whereupon she stepped up and said, "Well, with the high-price whiskey you were drinking last night you should have paid more. That was cheap." Lucy testified that at that time Zehmer told him that he did not want to "stick" him or hold him to the agreement because he, Lucy, was too tight and didn't know what he was doing, to which Lucy replied that he was not too tight; that he had been stuck before and was going through with it. Zehmer's version was that he said to Lucy: "I am not trying to claim it wasn't a deal on account of the fact the price was too low. If I had wanted to sell $50,000.00 would be a good price, in fact I think you would get stuck at $50,000.00." A disinterested witness testified that what Zehmer said to Lucy was that "he was going to let him up off the deal, because he thought he was too tight, didn't know what he was doing. Lucy said something to the effect that 'I have been stuck before and I will go through with it.'"

If it be assumed, contrary to what we think the evidence shows, that Zehmer was jesting about selling his farm to Lucy and that the transaction was intended by him to be a joke, nevertheless the evidence shows that Lucy did not so understand it but considered it to be a serious business transaction and the contract to be binding on the Zehmers as well as on himself. The very next day he arranged with his brother to put up half the money and take a half interest in the land. The day after that he employed an attorney to examine the title. The next night, Tuesday, he was back at Zehmer's place and there Zehmer told him for the first time, Lucy said, that he wasn't going to sell and he told Zehmer, "You know you sold that place fair and square." After receiving the report from his attorney that the title was good he wrote to Zehmer that he was ready to close the deal.

Not only did Lucy actually believe, but the evidence shows he was warranted in believing, that the contract represented a serious business transaction and a good faith sale and purchase of the farm.

In the field of contracts, as generally elsewhere, "We must look to the outward expression of a person as manifesting his intention rather than to his secret and unexpressed intention. 'The law imputes to a person an intention corresponding to the reasonable meaning of his words and acts.'" First Nat. Bank Roanoke Oil Co., 169 Va. 99, 114, 192 S.E. 764, 770.

At no time prior to the execution of the contract had Zehmer indicated to Lucy by word or act that he was not in earnest about selling the farm. They had argued about it and discussed its terms, as Zehmer admitted, for a long time. Lucy testified that if there was any jesting it was about paying $50,000 that night. The contract and the evidence show that he was not expected to pay the money that night. Zehmer said that after the writing was signed he laid it down on the counter in front of Lucy. Lucy said Zehmer handed it to him. In any event there had been what appeared to be a good faith offer and a good faith acceptance, followed by the execution and apparent delivery of a written contract. Both said that Lucy put the writing in his pocket and then offered Zehmer $5 to seal the bargain. Not until then, even under the defendants' evidence, was anything said or done to indicate that the matter was a joke. Both of the Zehmers testified that when Zehmer asked his wife to sign he whispered that it was a joke so Lucy wouldn't hear and that it was not intended that he should hear.

The mental assent of the parties is not requisite for the formation of a contract. If the words or other acts of one of the parties have but one reasonable meaning, his undisclosed intention is immaterial except when an unreasonable meaning which he attaches to his manifestations is known to the other party. Restatement of the Law of Contracts, Vol. I, | 71, p. 74.

"* * * The law, therefore, judges of an agreement between two persons exclusively from those expressions of their intentions which are communicated between them. * * *." Clark on Contracts, 4 ed., | 3, p. 4.

An agreement or mutual assent is of course essential to a valid contract but the law imputes to a person an intention corresponding to the reasonable meaning of his words and acts. If his words and acts, judged by a reasonable standard, manifest an intention to agree, it is immaterial what may be the real but unexpressed state of his mind. 17 C.J.S., Contracts, | 32, p. 361; 12 Am. Jur., Contracts, | 19, p. 515.

So a person cannot set up that he was merely jesting when his conduct and words would warrant a reasonable person in believing that he intended a real agreement, 17 C.J.S., Contracts, | 47, p. 390; Clark on Contracts, 4 ed., | 27, at p. 54.

Whether the writing signed by the defendants and now sought to be enforced by the complainants was the result of a serious offer by Lucy and a serious acceptance by the defendants, or was a serious offer by Lucy and an acceptance in secret jest by the defendants, in either event it constituted a binding contract of sale between the parties. 

Defendants contend further, however, that even though a contract was made, equity should decline to enforce it under the circumstances. These circumstances have been set forth in detail above. They disclose some drinking by the two parties but not to an extent that they were unable to understand fully what they were doing. There was no fraud, no misrepresentation, no sharp practice and no dealing between unequal parties. The farm had been bought for $11,000 and was assessed for taxation at $6,300. The purchase price was $50,000. Zehmer admitted that it was a good price. There is in fact present in this case none of the grounds usually urged against specific performance.

Specific performance, it is true, is not a matter of absolute or arbitrary right, but is addressed to the reasonable and sound discretion of the court. First Nat. Bank Roanoke Oil Co., supra, 169 Va. at p. 116, 192 S.E. at p. 771. But it is likewise true that the discretion which may be exercised is not an arbitrary or capricious one, but one which is controlled by the established doctrines and settled principles of equity; and, generally, where a contract is in its nature and circumstances unobjectionable, it is as much a matter of course for courts of equity to decree a specific performance of it as it is for a court of law to give damages for a breach of it. Bond Crawford, 193 Va. 437, 444, 69 S.E.(2d) 470, 475.

The complainants are entitled to have specific performance of the contracts sued on. The decree appealed from is therefore reversed and the cause is remanded for the entry of a proper decree requiring the defendants to perform the contract in accordance with the prayer of the bill.

Reversed and remanded.

364 N.W.2d 838 (1985)

DATASERV EQUIPMENT, INC., Respondent, v. TECHNOLOGY FINANCE LEASING CORP., Appellant.

No. CO-84-1514.

Court of Appeals of Minnesota.

March 26, 1985.

Robert J. Hennessey, Minneapolis, for respondent.

Stephen J. Davidson, Minneapolis, Gordon Locke, Technology Finance Group, Inc., Westport, Conn., for appellant.

Heard, considered and decided by HUSPENI, P.J., and FOLEY and WOZNIAK, JJ.

OPINION

WOZNIAK, Judge.

This is an appeal from a judgment entered after trial to the district court determining that appellant was subject to the jurisdiction of Minnesota courts and that appellant breached a contract to purchase certain computer equipment. We affirm that part of the judgment finding that the court had jurisdiction, and reverse on the question of contract formation.

FACTS

Appellant Technology Finance Group, Inc. (Technology), a Nevada corporation with its principal place of business in Connecticut, and Respondent Dataserv Equipment, Inc. (Dataserv), a Minnesota corporation with its principal place of business in Minneapolis, are dealers in new and used computer equipment.

