Farley v. Champs Fine Foods, Inc.
1987 N.D. LEXIS 299, 404 N.W.2d 493 (1987)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
An offeror's revocation of an offer is effective when communicated to the offeree. If the revocation is communicated before the offeree dispatches their acceptance, the offeree's power of acceptance is terminated and no contract is formed.
Facts:
- Champs Fine Foods, Inc. (Champs) hired Dennis Farley to manage several of its restaurants under an employment agreement that included a stock purchase option.
- Champs' parent company, Champs, Ltd., rejected Farley's attempt to exercise the option, leading to new negotiations for the purchase of the business.
- On June 3, 1983, Farley submitted a detailed purchase agreement to Oscar Grubert, an executive for Champs, which Grubert rejected.
- On August 2, 1983, Farley submitted a revised proposal, which Grubert also rejected.
- On September 12, 1983, Grubert sent Farley a letter outlining potential sale terms, including a price of $550,000 in cash, and stated a conclusion must be reached by October 1, 1983.
- On September 28, 1983, Grubert and Farley had a telephone conversation during which Grubert told Farley he was not going to enter into any agreement with him.
- Also on September 28, 1983, Farley mailed a letter to Grubert stating his acceptance of the $550,000 cash term from the September 12 letter.
Procedural Posture:
- Dennis Farley filed an action against Champs Fine Foods, Inc. in district court (trial court).
- Farley sought the remedy of specific performance to compel Champs to sell him four restaurants.
- Following a bench trial, the district court found in favor of Champs and dismissed Farley's action.
- Farley (appellant) appealed the district court's judgment to the Supreme Court of North Dakota, with Champs as the appellee.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Is an offeror's oral revocation, communicated to the offeree before the offeree dispatches an acceptance, effective at terminating the offer?
Opinions:
Majority - Gierke, Justice
Yes. An offeror's oral revocation communicated to the offeree before the dispatch of acceptance effectively terminates the offer. The court affirmed the trial court's finding of fact that Grubert's oral revocation during the September 28 telephone call occurred before Farley mailed his letter of acceptance. While an acceptance is effective upon dispatch under the mailbox rule (codified in § 9-03-19, N.D.C.C.), a revocation is effective upon communication to the offeree. Because the trial court's finding on the sequence of events was not clearly erroneous, the offer was effectively revoked before Farley's purported acceptance was dispatched. Therefore, no enforceable contract was formed.
Analysis:
This case serves as a classic illustration of the timing rules for offer, acceptance, and revocation in contract law. It reinforces the principle that while the mailbox rule protects the offeree by making acceptance effective upon dispatch, a revocation is only effective upon receipt by the offeree. The decision was ultimately determined by a finding of fact regarding the precise timing of the oral revocation versus the mailing of the acceptance. The case underscores the critical importance of factual determinations at the trial level and the deferential 'clearly erroneous' standard of review that appellate courts apply to such findings.
