Petterson v. Pattberg

New York Court of Appeals · 1928 · Contracts

Contractsunilateral contractrevocationperformanceacceptanceunilateral contractrevocationacceptance by performance

Facts

The defendant held a bond secured by a third mortgage on Petterson's property and wrote offering to accept cash for the mortgage with a $780 reduction if the mortgage was paid on or before May 31, 1924, and the April 25 installment was paid when due. Petterson paid the April 25 installment and later went to the defendant's home in late May with cash, stating that he had come to pay off the mortgage according to the agreement. Before Petterson actually tendered the money, the defendant told him he had sold the mortgage and refused to take the money. Petterson later had to pay the full amount to the third-party holder and claimed the lost $780 as damages.

Issue

When an offer proposes a unilateral contract by promising a mortgage reduction in exchange for early payment in full, can the offeror revoke the offer after the offeree arrives ready to perform but before actual tender and completed payment? More specifically, did any contract arise when Petterson announced his readiness to pay but was told before tender that the mortgage had been sold?

Rule

Where an offer calls for acceptance only by performance of a specified act, the offer is for a unilateral contract and remains revocable until the requested act has been performed. Actual knowledge by the offeree that the offeror has done an act inconsistent with the continuance of the offer, such as selling the subject matter to a third person, is sufficient withdrawal before acceptance.

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

In Cleveland, Nora Ellis sent Devin Park a signed letter stating: "I will accept $18,000 in cash in full satisfaction of the note I hold, if you pay that amount by July 1." On June 30, Devin arrived at Nora's office and said he was there to pay, but before he handed over the money, Nora told him she had assigned the note that morning to Lakefront Capital Group.

If Devin sues to enforce the discount, which is the best result?

Explanation. The letter proposed a unilateral contract: a promise to reduce the debt in exchange for the act of full payment by a stated date. Under the majority rule, such an offer may be withdrawn at any time before the requested act is performed. Devin's announcement that he came to pay did not constitute the requested act, and his actual knowledge that Nora had assigned the note was notice of conduct inconsistent with the continuance of the offer. No contract was formed.