Davis v. Satrom
383 N.W.2d 831, 1986 N.D. LEXIS 283 (1986)
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Rule of Law:
An acceptance of an offer for the sale of real property must be unqualified and absolute to form a contract; any modification or addition of terms constitutes a counteroffer. Furthermore, if an agreement is made conditional upon the approval of a third party, such as an attorney, the contract is not effective unless and until that approval is given.
Facts:
- Dwight W. Davis negotiated to purchase a mobile home park from Gayle E. Satrom and D.C. Blair.
- Davis submitted a 'letter of intent' with various terms, which Blair then altered and returned.
- Following more negotiations, Davis submitted an unsigned 'commercial purchase agreement and deposit receipt' containing new terms.
- Blair signed this agreement but inserted several additional handwritten conditions, including one making the agreement subject to the approval of the sellers' attorney.
- The sellers' attorney reviewed the agreement and did not approve it, citing potential unfavorable tax consequences for his clients.
- Blair informed Davis that they were unwilling to proceed with the transaction.
- Davis then sent a letter stating he was ready to perform under the terms of the agreement Blair had signed and enclosed a $10,000 check, which Satrom returned uncashed.
Procedural Posture:
- Dwight W. Davis sued Gayle E. Satrom and D.C. Blair in district court (trial court), seeking specific performance of the alleged contract or damages for breach.
- The defendants moved for summary judgment, arguing no enforceable contract existed.
- The district court granted summary judgment in favor of Satrom and Blair, dismissing Davis's complaint.
- Davis (appellant) appealed the summary judgment dismissal to the North Dakota Supreme Court.
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Issue:
Does a binding contract for the sale of real property exist when a purported acceptance contains additional terms and is made subject to a condition precedent, such as attorney approval, that is not fulfilled?
Opinions:
Majority - Erickstad, Chief Justice
No, a binding contract does not exist under these circumstances. To form a contract, there must be a meeting of the minds and an unqualified, absolute acceptance of an offer. In this case, the series of negotiations involved multiple counteroffers, not a final acceptance. Davis's initial letter was an offer; Blair's modifications were a counteroffer. Davis's subsequent purchase agreement was another counteroffer, and Blair's signing with handwritten additions was yet another counteroffer. There was never a 'mirror image' acceptance. Furthermore, even if Davis had accepted Blair's final counteroffer, it was subject to the condition precedent of approval by the sellers' attorney. Since the attorney reasonably withheld approval, this condition was not met, and the contract never became effective or operative.
Analysis:
This case reaffirms two foundational principles of contract law: the mirror image rule and the doctrine of conditions precedent. The decision illustrates that in real estate negotiations, any deviation from the terms of an offer constitutes a counteroffer, thereby terminating the original offer. It also solidifies the legal power of attorney approval clauses, confirming that such a condition, unless waived or met, will prevent a contract from becoming enforceable. This holding provides a strong protection for parties who wish to have legal counsel review an agreement before being fully bound by its terms.
