Bretz v. Portland General Electric Co.

United States Court of Appeals for the Ninth Circuit · 1989 · Contracts

ContractsStatute of FraudsOffer and AcceptanceEquitable Estoppelstatute of fraudssale of securitiesobjective manifestationsoffer

Facts

In 1983, Bretz offered to buy PGE's stock in Beartooth Coal Company and exchanged several letters with PGE about price and transaction terms. On August 23, PGE wrote that it would be "receptive to an offer" of $2,750,000 and asked Bretz to "resubmit[] your offer on the above basis." Bretz then sent a writing captioned "Acceptance of Offer," stated that he accepted PGE's "counter-offer," and believed a contract existed. Before PGE received that writing, Bretz entered into a third-party agreement for the sale of coal from the Beartooth property and later sued PGE for breach.

Issue

Did the parties' correspondence and related communications create an enforceable contract satisfying Montana's statute of frauds for the sale of securities? If not, could PGE nonetheless be equitably estopped from asserting the statute of frauds defense based on Bretz's claimed reliance?

Rule

Under Montana law, writings offered to satisfy the statute of frauds may be read together, but they must contain all essential elements of a contract, including objective evidence of the parties' assent to be bound. Parol evidence may explain ambiguities but may not supply an essential contract term. Whether a communication is an offer turns on its objective manifestations and surrounding circumstances, specifically whether it reasonably led the recipient to believe he had the power to close the deal by acceptance. In addition, equitable estoppel cannot defeat the statute of frauds unless a contract, oral or written, already exists.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Boise, Nora Kim offered in writing to buy all shares of a closely held mining subsidiary from Cascade Valley Resources, an Oregon corporation. Cascade replied, "We would be receptive to an offer of $4.2 million on the terms discussed and would appreciate your resubmitting your proposal on that basis." Nora immediately mailed back a signed document titled "Acceptance," stating that a binding contract now existed.

If the stock sale is subject to Montana's statute of frauds, are the writings most likely sufficient to establish an enforceable contract?

Explanation. The controlling rule is that multiple writings may satisfy the statute of frauds only if, taken together, they contain all essential elements of a contract, including objective evidence of assent to be bound. A statement that the seller would be "receptive to an offer" and asks the buyer to "resubmit" a proposal is an invitation to continue negotiations, not an offer that gives the buyer the power to close the deal by acceptance. Nora's label "Acceptance" cannot convert that invitation into an offer. (Derived from Bretz v. Portland General Electric Co. (n.d.).)