On or about August 29, 1979, Dataserv's Jack Skjonsby telephoned Technology's Ron Finerty in Connecticut and proposed to sell to Technology, for the price of $100,000, certain IBM computer "features" which Dataserv had previously purchased in Canada.

As a result of long distance telephone conversations between Skjonsby and Finerty, on August 30, 1979, Finerty sent Skjonsby a written offer to purchase the features and on September 6, 1979, Dataserv sent to Technology a proposed form of contract. Dataserv's proposed contract form included a nonstandard provision, appearing in the contract form as clause 8 and referred to by the parties as the "Indepth Clause." The clause provided that installation of the features would be done by Indepth, a third party. The contract also provided that "[t]his agreement is subject to acceptance by the seller . . . and shall only become effective on the date thereof," and "[t]his agreement is made subject to the terms and conditions included herein and Purchaser's acceptance is effective only to the extent that such terms and conditions are conditions herein. Any acceptance which contains conditions which are in addition to or inconsistent with the terms and conditions herein will be a counter offer and will not be binding unless agreed to in writing by the Seller."

On October 1, Finerty wrote Skjonsby that three changes "need to be made" in the contract, one of which was the deletion of clause 8. The letter closed with: "Let me know and I will make the changes and sign." Two of the changes were thereafter resolved, but the resolution of clause 8 remained in controversy.

Later in October 1979, Dataserv offered to accept, in substitution for Indepth, any other third-party installation company Technology would designate. Technology never agreed to this.

On November 8, 1979, Dataserv by telephone offered to remove the Indepth clause from the contract form. Technology responded that it was "too late," and that there was no deal.

On November 9, 1979, Finerty called Dataserv, and informed them that "the deal was not going to get done because they'd waited until too late a point in time." During this period of time, the market value of the features was dropping rapidly and Dataserv was anxious to complete the deal. It is undisputed that the market for used computer equipment, including its features, is downwardly price volatile.

By telex dated November 12, 1979, Dataserv informed Technology that the features were ready for pickup and that the pickup and payment be no later than November 15, 1979.

On November 13, 1979, Finerty responded by telex stating:

[S]ince [Dataserv] had not responded in a positive fashion to Alanthus' [Alanthus is the former name of Technology Finance Group] letter requesting contract changes * * * its offer to purchase [the features] was withdrawn on 11/9/79 via telephone conversation with Jack Skjonsby. Ten to fifteen days prior, I made Jack aware that this deal was dead if Dataserv did not agree to contract changes prior to the "Eleventh Hour".

On June 19, 1980, the features were sold by Dataserv to another party for $26,000. It then sought a judgment against Technology for the difference between the sale price of the features and the contract price.

By its Answer and by way of pretrial motion, Technology claimed that the court lacked jurisdiction over the person of the defendant. The trial court denied the motion on February 20, 1981.

At trial the parties stipulated that as of November 8, 1979 Dataserv telephonically offered to take out the Indepth Clause. The trial court found that this telephone call operated as an acceptance of Technology's counteroffer of October 1, 1979, thereby establishing a contract between the parties embodying the terms of Dataserv's printed standard contract dated September 6, 1979, minus clause 8 thereof. The trial court found that as of November 15, 1979, Technology breached its contract to Dataserv's damage, and awarded Dataserv $74,000 in damages, plus interest from the date of the breach.

ISSUES

1. Did the trial court err in finding jurisdiction over the person of Technology within the meaning of Minn.Stat. § 543.19 (1984)?

2. Did the trial court err in finding that the parties entered into a contract?

3. Did the trial court err in finding that Dataserv mitigated its damages?

ANALYSIS

1. The trial court found that because Technology held a business lease with a Minnesota corporation as lessee, it "transacts ... business within the state" under Minn.Stat. § 543.19, subd. 1(b) (1984) as a matter of law. It found that clause (b) constitutionally permitted jurisdiction based on the five-factor analysis of the minimum contacts between the defendant and Minnesota, set forth in Aftanase v. Economy Baler Co., 343 F.2d 187, 197 (8th Cir.1965). Minnesota has adopted the Aftanase test. Dent-Air, Inc. v. Beech Mountain Air Service, Inc., 332 N.W.2d 904, 907 (Minn.1983); Rostad v. On-Deck, Inc., 354 N.W.2d 95, 98 (Minn.Ct.App.1984).

Technology argues that its forum activities were "totally unrelated" to Dataserv's cause of action, thereby precluding jurisdiction under the Aftanase formula. We do not agree. It is apparent that Technology has a number of contacts within the State of Minnesota, including, at the time of negotiations, the maintenance of a sales office and the leasing of equipment within the state. In addition, Technology had the telephone and mail contacts with the State of Minnesota which gave rise to this litigation. Given these substantial contacts between not only Technology and the forum, but between the forum and the litigation, it is apparent that Technology has the requisite minimum contacts with Minnesota to permit Minnesota to exercise personal jurisdiction over it. See BLC Insurance Company v. Westin, Inc., 359 N.W.2d 752(Minn.Ct.App.1985). The purposeful behavior of Technology is such that it should have reasonably anticipated being haled into court here. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 298, 100 S. Ct. 559, 567, 62 L. Ed. 2d 490 (1980).

2. Technology claims that the trial court erred in finding that the parties entered into a contract. It contends that Dataserv's response to its counteroffer operated, as a matter of law, as a rejection, terminating Dataserv's power to subsequently accept the counteroffer.

Under familiar principles of contract law, a party's rejection terminates its power of acceptance. Restatement (Second) of Contracts § 380 (1981). Once rejected, an offer is terminated and cannot subsequently be accepted without ratification by the other party. Nodland v. Chirpich, 240 N.W.2d 513, 307 Minn. 360 (1976).

The critical issue is whether Dataserv rejected Technology's October 1 counteroffer. Dataserv responded to Technology's October 1 counteroffer by agreeing to delete two of the three objectionable clauses, but insisting that the third be included. By refusing to accept according to the terms of the proposal, Dataserv rejected Technology's counteroffer and thus no contract was formed. Moreover, Dataserv's offer to substitute other third party installation companies, which Technology rejected, operated as a termination of its power to accept Technology's counteroffer. Dataserv's so-called "acceptance," when it offered to delete clause 8 on November 8, 1979, was without any legal effect whatsoever, except to create a new offer which Technology immediately rejected.

