Davis v. Satrom

North Dakota Supreme Court · Contracts

Contractsofferacceptancecounterofferqualified acceptancemeeting of the mindsreal property salemobile home park

Facts

Davis negotiated with Satrom and Blair to buy a mobile home park and first sent a July 24, 1984 letter of intent offering terms and stating that if acceptable the owners should sign and return it, after which he would deposit $10,000 and prepare a purchase and sale agreement. Blair altered that letter and returned it, and after further negotiations Davis sent an unsigned commercial purchase agreement containing additional terms not in the original letter. Blair signed that agreement only after adding several handwritten conditions, including that the sellers' attorney approve it, and later informed the real estate agent that the sellers would pass on Davis's offer and terms. Davis then claimed he was ready to perform and tendered the $10,000 deposit, but the check was returned uncashed.

Issue

Was summary judgment proper because, as a matter of law, no enforceable contract was formed between Davis and the sellers? More specifically, did the parties' exchanged writings amount only to counteroffers, and did the attorney-approval condition prevent any agreement from becoming effective?

Rule

To form a contract for the sale of real property, there must be a meeting of the minds on all terms and an unqualified and absolute acceptance of an offer. A conditional or qualified acceptance that changes the original terms is a counteroffer and rejects the prior offer. Further, when a contract is expressly conditioned on approval by a third person, such as a party's attorney, the contract is not effective unless that approval is obtained, absent fraud in withholding approval.

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

In Boise, Idaho, Lena Ortiz emailed Marcus Bell a written offer to sell a four-unit rental property for $620,000, with closing on June 1 and seller financing at 5% interest. Marcus signed the offer but wrote in the margin that closing would occur on July 1 and financing would be at 4% interest, then returned it to Lena.

If Lena later refuses to sell and Marcus sues for specific performance, which is the strongest argument against contract formation?

Explanation. For a contract for the sale of real property, there must be a meeting of the minds on all terms and an unqualified, absolute acceptance. A response that modifies the original terms is a qualified acceptance and therefore a counteroffer, which rejects the original offer. Here, changing the closing date and interest rate prevents formation of a contract. (Derived from Davis v. Satrom (n.d.).)