Billings v. Wilby
175 N.C. 571 (1918)
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Rule of Law:
When parties reach a definite agreement on all essential terms of a contract through correspondence, the contract is binding, even if they express an intention to subsequently memorialize the agreement in a more formal written document.
Facts:
- William Wilby, a subcontractor for plumbing on a federal building, sent a letter to A. U. Billings, a contractor, inviting a bid for laying a sewer line.
- On January 13, 1916, Billings telegraphed an offer to complete the work for $500.
- On the same day, Wilby rejected the offer and sent a counter-offer via a night letter telegram, proposing to pay forty cents per running foot.
- On January 14, 1916, Billings replied by telegram, stating, 'Night letter received. Will accept. Send contract signed at once.'
- Billings prepared to begin work, assembling his crew and tools.
- Several days later, on the night before work was to commence, Wilby sent a telegram to Billings telling him he would be advised about the work in a day or two.
- Wilby never contacted Billings again about the project and instead performed the work himself.
Procedural Posture:
- A. U. Billings (plaintiff) sued William Wilby (defendant) in a North Carolina trial court for breach of contract.
- The case was tried before a jury.
- The trial court judge instructed the jury that if they believed the plaintiff's evidence, they should find that a contract existed.
- The jury found in favor of Billings and awarded damages.
- Wilby (appellant) appealed the trial court's judgment to the Supreme Court of North Carolina.
- Billings is the appellee in this appeal.
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Issue:
Does a party's acceptance of a counter-offer, which includes a request to 'send contract signed at once,' create a binding contract, or does this language make the formation of the contract conditional upon the execution of a formal written agreement?
Opinions:
Majority - Hoke, J.
Yes, a binding contract was formed. A request to formalize an agreement in writing does not prevent the formation of a contract if the parties have already agreed on all essential terms. The court reasoned that Billings's statement 'Send contract signed at once' was merely an expression of his preference to have their existing agreement formally written down for prudence and convenience. It was not a condition precedent to the formation of the contract. Citing precedents like Gooding v. Moore and Sanders v. Pottlizer Bros. Trust Co., the court affirmed the principle that when correspondence between parties contains all the details of a contract, it is enforceable even if they intended to later execute a single formal document which never materialized. The parties had a meeting of the minds through their telegrams, thus creating a valid and binding agreement on January 14.
Analysis:
This case clarifies the 'formal contract to follow' doctrine in contract formation. It establishes that a request for a formal written contract does not, by itself, prevent a binding agreement from being formed through informal communications if there is a clear offer and acceptance on all essential terms. This holding is significant for business communications, confirming that informal exchanges like telegrams (or modern equivalents like email and text messages) can create legally enforceable obligations. The decision places the burden on the party wishing to avoid being bound until a formal document is signed to make that condition explicit in their communications.