Dataserv's November 8 "acceptance" was also ineffective because it was not signed in accordance with the offer's conditions. While it is true that Minn.Stat. § 336.2-204 does not require a signed agreement prior to formation of a contract, where the parties know that the execution of a written contract was a condition precedent to their being bound, there can be no binding contract until the written agreement was executed. Staley Manufacturing Co. v. Northern Cooperatives, Inc., 168 F.2d 892 (8th Cir.1948).

3. Having found that no contract was formed between the parties, it is unnecessary to address the question of mitigation of damages.

DECISION

Technology was subject to the jurisdiction of Minnesota courts. No contract was formed between the parties.

Affirmed in part, reversed in part.

Daryl J. Lapp, with whom Thane D. Scott, Stephen L. Coco and Palmer & Dodge LLP were on brief, Boston, MA, for appellant.

Tina M. Traficanti, with whom Anthony M. Doniger and Sugarman, Rogers, Barshak & Cohen, P.C. were on brief, Boston, MA, for appellee.

Before TORRUELLA, Chief Judge, BOWNES, Senior Circuit Judge, and STAHL, Circuit Judge.

TORRUELLA, Chief Judge.

Ionics, Inc. ("Ionics") purchased thermostats from Elmwood Sensors, Inc. ("Elmwood") for installation in water dispensers manufactured by the former. Several of the dispensers subsequently caused fires which allegedly resulted from defects in the sensors. Ionics filed suit against Elmwood in order to recover costs incurred in the wake of the fires. Before trial, the district court denied Elmwood's motion for partial summary judgment. The District Court of Massachusetts subsequently certified to this court "the question whether, in the circumstances of this case, § 2-207 of M.G.L. c. 106 has been properly applied." Order of the district court, November 6, 1995.

I. Standard of Review

We review the grant or denial of summary judgment de novo. See Borschow Hosp. & Medical Supplies v. Cesar Castillo, Inc., 96 F.3d 10, 14 (1st Cir.1996).

II. Background

The facts of the case are not in dispute. Elmwood manufactures and sells thermostats. Ionics makes hot and cold water dispensers, which it leases to its customers. On three separate occasions, Ionics purchased thermostats from Elmwood for use in its water dispensers.^[1] Every time Ionics made a purchase of thermostats from Elmwood, it sent the latter a purchase order form which contained, in small type, various "conditions." Of the 20 conditions on the order form, two are of particular relevance:

18. REMEDIES — The remedies provided Buyer herein shall be cumulative, and in addition to any other remedies provided by law or equity. A waiver of a breach of any provision hereof shall not constitute a waiver of any other breach. The laws of the state shown in Buyer's address printed on the masthead of this order shall apply in the construction hereof.

19. ACCEPTANCE — Acceptance by the Seller of this order shall be upon the terms and conditions set forth in items 1 to 17 inclusive, and elsewhere in this order. Said order can be so accepted only on the exact terms herein and set forth. No terms which are in any manner additional to or different from those herein set forth shall become a part of, alter or in any way control the terms and conditions herein set forth.

Near the time when Ionics placed its first order, it sent Elmwood a letter that it sends to all of its new suppliers. The letter states, in part:

The information preprinted, written and/or typed on our purchase order is especially important to us. Should you take exception to this information, please clearly express any reservations to us in writing. If you do not, we will assume that you have agreed to the specified terms and that you will fulfill your obligations according to our purchase order. If necessary, we will change your invoice and pay your invoice according to our purchase order.

Following receipt of each order, Elmwood prepared and sent an "Acknowledgment" form containing the following language in small type:

THIS WILL ACKNOWLEDGE RECEIPT OF BUYER'S ORDER AND STATE SELLER'S WILLINGNESS TO SELL THE GOODS ORDERED BUT ONLY UPON THE TERMS AND CONDITIONS SET FORTH HEREIN AND ON THE REVERSE SIDE HEREOF AS A COUNTEROFFER. BUYER SHALL BE DEEMED TO HAVE ACCEPTED SUCH COUNTEROFFER UNLESS IT IS REJECTED IN WRITING WITHIN TEN (10) DAYS OF THE RECEIPT HEREOF, AND ALL SUBSEQUENT ACTION SHALL BE PURSUANT TO THE TERMS AND CONDITIONS OF THIS COUNTEROFFER ONLY; ANY ADDITIONAL OR DIFFERENT TERMS ARE HEREBY OBJECTED TO AND SHALL NOT BE BINDING UPON THE PARTIES UNLESS SPECIFICALLY AGREED TO IN WRITING BY SELLER.

Although this passage refers to a "counteroffer," we wish to emphasize that this language is not controlling. The form on which the language appears is labelled an "Acknowledgment" and the language comes under a heading that reads "Notice of Receipt of Order." The form, taken as a whole, appears to contemplate an order's confirmation rather than an order's rejection in the form of a counteroffer.

It is undisputed that the Acknowledgment was received prior to the arrival of the shipment of goods. Although the district court, in its ruling on the summary judgment motion, states that "with each shipment of thermostats, Elmwood included an Acknowledgment Form," Order of the District Court, August 23, 1995, this statement cannot reasonably be taken as a finding in support of the claim that the Acknowledgment and the shipment arrived together. First, in its certification order, the court states that "[t]he purchaser, after receiving the Acknowledgment, accepted delivery of the goods without objection." Order Pursuant to 28 U.S.C. § 1292(b), Nov. 6, 1995 (emphasis added). This language is clearer and more precise than the previous statement and suggests that the former was simply a poor choice of phrasing. Furthermore, Ionics has not disputed the arrival time of the Acknowledgment. In its Memorandum in Support of Defendant's Motion for Partial Summary Judgment Elmwood stated, under the heading of "Statements of Undisputed Facts," that "for each of the three orders, Ionics received the Acknowledgment prior to receiving the shipment of thermostats." Memorandum in Support of Defendant's Motion for Partial Summary Judgment, at 3. In its own memorandum, Ionics argued that there existed disputed issues of material fact, but did not contradict Elmwood's claim regarding the arrival of the Acknowledgment Form. SeePlaintiff's Memorandum in Support of its Opposition to Defendant's Motion for Partial Summary Judgment at 4-10. Furthermore, in its appellate brief, Ionics does not argue that the time of arrival of the Acknowledgment Form is in dispute. Ionics repeats language from the district court's summary judgment ruling that "with each shipment of thermostats, Elmwood included an Acknowledgment Form," Appellee's Brief at 7, but does not argue that the issue is in dispute or confront the language in Elmwood's brief which states that "[i]t is undisputed that for each of the three orders, Ionics received the Acknowledgment prior to receiving the shipment of thermostats." Appellant's Brief at 6.

