Lonergan v. Scolnick
1954 Cal. App. LEXIS 1580, 276 P.2d 8, 129 Cal. App. 2d 179 (1954)
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Rule of Law:
A communication is not a contractual offer if the recipient knows or has reason to know that the person making it does not intend it as a final expression of purpose until they give a further expression of assent.
Facts:
- In March 1952, Defendant placed a newspaper advertisement to sell a 40-acre property, stating 'need cash, will sacrifice.'
- On March 26, 1952, in response to an inquiry, Defendant sent Plaintiff a 'form letter' describing the property and stating his 'rock-bottom price is $2,500 cash.'
- On April 7, 1952, Plaintiff wrote to Defendant asking for the property's legal description and other details.
- On April 8, 1952, Defendant replied with the legal description and stated, 'If you are really interested, you will have to decide fast, as I expect to have a buyer in the next week or so.'
- On April 12, 1952, Defendant sold the property to a third party.
- On April 14, 1952, Plaintiff received Defendant's letter of April 8.
- On April 15, 1952, Plaintiff wrote to Defendant stating he would open an escrow to deposit $2,500 'in conformity with your offer.'
- On April 17, 1952, Plaintiff initiated an escrow, depositing $100.
Procedural Posture:
- Plaintiff sued Defendant in the trial court for specific performance of an alleged land sale contract or, in the alternative, for damages.
- By stipulation, the trial court first decided the issue of whether a contract had been formed.
- The trial court found that the parties did not enter into a contract and entered a judgment in favor of the Defendant.
- Plaintiff, as the appellant, appealed the judgment to the Court of Appeal.
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Issue:
Does a series of communications, including a newspaper advertisement, a form letter stating a 'rock-bottom price,' and a follow-up letter urging a potential buyer to 'decide fast' because other buyers are expected, constitute a binding offer to sell real property?
Opinions:
Majority - Barnard, P. J.
No, a series of communications indicating that a seller is merely soliciting interest and reserving the right to make a final decision does not constitute a binding offer. There can be no contract unless the minds of the parties have met and mutually agreed upon a specific thing. Here, the defendant's communications were preliminary negotiations, not a definite offer. The newspaper advertisement was a mere request for an offer. The 'form letter' and the 'rock-bottom price' were informational. Crucially, the defendant's statement that he 'expect[ed] to have a buyer in the next week or so' and that the plaintiff would have to 'decide fast' indicated an intent to sell to the 'first-comer' and reserved the right to do so. This language clearly signaled to the plaintiff that a further expression of assent from the defendant was required to form a contract, thus precluding the existence of a binding offer.
Analysis:
This case clarifies the distinction between a binding offer and preliminary negotiations in contract formation. It reinforces the objective theory of contracts, where the offeror's intent is judged by what a reasonable person in the offeree's position would understand from the communications. The decision establishes that language indicating the offeror is entertaining other potential buyers or reserves the right to make a final choice negates the 'expression of fixed purpose' required for an offer. This precedent is crucial for cases involving advertisements and multi-party negotiations, emphasizing that mere price quotes and calls for quick action do not automatically create a power of acceptance.
