Dataserv Equipment, Inc. v. Technology Finance Leasing Corp.
364 N.W.2d 838, 1985 Minn. App. LEXIS 4065, 40 U.C.C. Rep. Serv. (West) 1627 (1985)
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Rule of Law:
A rejection terminates the power of acceptance, and once an offer is rejected or a counteroffer is made, the original offer cannot be subsequently accepted without ratification by the offeror.
Facts:
- Technology Finance Group, Inc. (Technology), a Nevada corporation based in Connecticut, and Dataserv Equipment, Inc. (Dataserv), a Minnesota corporation based in Minneapolis, are dealers in new and used computer equipment.
- Around August 29, 1979, Dataserv's Jack Skjonsby telephoned Technology's Ron Finerty in Connecticut and proposed to sell certain IBM computer "features" to Technology for $100,000.
- On August 30, 1979, Finerty (Technology) sent Skjonsby (Dataserv) a written offer to purchase the features.
- On September 6, 1979, Dataserv sent Technology a proposed contract form, which included a non-standard "In-depth Clause" (clause 8) for installation by a third party and stipulated that any acceptance containing additional or inconsistent conditions would be a counteroffer.
- On October 1, Finerty wrote to Skjonsby stating three changes "need to be made" in the contract, one of which was the deletion of clause 8, and concluded with, "Let me know and I will make the changes and sign."
- Later in October 1979, Dataserv offered to accept any other third-party installation company Technology would designate in substitution for Indepth, but Technology never agreed to this.
- On November 8, 1979, Dataserv by telephone offered to remove the Indepth clause from the contract form, to which Technology responded that it was "too late" and that there was no deal.
- On November 9, 1979, Finerty called Dataserv and informed them that "the deal was not going to get done because they’d waited until too late a point in time."
- On November 13, 1979, Finerty responded by telex, stating that Technology's offer to purchase had been withdrawn on November 9, 1979, because Dataserv had not positively responded to the requested contract changes.
Procedural Posture:
- Dataserv Equipment, Inc. sued Technology Finance Group, Inc. in district court (trial court/court of first instance).
- Technology Finance Group, Inc. filed an Answer and pretrial motion claiming the court lacked personal jurisdiction over it.
- The trial court denied Technology Finance Group, Inc.'s motion on February 20, 1981, finding it had jurisdiction.
- At trial, the parties stipulated that Dataserv telephonically offered to remove the Indepth Clause on November 8, 1979.
- The trial court found that Dataserv's November 8, 1979, telephone call operated as an acceptance of Technology Finance Group, Inc.'s counteroffer, thereby establishing a contract.
- The trial court further found that Technology Finance Group, Inc. breached the contract as of November 15, 1979, and awarded Dataserv $74,000 in damages plus interest.
- Technology Finance Group, Inc. appealed the district court's judgment to the Minnesota Court of Appeals.
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Issue:
Did the parties form a binding contract for the sale of computer equipment when one party responded to a counteroffer by conditionally accepting some terms but insisting on others, followed by a delayed attempt to accept the original counteroffer after its withdrawal?
Opinions:
Majority - Wozniak, Judge
No, the trial court erred in finding that the parties entered into a contract. The court affirmed the trial court's finding of personal jurisdiction over Technology, determining that Technology had sufficient minimum contacts with Minnesota—including a sales office, equipment leases, and the specific telephone and mail contacts related to the transaction. Applying the `Aftanase` five-factor test, the court concluded Technology's purposeful behavior meant it should have reasonably anticipated being sued in Minnesota, satisfying due process. Regarding contract formation, the court found that Dataserv's response to Technology's October 1 counteroffer was not an acceptance but a rejection because Dataserv agreed to delete only two of the three objectionable clauses while insisting on a modified third (the Indepth Clause). Under established contract law principles (Restatement (Second) of Contracts § 380; `Nodland v. Chirpich`), a party's rejection terminates its power of acceptance, and once rejected, an offer cannot be subsequently accepted without ratification by the offeror. Dataserv's later offer in October to substitute a different installer also operated as a termination of its power to accept. Therefore, Dataserv's November 8 attempt to 'accept' by offering to delete clause 8 was legally ineffective, functioning only as a new offer which Technology immediately rejected. The court also noted that while `Minn.Stat. § 336.2-204` does not always require a signed agreement, where parties know that a written contract execution is a condition precedent, no binding contract forms until executed (`Staley Manufacturing Co. v. Northern Cooperatives, Inc.`).
Analysis:
This case is significant for its application of fundamental contract principles, particularly the effect of counteroffers and rejections on the power of acceptance. It clarifies that a party cannot unilaterally revive a previously rejected offer by attempting to accept it at a later date, especially after the offeror has expressed that the deal is off due to unaddressed conditions. The ruling underscores the importance of clear, unambiguous acceptance of all material terms for a contract to be formed, demonstrating that extensive negotiations do not automatically ripen into a binding agreement without a definitive meeting of the minds on all essential terms.
