Roth v. Malson
79 Cal.Rptr.2d 226 (1998)
Rule of Law:
A purported acceptance of an offer that is communicated in a form designated as a counteroffer constitutes a new proposal, not a valid acceptance, because contract formation is governed by objective manifestations of intent. Courts will treat a document as what it says it is, rather than comparing its substantive terms to the original offer.
Facts:
- George E. Malson authorized Stromer Realty to sell his 23.8-acre property.
- On October 25, 1995, John Roth submitted a written offer to buy the property for $41,650.
- On November 2, 1995, Malson responded with a written counteroffer on a standard realtor form for a price of $44,000, which was set to expire on November 8, 1995.
- The standard form provided a specific section for 'Acceptance' and a separate, distinct section below it labeled 'Counter to Counter Offer'.
- On November 6, 1995, Roth signed the form in the section labeled 'Counter to Counter Offer' instead of the 'Acceptance' section.
- In the 'Changes/Amendments' portion of the 'Counter to Counter Offer' section, Roth handwrote 'Price to be 44,000.00 as above. Escrow to close on or before Dec. 6, 1995. All cash', which were terms identical to Malson's counteroffer.
- Roth returned the signed form to the real estate agent before the November 8 expiration date.
- On November 16, 1995, Malson, through his attorney, informed the agent that he was rejecting Roth's counter-counteroffer and taking the property off the market.
Procedural Posture:
- John Roth sued George E. Malson in the trial court, seeking specific performance and damages for breach of contract.
- Both parties filed cross-motions for summary judgment.
- The trial court denied Roth's motion and granted Malson's motion for summary judgment, concluding no contract had been formed.
- A final judgment was entered in favor of Malson.
- Plaintiff John Roth (appellant) appealed the judgment to the Court of Appeal of California.
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Issue:
Does a response to a counteroffer constitute a valid acceptance when it is signed in the section of a standardized form designated 'Counter to Counter Offer' and includes handwritten terms, even if those terms do not materially vary from the counteroffer?
Opinions:
Majority - Sims, Acting P. J.
No. A response to a counteroffer does not constitute a valid acceptance when it is made using the portion of the form designated for a counter-counteroffer. Contract formation is governed by objective manifestations of consent, not the subjective intent of the parties. A reasonable person viewing the document would conclude that by signing in the 'Counter to Counter Offer' section and adding handwritten terms under 'Changes/Amendments,' the party was making a new proposal that required a response, rather than unconditionally accepting the existing offer. The court, relying on Krasley v. Superior Court, held that a document labeled as a counteroffer should be treated as such to avoid ambiguity and the 'game-playing' that would result from courts having to compare terms to determine if they materially vary. This objective approach provides clarity and predictability, especially when using standardized forms.
Dissenting - Raye, J.
Yes. A valid contract was formed because the substance of the response, not its form, should control the outcome. The majority's bright-line rule is overly formalistic and ignores the reasonable expectations of the parties. Roth's response, though placed in the wrong section of the form, did not change, add to, or qualify any terms of the offer; it merely reaffirmed the critical terms, manifesting an unconditional agreement. The failure to specify an expiration date for the 'counter-counteroffer' further indicates that no response was expected and that Roth intended to accept. Contract law should focus on whether there was a clear, positive, and unambiguous intent to be bound, which Roth's actions demonstrated, rather than penalizing a party for a clerical error on a preprinted form.
Analysis:
This case solidifies a formalist, objective approach to contract formation, particularly in the context of standardized real estate forms. By prioritizing the explicit structure and labels of the form over the substantive alignment of the terms, the decision establishes a bright-line rule: a response presented as a counteroffer is a counteroffer. This holding enhances predictability and certainty in transactions, discouraging litigation over subjective intent or minor deviations in form. However, it also creates a risk that a contract will not be formed due to a simple clerical mistake, even when the parties' substantive intentions appear to have aligned.
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