Motel Services, Inc. v. Central Maine Power Co.
1978 Me. LEXIS 1021, 394 A.2d 786 (1978)
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Rule of Law:
An offer for a unilateral contract becomes irrevocable upon the offeree's part performance, and full performance entitles the offeree to payment, even if the offeree's status changes during performance or the offeror's actions impede final formalities, provided the offeror ultimately receives the bargained-for product.
Facts:
- On August 5, 1971, Motel Services, Inc. (appellant) entered into an agreement with Waterville Housing Authority (WHA) to build two housing projects on a “turnkey” basis.
- Motel Services sought to change the construction specifications from oil to electrical heating to qualify for a promotional allowance offered by Central Maine Power Company (CMP) to 'owners' who initially built for or converted to electric heating.
- Motel Services, with CMP's assistance, demonstrated electric heating's economy and promised WHA a $16,000 reduction in its contract price if the change was approved, with approximately $8,000 of this reduction stemming from its expectation of receiving CMP's allowance.
- Motel Services installed the electrical heating system and completed approximately 90% of CMP's required standards for the allowance.
- Prior to April 1, Motel Services conveyed both premises to WHA, before fully complying with all CMP standards, primarily to avoid an imminent property tax imposition.
- After the conveyance, the projects were completed to the full satisfaction of WHA and in compliance with all CMP's electric heating standards.
- A CMP employee, unaware Motel Services expected the allowance, sent the appropriate claim forms and subsequently the allowance payment to WHA, who was the owner on the date of project completion.
Procedural Posture:
- Motel Services, Inc. brought an action against Central Maine Power Company (CMP) in a court of first instance, heard by a single Justice, sitting without a jury.
- CMP sued Waterville Housing Authority (WHA) in a third-party action, seeking return of the allowance in the event of a judgment in Motel Services' favor.
- The presiding Justice found that Motel Services had not fully complied with the requirements of the allowance policy prior to conveying the property and ruled in favor of CMP, concluding that no enforceable contract was produced.
- The third-party action by CMP against WHA was dismissed.
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Issue:
Does an offeror of a unilateral contract owe a promotional allowance to an offeree who began performance as an owner, but transferred ownership before all construction standards were met and was prevented by the offeror from completing the final claim forms?
Opinions:
Majority - Pomeroy, Justice
Yes, CMP is obligated to pay Motel Services the allowance. The court correctly characterized CMP’s marketing policy as an offer to enter into a unilateral contract. The offer was accepted, forming a binding contract, by Motel Services' part performance, specifically by undertaking to install the electric heating system in accordance with CMP's policy while Motel Services was the owner of the homes. This part performance rendered CMP's offer irrevocable, in line with Brackenbury v. Hodgkin and Restatement (2nd) of Contracts § 45. Motel Services' failure to complete the final allowance forms is not a defense for CMP, as CMP's own actions (sending forms to WHA) prevented Motel Services from completing this step. Furthermore, Motel Services' change in ownership status after acceptance but before full completion does not preclude recovery. The status of 'owner' was relevant at the point when the offer was irrevocably accepted. Once accepted, a binding unilateral contract came into being, contingent only upon full performance. Since CMP received what it had bargained for—a home with an electric heating system installed according to its standards—the change in ownership status does not affect recovery. WHA is not entitled to the allowance because it had no prior knowledge of the offer and provided no consideration.
Analysis:
This case significantly clarifies the principles of unilateral contracts, emphasizing that an offer becomes irrevocable upon the offeree's part performance, which creates a binding contract contingent on full performance. It establishes that an offeror cannot prevent an offeree from completing performance and then use that prevention as a defense against payment. Furthermore, the decision provides an important precedent that a change in the offeree's status after acceptance does not necessarily nullify a unilateral contract, especially if the offeror ultimately receives the bargained-for product as specified in the offer. This impacts future cases by reinforcing the enforceability of unilateral contracts once performance has commenced and by limiting an offeror's ability to avoid obligations based on subsequent changes in the offeree's circumstances.
