Cole-McIntyre-Norfleet Co. v. Holloway

Supreme Court of Tennessee · Contracts

Contractsacceptancesilence as acceptancedelayreasonable timesales contractstraveling salesmanoffer and acceptance

Facts

On March 26, 1917, plaintiff's traveling salesman, who was authorized to solicit and receive orders, obtained defendant's order for goods including fifty barrels of meal. The written order stated it would not be binding until accepted by the seller at its Memphis office, that the salesman had no authority to sign for either party, and that the order could not be countermanded. Plaintiff gave no confirmation or rejection for about sixty days, although its salesman saw defendant weekly and plaintiff could have notified him by mail or wire; during that period the prices of the goods rose greatly. On May 26, when defendant told plaintiff to begin shipment of the meal, plaintiff said it had not accepted the March 26 order and that no contract existed.

Issue

When a buyer submits an order that by its terms is not binding until accepted by the seller, does the seller's failure for an unreasonable time to notify the buyer of acceptance or rejection constitute acceptance? More specifically, can silence and delay amount to acceptance where the goods and market conditions make prompt action important?

Rule

Although an offer to buy or sell is not binding until acceptance is communicated, acceptance may be communicated either by formal notice or by acts amounting to acceptance. An offeree's unreasonable delay in notifying the offeror of its decision may itself amount to acceptance, particularly when the subject matter or market conditions make delay materially affect marketability or allow the offeree to speculate on profitability.

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

Lakeside Grain Supply, a fictional wholesaler based in St. Louis, sent an authorized traveling salesperson to visit Omar Bennett's feed store in Paducah, Kentucky. Omar signed a written order for 200 sacks of poultry mash stating the order would not bind the seller until accepted at its home office and could not be canceled; the seller then said nothing for seven weeks even though its salesperson stopped by every Friday and prices rose sharply during that period.

If Omar sues after the seller finally says it never accepted the order, which result is most consistent with the governing rule?

Explanation. The majority rule is that although an offer is ordinarily not binding until acceptance is communicated, acceptance may be shown by acts amounting to acceptance, and unreasonable delay in communicating a decision may itself count as acceptance. That is especially true where the goods or market conditions make delay materially significant and create a risk that the seller is waiting to see whether the deal becomes profitable. The home-office clause does not prevent that result if the seller delays unreasonably.