As we have noted, the Acknowledgment Form expressed Elmwood's willingness to sell thermostats on "terms and conditions" that the Form indicated were listed on the reverse side. Among the terms and conditions listed on the back was the following:

9. WARRANTY

All goods manufactured by Elmwood Sensors, Inc. are guaranteed to be free of defects in material and workmanship for a period of ninety (90) days after receipt of such goods by Buyer or eighteen months from the date of manufacturer [sic] (as evidenced by the manufacturer's date code), whichever shall be longer. THERE IS NO IMPLIED WARRANTY OF MERCHANTABILITY AND NO OTHER WARRANTY, EXPRESSED OR IMPLIED, EXCEPT SUCH AS IS EXPRESSLY SET FORTH HEREIN. SELLER WILL NOT BE LIABLE FOR ANY GENERAL, CONSEQUENTIAL OR INCIDENTAL DAMAGES, INCLUDING WITHOUT LIMITATION ANY DAMAGES FROM LOSS OF PROFITS, FROM ANY BREACH OF WARRANTY OR FOR NEGLIGENCE, SELLER'S LIABILITY AND BUYER'S EXCLUSIVE REMEDY BEING EXPRESSLY LIMITED TO THE REPAIR OF DEFECTIVE GOODS F.O.B. THE SHIPPING POINT INDICATED ON THE FACE HEREOF OR THE REPAYMENT OF THE PURCHASE PRICE UPON THE RETURN OF THE GOODS OR THE GRANTING OF A REASONABLE ALLOWANCE ON ACCOUNT OF ANY DEFECTS, AS SELLER MAY ELECT.

Neither party disputes that they entered into a valid contract and neither disputes the quantity of thermostats purchased, the price paid, or the manner and time of delivery. The only issue in dispute is the extent of Elmwood's liability.

In summary, Ionics' order included language stating that the contract would be governed exclusively by the terms included on the purchase order and that all remedies available under state law would be available to Ionics. In a subsequent letter, Ionics added that Elmwood must indicate any objections to these conditions in writing. Elmwood, in turn, sent Ionics an Acknowledgment stating that the contract was governed exclusively by the terms in the Acknowledgment, and Ionics was given ten days to reject this "counteroffer." Among the terms included in the Acknowledgment is a limitation on Elmwood's liability. As the district court stated, "the terms are diametrically opposed to each other on the issue of whether all warranties implied by law were reserved or waived." Order of the District Court, August 23, 1995.

We face, therefore, a battle of the forms. This is purely a question of law. The dispute turns on whether the contract is governed by the language after the comma in § 2-207(1) of the Uniform Commercial Code, according to the rule laid down by this court in Roto-Lith, Ltd. v. F.P. Bartlett & Co., 297 F.2d 497 (1st Cir.1962), or whether it is governed by subsection (3) of the Code provision, as enacted by both Massachusetts, Mass. Gen. L. ch. 106, § 2-207 (1990 and 1996 Supp.), and Rhode Island, R.I. Gen. Laws § 6A-2-207 (1992).^[2] We find the rule of Roto-Lith to be in conflict with the purposes of section 2-207 and, accordingly, we overrule Roto-Lith and find that subsection (3) governs the contract.^[3] Analyzing the case under section 2-207, we conclude that Ionics defeats Elmwood's motion for partial summary judgment.

III. Legal Analysis

Our analysis begins with the statute. Section 2-207 reads as follows:

§ 2-207. Additional Terms in Acceptance or Confirmation

(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.

(2) The additional or different terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:

(a) the offer expressly limits acceptance to the terms of the offer;

(b) they materially alter it; or

(c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received.

(3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this chapter.

Mass. Gen. L. ch. 106, § 2-207 (1990 and 1996 Supp.).

In Roto-Lith, Roto-Lith sent a purchase order to Bartlett, who responded with an acknowledgment that included language purporting to limit Bartlett's liability. Roto-Lith did not object. Roto-Lith, 297 F.2d at 498-99. This court held that "a response which states a condition materially altering the obligation solely to the disadvantage of the offeror is an `acceptance * * * expressly * * * conditional on assent to the additional * * * terms.'" Id. at 500. This holding took the case outside of section 2-207 by applying the exception after the comma in subsection (1). The court then reverted to common law and concluded that Roto-Lith "accepted the goods with knowledge of the conditions specified in the acknowledgment [and thereby] became bound." Id. at 500. In other words, the Roto-Lith court concluded that the defendant's acceptance was conditional on assent, by the buyer, to the new terms and, therefore, constituted a counter offer rather than an acceptance. When Roto-Lith accepted the goods with knowledge of Bartlett's conditions, it accepted the counteroffer and Bartlett's terms governed the contract. Elmwood argues that Roto-Lith governs the instant appeal, implying that the terms of Elmwood's acknowledgment govern.

Ionics claims that the instant case is distinguishable because in Roto-Lith "the seller's language limiting warranties implied at law was proposed as an addition to, but was not in conflict with, the explicit terms of the buyer's form. [In the instant case] the explicit terms of the parties' forms conflict with and reject each other." Appellee's Brief at 21.

We do not believe that Ionics' position sufficiently distinguishes Roto-Lith. It would be artificial to enforce language that conflicts with background legal rules while refusing to enforce language that conflicts with the express terms of the contract. Every contract is assumed to incorporate the existing legal norms that are in place. It is not required that every contract explicitly spell out the governing law of the jurisdiction. Allowing later forms to govern with respect to deviations from the background rules but not deviations from the terms in the contract would imply that only the terms in the contract could be relied upon. Aside from being an artificial and arbitrary distinction, such a standard would, no doubt, lead parties to include more of the background rules in their initial forms, making forms longer and more complicated. Longer forms would be more difficult and time consuming to read — implying that even fewer forms would be read than under the existing rules. It is the failure of firms to read their forms that has brought this case before us, and we do not wish to engender more of this type of litigation.

Our inquiry, however, is not complete. Having found that we cannot distinguish this case from Roto-Lith, we turn to the Uniform Commercial Code, quoted above. A plain language reading of section 2-207 suggests that subsection (3) governs the instant case. Ionics sent an initial offer to which Elmwood responded with its "Acknowledgment." Thereafter, the conduct of the parties established the existence of a contract as required by section 2-207(3).

Furthermore, the case before us is squarely addressed in comment 6, which states:

6. If no answer is received within a reasonable time after additional terms are proposed, it is both fair and commercially sound to assume that their inclusion has been assented to. Where clauses on confirming forms sent by both parties conflict[,] each party must be assumed to object to a clause of the other conflicting with one on the confirmation sent by himself. As a result[,] the requirement that there be notice of objection which is found in subsection (2) [of § 2-207] is satisfied and the conflicting terms do not become part of the contract. The contract then consists of the terms originally expressly agreed to, terms on which the confirmations agree, and terms supplied by this Act.

