Port Huron MacHinery Co. v. Wohlers
207 Iowa 826, 221 N.W. 843 (1928)
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Rule of Law:
An offer that invites acceptance by performance (a unilateral contract) is accepted, and a binding contract is formed, when the offeree performs the requested act. For an order of goods, the act of shipping the goods constitutes acceptance, making the offeror's subsequent attempt to revoke the offer ineffective.
Facts:
- On July 18, 1927, Wohlers signed a written order for the purchase of farm machinery from Port Huron Machinery Co.
- The order directed Port Huron to ship the goods to Wohlers and specified the price of $1,562.50.
- The order included a liquidated damages clause requiring Wohlers to pay 10% of the list price and shipping costs if he failed to accept the machinery.
- Immediately after the order was signed, Port Huron's agent telephoned the company, and the order was relayed for fulfillment.
- On July 20, 1927, Port Huron shipped the machinery to Wohlers in accordance with the terms of the order.
- On July 21, 1927, Wohlers sent a telegram to Port Huron attempting to cancel the order.
- Port Huron received the cancellation telegram on July 22, 1927, after the goods had already been shipped.
- Wohlers subsequently refused to accept delivery of the machinery.
Procedural Posture:
- Port Huron Machinery Co. sued Wohlers in an Iowa trial court to enforce the contract's liquidated damages clause.
- At the close of the plaintiff's case, both parties moved for a directed verdict.
- The trial court sustained the plaintiff's motion and entered a judgment in favor of Port Huron Machinery Co.
- Wohlers, as the appellant, appealed the trial court's judgment to the Supreme Court of Iowa.
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Issue:
Does shipping goods in response to a purchase order constitute an acceptance that forms a binding contract, even if that acceptance is not separately communicated to the offeror before they attempt to revoke the offer?
Opinions:
Majority - De Graff, J.
Yes. Shipping goods in response to a purchase order constitutes acceptance and forms a binding unilateral contract. The court reasoned that Wohlers' purchase order was an offer inviting acceptance by an act—the shipment of the goods—not by a return promise. This created a unilateral contract. In such contracts, the performance of the requested act serves as both the acceptance and the consideration, and separate communication of acceptance is not required. Port Huron accepted the offer and formed a binding contract on July 20 when it shipped the machinery. Therefore, Wohlers' attempted revocation on July 21 was too late and legally ineffective. Citing precedents like Hankins v. Young, the court affirmed that the delivery of goods pursuant to an order is an acceptance of that order.
Analysis:
This case provides a clear illustration of acceptance by performance in the context of a unilateral contract for the sale of goods. It reinforces the distinction between unilateral contracts (promise for an act) and bilateral contracts (promise for a promise), clarifying that communication of acceptance is not essential for the former. The decision gives legal protection to sellers who promptly act on purchase orders, establishing that their performance of shipping the goods locks in the contract. This precedent is significant for commercial transactions, as it provides sellers with certainty that once they begin performance, the buyer cannot unilaterally withdraw from the agreement.
