Los Angeles Traction Co. v. Wilshire
67 P. 1086, 1902 Cal. LEXIS 863, 135 Cal. 654 (1902)
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Rule of Law:
An offer for a unilateral contract becomes irrevocable once the offeree commences performance by incurring significant costs and obligations in reliance on the offer, thereby transforming it into a binding bilateral contract. When no time for performance is specified in a contract, performance must be completed within a reasonable time, and the burden is on the party alleging unreasonableness to prove it.
Facts:
- Appellants, including Wilshire, and other property owners, signed a written instrument promising to pay $2,000 to the Los Angeles Traction Company.
- The payment was conditioned on the completion of a double-track street railway by the Los Angeles Traction Company to the intersection of Seventh and Hoover Streets.
- This instrument, along with an escrow agreement detailing the railway's route and terms, was placed in escrow with Citizens’ Bank, stating the notes would be delivered to the Traction Company upon completion and operation of the line.
- On the faith of these instruments, the Los Angeles Traction Company, in November 1895 (less than four months after the agreement), paid $1,505 to the city for a franchise to construct the road over the agreed course within city limits.
- Before April 28, 1896, the Los Angeles Traction Company commenced work on the railway, but work was not diligently prosecuted until after July 1, 1897.
- On July 1, 1897, appellants served a written notice on the Los Angeles Traction Company stating they did not recognize any liability, asserting the road had not been completed within an agreed-upon time.
- Soon after receiving this notice, the Los Angeles Traction Company actively engaged in construction and completed the road, commencing operation to Seventh and Hoover Streets, as provided in the instruments, before the end of 1897.
- The Los Angeles Traction Company's construction included using an existing track of another street-railway company for approximately 1,800 feet and building a single track at a corner where a double track was generally specified.
Procedural Posture:
- The Los Angeles Traction Company (plaintiff) sued the appellants (defendants) in state trial court for the promised payment of $2,000, plus interest and attorney’s fees.
- The trial court found in favor of the Los Angeles Traction Company and entered judgment for the requested amount.
- The appellants appealed this judgment and from an order denying their motion for a new trial to the California Supreme Court.
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Issue:
Does a unilateral offer become a binding, enforceable bilateral contract that cannot be unilaterally withdrawn once the offeree begins performance by incurring significant costs and obligations? And, can a party claim failure of consideration or breach if the performance is not completed within an 'agreed upon' time when no such time was specified in the contract, and performance is completed within a reasonable time?
Opinions:
Majority - Gray, C.
Yes, a unilateral offer becomes a binding and enforceable bilateral contract that cannot be unilaterally withdrawn once the offeree begins performance by incurring significant costs and obligations. No, there is no failure of consideration or breach if performance is not completed within an 'agreed upon' time when no such time was specified, and performance is completed within a reasonable time, especially when the party seeking to withdraw the offer provides no evidence of unreasonable delay or damages. The court determined that the contract was based solely on the written instruments, which did not specify a time for completion, thereby rejecting appellants' claims of oral agreements. The contract, initially a unilateral offer, ripened into a binding, enforceable bilateral obligation when the Los Angeles Traction Company accepted and acted upon it by purchasing a franchise for over $1,500. This partial performance made the offer irrevocable, and the appellants' subsequent notice of withdrawal was ineffectual because it was based on a non-existent 'agreed time' and came too late after the parties' obligations had become fixed. Any rescission would have required making the other party whole. Regarding the lack of a specified completion time, the court found that the plaintiff 'duly performed all and singular the acts and conditions,' which implied performance within a reasonable time. The appellants failed to present any evidence to show the work was not completed within a reasonable time or that they suffered damages due to delay; the court noted it could not take judicial notice of the complexities of railway construction. Furthermore, the court found the Los Angeles Traction Company complied with the contract terms regarding construction by reasonably interpreting the requirements, such as using existing tracks for a short distance (in accordance with Civil Code § 499) and constructing a single track at a corner where it was the most practical and usual way for a double-track railway.
Analysis:
This case is a foundational precedent affirming that an offer for a unilateral contract becomes irrevocable upon the offeree's commencement of performance, effectively converting it into a bilateral contract. It emphasizes that significant reliance and part performance, particularly through financial investment, cement contractual obligations. The ruling also clarifies that when a contract lacks a specific timeline for performance, the law implies a 'reasonable time,' placing the evidentiary burden on the party alleging a breach due to unreasonable delay to provide specific facts and evidence of detriment.