Mass. Gen. L. ch. 106, § 2-207, Uniform Commercial Code Comment 6. This Comment addresses precisely the facts of the instant case. Any attempt at distinguishing the case before us from section 2-207 strikes us as disingenuous.

We are faced, therefore, with a contradiction between a clear precedent of this court, Roto-Lith, which suggests that the language after the comma in subsection (1) governs, and the clear dictates of the Uniform Commercial Code, which indicate that subsection (3) governs. It is our view that the two cannot coexist and the case at bar offers a graphic illustration of the conflict. We have, therefore, no choice but to overrule our previous decision in Roto-Lith, Ltd. v. F.P. Bartlett & Co., 297 F.2d 497 (1st Cir. 1962). Our decision brings this circuit in line with the majority view on the subject and puts to rest a case that has provoked considerable criticism from courts and commentators and alike.^[4]

We hold, consistent with section 2-207 and Official Comment 6, that where the terms in two forms are contradictory, each party is assumed to object to the other party's conflicting clause. As a result, mere acceptance of the goods by the buyer is insufficient to infer consent to the seller's terms under the language of subsection (1).^[5] Nor do such terms become part of the contract under subsection (2) because notification of objection has been given by the conflicting forms. See § 2-207(2)(c).

The alternative result, advocated by Elmwood and consistent with Roto-Lith, would undermine the role of section 2-207. Elmwood suggests that "a seller's expressly conditional acknowledgment constitutes a counteroffer where it materially alters the terms proposed by the buyer, and the seller's terms govern the contract between the parties when the buyer accepts and pays for the goods." Appellant's Brief at 12. Under this view, section 2-207 would no longer apply to cases in which forms have been exchanged and subsequent disputes reveal that the forms are contradictory. That is, the last form would always govern.

The purpose of section 2-207, as stated in Roto-Lith, "was to modify the strict principle that a response not precisely in accordance with the offer was a rejection and a counteroffer." Roto-Lith, 297 F.2d at 500; see also Dorton v. Collins & Aikman Corp., 453 F.2d 1161, 1165-66 (6th Cir.1972) (stating that section 2-207 "was intended to alter the `ribbonmatching' or `mirror' rule of common law, under which the terms of an acceptance or confirmation were required to be identical to the terms of the offer"). Under the holding advocated by Elmwood, virtually any response that added to or altered the terms of the offer would be a rejection and a counteroffer. We do not think that such a result is consistent with the intent of section 2-207 and we believe it to be expressly contradicted by Comment 6.

Applied to this case, our holding leads to the conclusion that the contract is governed by section 2-207(3). Section 2-207(1) is inapplicable because Elmwood's acknowledgment is conditional on assent to the additional terms. The additional terms do not become a part of the contract under section 2-207(2) because notification of objection to conflicting terms was given on the order form and because the new terms materially alter those in the offer. Finally, the conduct of the parties demonstrates the existence of a contract, as required by section 2-207(3). Thus, section 2-207(3) applies and the terms of the contract are to be determined in accordance with that subsection.

We conclude, therefore, that section 2-207(3) prevails and "the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this chapter." Mass. Gen. L. ch. 106, § 2-207(3).

The reality of modern commercial dealings, as this case demonstrates, is that not all participants read their forms. See James J. White & Robert S. Summers, Uniform Commercial Code § 1-3 at 6-7 (4th ed.1995). To uphold Elmwood's view would not only fly in the face of Official Comment 6 to section 2-207 of the Uniform Commercial Code, and the overall purpose of that section, it would also fly in the face of good sense. The sender of the last form (in the instant case, the seller) could insert virtually any conditions it chooses into the contract, including conditions contrary to those in the initial form. The final form, therefore, would give its sender the power to re-write the contract. Under our holding today, we at least ensure that a party will not be held to terms that are directly contrary to the terms it has included in its own form. Rather than assuming that a failure to object to the offeree's conflicting terms indicates offeror's assent to those terms, we shall make the more reasonable inference that each party continues to object to the other's contradictory terms. We think it too much to grant the second form the power to contradict and override the terms in the first form.

IV. Conclusion

For the reasons stated herein, the district court's order denying Elmwood's motion for partial summary judgment is affirmed and the case is remanded to the district court for further proceedings.

[1] Orders were placed in March, June, and September 1990.

[2] There is some uncertainty on the question of whether Massachusetts or Rhode Island law governs. We need not address this issue, however, because the two states have adopted versions of section 2-207 of the Uniform Commercial Code that are virtually equivalent.

[3] Although panel decisions of this court are ordinarily binding on newly constituted panels, that rule does not obtain in instances where, as here, a departure is compelled by controlling authority (such as the interpreted statute itself). In such relatively rare instances, we have sometimes chosen to circulate the proposed overruling opinion to all active members of the court prior to publication even though the need to overrule precedent is reasonably clear. See, e.g., Wright v. Park, 5 F.3d 586, 591 n. 7 (1st Cir.1993); Trailer Marine Transport Corp. v. Rivera Vazquez, 977 F.2d 1, 9 n. 5 (1st Cir.1992). This procedure is, of course, informal, and does not preclude a suggestion of rehearing en banc on any issue. We have followed that praxis here and can report that none of the active judges of this court has objected to the panel's analysis or to its conclusion that Roto-Lith has outlived its usefulness as circuit precedent.

[4] See, e.g., Step-Saver Data Systems, Inc. v. Wyse Technology, 939 F.2d 91, 101 (3d Cir.1991); St. Charles Cable TV, Inc. v. Eagle Comtronics, Inc., 687 F.Supp. 820, 828 & n. 19 (S.D.N.Y.1988); Daitom v. Pennwalt Corp., 741 F.2d 1569, 1576-77 (10th Cir.1984); Luria Bros. v. Pielet Bros. Scrap Iron & Metal, 600 F.2d 103, 113 (7th Cir.1979); Dorton v. Collins & Aikman Corp., 453 F.2d 1161, 1168 & n. 5 (6th Cir.1972); ; James J. White & Robert S. Summers, 1 Uniform Commercial Code, § 1-3, at 12, 16-17 (1995); Murray, Intention over Terms: An Exploration of UCC 2-207 & New Section 60, Restatement of Contracts, 37 Fordham L.Rev. 317, 329 (1969).

