Rhode Island Tool Company v. United States
128 F. Supp 417, 130 Ct. Cl. 698, 1955 U.S. Ct. Cl. LEXIS 61 (1955)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
When postal regulations allow a sender to recall a mailed communication before delivery, a contractual acceptance is not effective until it is received by the offeror, modifying the traditional 'mailbox rule' that an acceptance is effective upon dispatch.
Facts:
- The U.S. Navy (defendant) issued an invitation for bids on two types of bolts: 'stud bolts' and the more expensive 'machine bolts'.
- The plaintiff's sales manager, failing to notice the change in description from stud to machine bolts on the third page of the invitation, calculated and submitted a bid based on the lower price of stud bolts for all items.
- The defendant awarded the plaintiff the contract for the machine bolts (items 13-15) at the erroneously low price.
- On Friday, October 1, 1948, the plaintiff discovered its calculation error.
- On Monday, October 4, 1948, the plaintiff's representative telephoned the Navy Supply Office to inform them of the error and formally withdraw the bid.
- Later that same day, October 4, the plaintiff sent a telegram to the Navy confirming the withdrawal of its bid.
- Also on October 4, the defendant mailed a formal notice of award to the plaintiff.
- The plaintiff received the defendant's notice of award after it had already telephoned and telegraphed its withdrawal.
Procedural Posture:
- Plaintiff filed suit in the U.S. Court of Claims to recover $1,640.60, asserting that it had made a mistake in its bid and had successfully withdrawn it before a binding contract was formed.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Is an acceptance of an offer effective upon mailing, thereby forming a binding contract, when the offeror notifies the offeree of a mistake and withdraws the offer after the acceptance is mailed but before it is received?
Opinions:
Majority - Jones, C.J.
No. A binding contract had not yet been made because the acceptance was not effective until received. The traditional 'mailbox rule,' which makes acceptance effective upon dispatch, was based on the premise that a sender lost control of a letter once it was mailed. However, modern U.S. Postal regulations allow the sender to recall a letter at any point before its actual delivery. Because the sender retains control, the post office acts as the sender's agent, and the acceptance is therefore not final until it reaches its destination. Since the plaintiff notified the defendant of its mistake and withdrew its bid before receiving the notice of award, no contract was formed. Furthermore, the defendant's own invitation for bids specified that the award would become a binding contract when 'received' by the bidder, reinforcing the court's interpretation.
Dissenting - Whitaker, J.
Yes. A binding contract was formed when the notice of award was mailed. The plaintiff's bid included a promise to keep the offer open for 20 days, which is a binding agreement. A unilateral mistake by the plaintiff is insufficient to invalidate this agreement; only a mutual mistake would suffice. There was no evidence that the defendant knew or should have known of the plaintiff's mistake, as there were wide variations in the bids. Therefore, the plaintiff's withdrawal was ineffective, and a contract was formed upon the mailing of the acceptance.
Analysis:
This decision marks a significant judicial modification of the common law 'mailbox rule' in light of modern regulatory changes. By tying the effectiveness of an acceptance to the sender's ability to control the communication, the court shifted the moment of contract formation from dispatch to receipt. This ruling prioritizes the prevention of unjust enrichment resulting from a known mistake over the rigid application of an outdated legal formality. The case serves as a precedent for adapting traditional contract principles to new technological or regulatory realities that alter the underlying assumptions of those principles.
