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Marchiondo v. Scheck

Supreme Court of New Mexico
432 P.2d 405 (1967)
ELI5:

Rule of Law:

Part performance by an offeree of an offer for a unilateral contract creates an option contract, making the offer irrevocable for the time stated. The offeror's duty to perform is then conditional upon the offeree's full performance within the specified time.


Facts:

  • Defendant, a property owner, made a written offer to sell real estate to a specific prospective buyer.
  • The offer included a promise to pay a commission to the Plaintiff, a real estate broker, upon the sale of the property.
  • The offer stipulated a six-day time limit for acceptance.
  • On the morning of the sixth day, Defendant delivered a written revocation of the offer to the Plaintiff broker.
  • Later on that same day, after the revocation was received, the Plaintiff broker secured the prospective buyer's acceptance of the Defendant's original offer.

Procedural Posture:

  • Plaintiff (broker) sued Defendant (property owner) for breach of contract in the trial court, seeking to recover the commission.
  • The trial court, finding for the Defendant, dismissed the Plaintiff's complaint.
  • The Plaintiff appealed the trial court's dismissal to the Court of Appeals.

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Issue:

Does an offeror have the right to revoke an offer to enter into a unilateral contract after the offeree has commenced performance but before that performance is complete?


Opinions:

Majority - Wood, Judge

No. An offeror does not have the right to revoke an offer for a unilateral contract once the offeree has begun performance. The court adopts the modern rule articulated in the Restatement of Contracts, § 45, which states that once an offeree begins performance in response to an offer for a unilateral contract, an option contract is created. This option contract makes the original offer irrevocable for the time stated in the offer, or for a reasonable time if no time is stated. The offeror’s duty to perform (e.g., pay the commission) is then conditional upon the offeree completing the performance as specified in the offer. This rule avoids the injustice of allowing an offeror to revoke an offer after an offeree has expended time and effort in reliance upon it. Therefore, the defendant's right to revoke depended on the factual question of whether the plaintiff had partially performed before receiving the revocation.



Analysis:

This decision formally adopts the modern rule from the Restatement (Second) of Contracts § 45, moving away from the classical contract law principle that an offer for a unilateral contract could be revoked at any time before full performance. By treating partial performance as the creation of an option contract, the court provides significant protection to offerees who rely on such offers. The ruling establishes a new precedent in the jurisdiction that prevents an offeror from revoking an offer after the offeree has invested time and resources into performance. Future litigation in this area will now focus on the factual determination of what actions constitute the 'beginning of performance' sufficient to create an irrevocable option.

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