[5] See also Official Comment 3 ("If [additional or different terms] are such as materially to alter the original bargain, they will not be included unless expressly agreed to by the other party.").

366 A.2d 162 (1976)

Ernest P. ARDENTE v. William A. HORAN and Katherine L. Horan.

No. 76-6-Appeal.

Supreme Court of Rhode Island.

December 2, 1976.

Manning, West, Santaniello & Pari, Joseph T. Pari, Providence, for plaintiff.

Moore, Virgadamo, Boyle & Lynch, Ltd., Jeremiah C. Lynch, Jr., Joseph R. Palumbo, Jr., Newport, for defendants.

OPINION

DORIS, Justice.

Ernest P. Ardente, the plaintiff, brought this civil action in Superior Court to specifically enforce an agreement between himself and William A. and Katherine L. Horan, the defendants, to sell certain real property. The defendants filed an answer together with a motion for summary judgment pursuant to Super.R.Civ.P. 56. Following the submission of affidavits by both the plaintiff and the defendants and a hearing on the motion, judgment was entered by a Superior Court justice for the defendants. The plaintiff now appeals.

In August 1975, certain residential property in the city of Newport was offered for sale by defendants. The plaintiff made a bid of $250,000 for the property which was communicated to defendants by their attorney. After defendants' attorney advised plaintiff that the bid was acceptable to defendants, he prepared a purchase and sale agreement at the direction of defendants and forwarded it to plaintiff's attorney for plaintiff's signature. After investigating certain title conditions, plaintiff executed the agreement. Thereafter plaintiff's attorney returned the document to defendants along with a check in the amount of $20,000 and a letter dated September 8, 1975, which read in relevant part as follows:

"My clients are concerned that the following items remain with the real estate: a) dining room set and tapestry wall covering in dining room; b) fireplace fixtures throughout; c) the sun parlor furniture. I would appreciate your confirming that these items are a part of the transaction, as they would be difficult to replace."

The defendants refused to agree to sell the enumerated items and did not sign the purchase and sale agreement. They directed their attorney to return the agreement and the deposit check to plaintiff and subsequently refused to sell the property to plaintiff. This action for specific performance followed.

In Superior Court, defendants moved for summary judgment on the ground that the facts were not in dispute and no contract had been formed as a matter of law.[1] The trial justice ruled that the letter quoted above constituted a conditional acceptance of defendants' offer to sell the property and consequently must be construed as a counteroffer. Since defendants never accepted the counteroffer, it followed that no contract was formed, and summary judgment was granted.

Summary judgment is a drastic remedy and should be cautiously applied; nevertheless, where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law, summary judgment properly issues. Ladouceur v. Prudential Ins. Co., 111 R.I. 370, 302 A.2d 801 (1973). On appeal this court is bound by the same rules as the trial court. Cardente v. Travelers Ins. Co., 112 R.I. 713, 315 A.2d 63 (1974). With these rules in mind we address ourselves to the facts.

The plaintiff assigns several grounds for appeal in his brief. He urges first that summary judgment was improper because there existed a genuine issue of fact. The factual question, according to plaintiff, was whether the oral agreement which preceded the drafting of the purchase and sale agreement was intended by the parties to take effect immediately to create a binding oral contract for the sale of the property.

We cannot agree with plaintiff's position. A review of the record shows that the issue was never raised before the trial justice. The plaintiff did not, in his affidavit in opposition to summary judgment or by any other means, bring to the attention of the trial court any facts which established the existence of a relevant factual dispute. Indeed, at the hearing on the motion plaintiff did not even mention the alleged factual dispute which he now claims the trial justice erred in overlooking. The only issue plaintiff addressed was the proper interpretation of the language used in plaintiff's letter of acceptance. This was solely a question of law. See Cassidy v. Springfield Life Ins. Co., 106 R.I. 615, 262 A.2d 378 (1970); Johnson v. Kile & Morgan Co., 49 R.I. 99, 140 A. 3 (1928).

It is well-settled that one who opposes a motion for summary judgment may not rest upon the mere allegations or denials of his pleading. He has an affirmative duty to set forth specific facts which show that there is a genuine issue of fact to be resolved at trial. If he does not do so, summary judgment, if appropriate, will be entered against him. Gallo v. National Nursing Homes, Inc., 106 R.I. 485, 488, 261 A.2d 19, 21 (1970); Sutter v. Harrington, 51 R.I. 325, 154 A. 657 (1931); 1 Kent, R. I.Civ.Prac. § 56.4 (1969). Accordingly, since no genuine issue of fact was presented to the trial justice, we hold that he did not err in ruling that summary judgment was appropriate.[2]

The plaintiff's second contention is that the trial justice incorrectly applied the principles of contract law in deciding that the facts did not disclose a valid acceptance of defendants' offer. Again we cannot agree.

The trial justice proceeded on the theory that the delivery of the purchase and sale agreement to plaintiff constituted an offer by defendants to sell the property. Because we must view the evidence in the light most favorable to the party against whom summary judgment was entered, in this case plaintiff, we assume as the trial justice did that the delivery of the agreement was in fact an offer.[3]

The question we must answer next is whether there was an acceptance of that offer. The general rule is that where, as here, there is an offer to form a bilateral contract, the offeree must communicate his acceptance to the offeror before any contractual obligation can come into being. A mere mental intent to accept the offer, no matter how carefully formed, is not sufficient. The acceptance must be transmitted to the offeror in some overt manner. Bullock v. Harwick, 158 Fla. 834, 30 So. 2d 539 (1947); Armstrong v. Guy H. James Constr. Co., 402 P.2d 275 (Okl.1965); 1 Restatement Contracts § 20 (1932). See generally 1 Corbin, Contracts § 67 (1963). A review of the record shows that the only expression of acceptance which was communicated to defendants was the delivery of the executed purchase and sale agreement accompanied by the letter of September 8. Therefore it is solely on the basis of the language used in these two documents that we must determine whether there was a valid acceptance. Whatever plaintiff's unexpressed intention may have been in sending the documents is irrelevant. We must be concerned only with the language actually used, not the language plaintiff thought he was using or intended to use.

