Youngstown Steel Erecting Co. v. MacDonald Engineering Co.
154 F.Supp. 337, 1957 U.S. Dist. LEXIS 3091 (1957)
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Rule of Law:
A reply to an offer that purports to accept it but is conditional on the offeror's assent to terms additional to or different from those offered is not an acceptance but is a counteroffer. A subsequent, unequivocal acceptance of that counteroffer creates a binding contract.
Facts:
- Defendant, a general contractor, was building nine cement storage silos for the Bessemer Limestone & Cement Company.
- Plaintiff, a steel construction company, learned of the project and sought a subcontract to place the reinforcing steel rods.
- On July 6, 1955, Plaintiff mailed a written proposal to Defendant offering to perform the work for $55.00 per ton.
- On July 8, 1955, Defendant replied by letter, stating its 'understanding' that it would provide certain equipment under specific conditions and that Plaintiff would be responsible for furnishing certain supports, and concluded by asking, 'Please advise us if this is your understanding.'
- On July 10, 1955, Plaintiff sent a registered letter to Defendant stating, 'We accept all terms stated in your letter of July 8, 1955... Thank you for your business.'
- After receiving Plaintiff's July 10th letter, Defendant, without notifying Plaintiff, awarded the subcontract to another company, Bruce Campbell Construction Company.
Procedural Posture:
- Plaintiff filed a lawsuit against Defendant for breach of contract in the Common Pleas Court of Cuyahoga County, Ohio (a state court of first instance).
- Defendant removed the case to the United States District Court based on diversity of citizenship.
- The case was tried by the court without a jury.
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Issue:
Does a series of letters, where an initial offer is met with a reply containing additional terms, and that reply is then unequivocally accepted, create a binding contract?
Opinions:
Majority - Weick, District Judge
Yes. A binding contract was formed through the correspondence between the parties. The court reasoned that Plaintiff's letter of July 6th constituted a definite offer. Defendant's reply on July 8th was not an acceptance under the mirror image rule because it imposed additional terms regarding equipment usage and material supply; it was therefore a counteroffer. Plaintiff's letter of July 10th was an unequivocal acceptance of that counteroffer, which created a manifestation of mutual assent and formed a binding contract. Defendant's subsequent action of awarding the work to another contractor without notice constituted a breach of this contract.
Analysis:
This case provides a clear illustration of fundamental contract formation principles, specifically the 'mirror image rule' and the concept of a counteroffer. The decision reinforces that a reply to an offer must be an unconditional acceptance of its terms to form a contract; any variation creates a counteroffer that the original offeror must then accept. It highlights that a contract can be formed through a series of communications, even without a single formal document, and that a party cannot silently disregard a clear acceptance of its own counteroffer. The case is a foundational example for students learning about offer, acceptance, and mutual assent.
