Allied Steel and Conveyors, Inc. v. Ford Motor Co.
277 F.2d 907 (1960)
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Rule of Law:
Where an offer suggests a particular method of acceptance but does not make it exclusive, the offeree's commencement of performance constitutes acceptance of the offer and all of its terms, creating a binding contract.
Facts:
- On August 19, 1955, Ford Motor Company sent Allied Steel & Conveyors, Inc. a purchase order for machinery, which included a broad indemnity clause (Form 3618) that was explicitly marked 'VOID'.
- Ford later sent 'Amendment No. 1,' which Allied accepted, changing the agreement so that Ford, not Allied, would perform the installation.
- On July 26, 1956, Ford sent 'Amendment No. 2' for the purchase of additional machinery, with installation to be done by Allied.
- Attached to Amendment No. 2 was the same Form 3618 with the broad indemnity clause, but this time it was not marked 'VOID'.
- Amendment No. 2 stated it was 'not binding until accepted' and that 'Acceptance should be executed on acknowledgment copy which should be returned'.
- Before Allied formally signed or returned the acknowledgment copy, it began installing the machinery on Ford’s premises.
- On September 5, 1956, during the installation, an Allied employee, Hankins, was injured due to the negligence of Ford's employees.
- On November 10, 1956, after the injury had occurred, Allied executed and returned the acknowledgment copy of Amendment No. 2 to Ford.
Procedural Posture:
- John T. Hankins, an Allied employee, sued Ford Motor Company in the U.S. District Court for the Eastern District of Michigan for personal injuries.
- Ford filed a third-party complaint against Allied, seeking indemnification based on the terms of Amendment No. 2.
- A jury returned a verdict in favor of Hankins against Ford for $12,500.
- The jury also returned a verdict in favor of Ford against Allied for the same amount based on the indemnity agreement.
- The District Court denied Allied’s motion for judgment notwithstanding the verdict and entered judgment against it.
- Allied, as appellant, appealed the judgment to the United States Court of Appeals for the Sixth Circuit.
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Issue:
Does an offeree's commencement of performance, in accordance with the terms of an offer that suggests but does not mandate a formal method of acceptance, create a binding contract that includes all terms of the offer?
Opinions:
Majority - William E. Miller
Yes. An offeree's commencement of performance creates a binding contract inclusive of all the offer's terms when the offer suggests, rather than exclusively requires, a specific mode of acceptance. The court reasoned that the language 'Acceptance should be executed on acknowledgment copy' was a suggested, not an exclusive, method of acceptance. Therefore, Allied accepted the entire offer of Amendment No. 2 when it began installing the machinery with Ford's knowledge and acquiescence. This acceptance by performance bound Allied to all the terms of the amendment, including the indemnity clause that was not voided. Once Allied began performance, and Ford accepted the benefits of that performance, a binding bilateral contract was formed, and Allied could not later complain that it was not bound by the indemnity provision.
Analysis:
This case is a classic example of acceptance by performance in contract law, illustrating that actions can form a binding agreement even without a formal signature. The decision reinforces the principle that if an offer does not explicitly limit the means of acceptance, beginning performance is considered a valid acceptance that binds the performing party to all terms of the offer. It serves as a significant precedent for situations where parties begin work before all contractual formalities are completed, emphasizing that a party cannot selectively benefit from a contract's terms while disavowing its obligations.