There is no doubt that the execution and delivery of the purchase and sale agreement by plaintiff, without more, would have operated as an acceptance. The terms of the accompanying letter, however, apparently conditioned the acceptance upon the inclusion of various items of personalty. In assessing the effect of the terms of that letter we must keep in mind certain generally accepted rules. To be effective, an acceptance must be definite and unequivocal. "An offeror is entitled to know in clear terms whether the offeree accepts his proposal. It is not enough that the words of a reply justify a probable inference of assent." 1 Restatement Contracts § 58, comment a (1932). The acceptance may not impose additional conditions on the offer, nor may it add limitations. "An acceptance which is equivocal or upon condition or with a limitation is a counteroffer and requires acceptance by the original offeror before a contractual relationship can exist." John Hancock Mut. Life Ins. Co. v. Dietlin, 97 R.I. 515, 518, 199 A.2d 311, 313 (1964). Accord, Cavanaugh v. Conway, 36 R.I. 571, 587,90 A. 1080, 1086 (1914).

However, an acceptance may be valid despite conditional language if the acceptance is clearly independent of the condition. Many cases have so held. Williston states the rule as follows:

"Frequently an offeree, while making a positive acceptance of the offer, also makes a request or suggestion that some addition or modification be made. So long as it is clear that the meaning of the acceptance is positively and unequivocally to accept the offer whether such request is granted or not, a contract is formed." 1 Williston, Contracts § 79 at 261-62 (3d ed. 1957).

Corbin is in agreement with the above view. 1 Corbin, supra, § 84 at 363-65. Thus our task is to decide whether plaintiff's letter is more reasonably interpreted as a qualified acceptance or as an absolute acceptance together with a mere inquiry concerning a collateral matter.

In making our decision we recognize that, as one text states, "The question whether a communication by an of feree is a conditional acceptance or counter-offer is not always easy to answer. It must be determined by the same common-sense process of interpretation that must be applied in so many other cases." 1 Corbin, supra § 82 at 353. In our opinion the language used in plaintiff's letter of September 8 is not consistent with an absolute acceptance accompanied by a request for a gratuitous benefit. We interpret the letter to impose a condition on plaintiff's acceptance of defendants' offer. The letter does not unequivocally state that even without the enumerated items plaintiff is willing to complete the contract. In fact, the letter seeks "confirmation" that the listed items "are a part of the transaction". Thus, far from being an independent, collateral request, the sale of the items in question is explicitly referred to as a part of the real estate transaction. Moreover, the letter goes on to stress the difficulty of finding replacements for these items. This is a further indication that plaintiff did not view the inclusion of the listed items as merely collateral or incidental to the real estate transaction.

A review of the relevant case law discloses that those cases in which an acceptance was found valid despite an accompanying conditional term generally involved a more definite expression of acceptance than the one in the case at bar. E. g., Moss v. Cogle, 267 Ala. 208, 101 So. 2d 314 (1958); Taybe Constr. Co. v. Beco, Inc., 3 Conn. Cir. 406, 216 A.2d 208, 212 (1965); Katz v. Pratt Street Realty Co., 257 Md. 103, 262 A.2d 540 (1970); Nelson v. Hamlin, 258 Mass. 331, 155 N.E. 18 (1927); Duprey v. Donahoe, 52 Wash. 2d 129, 323 P.2d 903 (1958).

Accordingly, we hold that since the plaintiff's letter of acceptance dated September 8 was conditional, it operated as a rejection of the defendants' offer and no contractual obligation was created.

The plaintiff's appeal is denied and dismissed, the judgment appealed from is affirmed and the case is remanded to the Superior Court.

PAOLINO, J., did not participate.

NOTES

[1] Although the contract would appear to be within the statute of frauds, defendants did not raise this defense in the trial court, nor do they raise it here. Where a party makes no claim to the benefit of the statute, the court sua sponte will not interpose it for him. Conti v. Fisher, 48 R.I. 33, 36, 134 A. 849, 850 (1926).

[2] We note that not only did plaintiff fail to present the supposed factual issue to the trial justice, he also did not raise the issue at oral argument before us. Moreover, in his Memorandum in Opposition to Motion to Affirm Judgment Below, filed in this court after briefs were filed, plaintiff conceded that no factual dispute existed. The plaintiff stated:

"Your appellant readily acknowledges that there was no genuine issue of fact to be resolved and that the trial justice, in this regard, did not err in granting appellee's motion for Summary Judgment. However, having granted appellee's motion, the trial justice proceeded to render decision for the wrong party. This, in substance, is the thrust of appellant's appeal." Id. at 1.

[3] The conclusion that the delivery of the agreement was an offer is not unassailable in view of the fact that defendants did not sign the agreement before sending it to plaintiff, and the fact that plaintiff told defendants' attorney after the agreement was received that he would have to investigate certain conditions of title before signing the agreement. If it was not an offer, plaintiff's execution of the agreement could itself be no more than an offer, which defendants never accepted.

83 So.2d 449 (La. Ct. App. 1955)

EVER-TITE ROOFING CORPORATION v. GREEN

Court of Appeal of Louisiana, Second Circuit

November 28, 1955

AYRES, Judge.

This is an action for damages allegedly sustained by plaintiff as the result of the breach by the defendants of a written contract for the re-roofing of defendants' residence. Defendants denied that their written proposal or offer was ever accepted by plaintiff in the manner stipulated therein for its acceptance, and hence contended no contract was ever entered into. The trial court sustained defendants' defense and rejected plaintiff's demands and dismissed its suit at its costs. From the judgment thus rendered and signed, plaintiff appealed.

Defendants executed and signed an instrument June 10, 1953, for the purpose of obtaining the services of plaintiff in re-roofing their residence situated in Webster Parish, Louisiana. The document set out in detail the work to be done and the price therefor to be paid in monthly installments. This instrument was likewise signed by plaintiff's sale representative, who, however, was without authority to accept the contract for and on behalf of the plaintiff. This alleged contract contained these provisions:

"This agreement shall become binding only upon written acceptance hereof, by the principal or authorized officer of the Contractor, or upon commencing performance of the work. This contract is Not Subject to Cancellation. It is understood and agreed that this contract is payable at office of Ever-Tite Roofing Corporation, 5203 Telephone, Houston, Texas. It is understood and agreed that this Contract provides for attorney's fees and in no case less than ten per cent attorney's fees in the event same is placed in the hands of an attorney for  collecting or collected through any court, and further provides for accelerated maturity for failure to pay any installment of principal or interest thereon when due.

"This written agreement is the only and entire contract covering the subject matter hereof and no other representations have been made unto Owner except these herein contained. No guarantee on repair work, partial roof jobs, or paint jobs." (Emphasis supplied.)

Inasmuch as this work was to be performed entirely on credit, it was necessary for plaintiff to obtain credit reports and approval from the lending institution which was to finance said contract. With this procedure defendants were more or less familiar and knew their credit rating would have to be checked and a report made. On receipt of the proposed contract in plaintiff's office on the day following its execution, plaintiff requested a credit report, which was made after investigation and which was received in due course and submitted by plaintiff to the lending agency. Additional information was requested by this institution, which was likewise in due course transmitted to the institution, which then gave its approval.

The day immediately following this approval, which was either June 18 or 19, 1953, plaintiff engaged its workmen and two trucks, loaded the trucks with the necessary roofing materials and proceeded from Shreveport to defendants' residence for the purpose of doing the work and performing the services allegedly contracted for the defendants. Upon their arrival at defendants' residence, the workmen found others in the performance of the work which plaintiff had contracted to do. Defendants notified plaintiff's workmen that the work had been contracted to other parties two days before and forbade them to do the work.

Formal acceptance of the contract was not made under the signature and approval of an agent of plaintiff. It was, however, the intention of plaintiff to accept the contract by commencing the work, which was one of the ways provided for in the instrument for its acceptance, as will be shown by reference to the extract from the contract quoted hereinabove. Prior to this time, however, defendants had determined on a course of abrogating the agreement and engaged other workmen without notice thereof to plaintiff.

The basis of the judgment appealed was that defendants had timely notified plaintiff before "commencing performance of work". The trial court held that notice to plaintiff's workmen upon their arrival with the materials that defendants did not desire them to commence the actual work was sufficient and timely to signify their intention to withdraw from the contract. With this conclusion we find ourselves unable to agree.

Defendants' attempt to justify their delay in thus notifying plaintiff for the reason they did not know where or how to contact plaintiff is without merit. The contract itself, a copy of which was left with them, conspicuously displayed plaintiff's name, address and telephone number. Be that as it may, defendants at no time, from June 10, 1953, until plaintiff's workmen arrived for the purpose of commencing the work, notified or attempted to notify plaintiff of their intention to abrogate, terminate or cancel the contract.

Defendants evidently knew this work was to be processed through plaintiff's Shreveport office. The record discloses no unreasonable delay on plaintiff's part in receiving, processing or accepting the contract or in commencing the work contracted to be done. No time limit was specified in the contract within which it was to be accepted or within which the work was to be begun. It was nevertheless understood between the parties that some delay would ensue before the acceptance of the contract and the commencement of the work, due to the necessity of compliance with the requirements relative to financing the job through a lending agency. The evidence as referred to hereinabove shows that plaintiff proceeded with due diligence.

The general rule of law is that an offer proposed may be withdrawn before its acceptance and that no obligation is incurred thereby. This is, however, not without exceptions. For instance, Restatement of the Law of Contracts stated:

"(1) The power to create a contract by acceptance of an offer terminates at the time specified in the offer, or, if no time is specified, at the end of a reasonable time.

"What is a reasonable time is a question of fact depending on the nature of the contract proposed, the usages of business and other circumstances of the case which the offeree at the time of his acceptance either knows or has reason to know."

These principles are recognized in the Civil Code. LSA-C.C. Art. 1800 provides that an offer is incomplete as a contract until its acceptance and that before its acceptance the offer may be withdrawn. However, this general rule is modified by the provisions of LSA-C.C. Arts. 1801, 1802, 1804 and 1809, which read as follows:

"Art. 1801. The party proposing shall be presumed to continue in the intention, which his proposal expressed, if, on receiving the unqualified assent of him to whom the proposition is made, he do not signify the change of his intention.

"Art. 1802. He is bound by his proposition, and the signification of his dissent will be of no avail, if the proposition be made in terms, which evince a design to give the other party the right of concluding the contract by his assent; and if that assent be given within such time as the situation of the parties and the nature of the contract shall prove that it was the intention of the proposer to allow. * * *

"Art. 1804. The acceptance needs (need) not be made by the same act, or in point of time, immediately after the proposition; if made at any time before the person who offers or promises has changed his mind, or may reasonably be presumed to have done so, it is sufficient. * * *

"Art. 1809. The obligation of a contract not being complete, until the acceptance, or in cases where it is implied by law, until the circumstances, which raise such implication, are known to the party proposing; he may therefore revoke his offer or proposition before such acceptance, but not without allowing such reasonable time as from the terms of his offer he has given, or from the circumstances of the case he may be supposed to have intended to give to the party, to communicate his determination." (Emphasis supplied.)

Therefore, since the contract did not specify the time within which it was to be accepted or within which the work was to have been commenced, a reasonable time must be allowed therefor in accordance with the facts and circumstances and the evident intention of the parties. A reasonable time is contemplated where no time is expressed. What is a reasonable time depends more or less upon the circumstances surrounding each particular case. The delays to process defendants' application were not unusual. The contract was accepted by plaintiff by the commencement of the performance of the work contracted to be done. This commencement began with the loading of the trucks with the necessary materials in Shreveport and transporting such materials and the workmen to defendants' residence. Actual commencement or performance of the work therefore began before any notice of dissent by defendants was given plaintiff. The proposition and its acceptance thus became a completed contract.

By their aforesaid acts defendants breached the contract. They employed others to do the work contracted to be done by plaintiff and forbade plaintiff's workmen to engage upon that undertaking. By this breach defendants are legally bound to respond to plaintiff in damages. LSA-C.C. Art. 1930 provides:

"The obligations of contract (contracts) extending to whatsoever is incident to such contracts, the party who violates them, is liable, as one of the incidents of his obligations, to the payment of the damages, which the other party has sustained by his default."

The same authority in Art. 1934 provides the measure of damages for the breach of a contract. This article, in part, states:

"Where the object of the contract is anything but the payment of money, the damages due to the creditor for its breach are the amount of the loss he has sustained, and the profit of which he has been deprived, * * *".

Plaintiff expended the sum of $85.37 in loading the trucks in Shreveport with materials and in transporting them to the site of defendants' residence in Webster Parish and in unloading them on their return, and for wages for the workmen for the time consumed. Plaintiff's Shreveport manager testified that the expected profit on this job was $226. None of this evidence is controverted or contradicted in any manner.

True, as plaintiff alleges, the contract provides for attorney's fees where an attorney is employed to collect under the contract, but this is not an action on the contract or to collect under the contract but is an action for damages for a breach of the contract. The contract in that respect is silent with reference to attorney's fees. In the absence of an agreement for the payment of attorney's fees or of some law authorizing the same, such fees are not allowed.

For the reasons assigned, the judgment appealed is annulled, avoided, reversed and set aside and there is now judgment in favor of plaintiff, Ever-Tite Roofing Corporation, against the defendants, G.T. Green and Mrs. Jessie Fay Green, for the full sum of $311.37, with 5 per cent per annum interest thereon from judicial demand until paid, and for all costs.

Reversed and rendered.