P owned real estate and took out a mortgage from D against the property. The mortgage had 5 years remaining before it came due.
D wrote P and said that he would knock $780 off the mortgage if the mortgage is paid on or before May 31 and the regular quarterly payment due in April is made on time.
P made the April payment on time.
P went to D's house in late May to pay off the remainder of the mortgage. D refused to accept payment from P and told P he had sold the mortgage to a third party. Thus, P lost the $780 discount he would have gotten.
P sued D for this amount.
Procedural History:
Lower court found for P, contract was binding.
NY Appellate Court affirmed, found for P.
NY COA reversed, found for D, contract was not formed.
Issues:
Can an offeror in a unilateral contract revoke the offer at any time before performance?
Holding/Rule:(DEPRECATED)
An offeror in a unilateral contract may revoke the offer at any time before performance.
Reasoning:
The act requested to be done by the offeror was payment in full of the reduced principal prior to the due date. The offeree was not able to do this, so no contract was formed. (It was the offeree that prevented this though!)
It is elementary that any offer to enter into a unilateral contract may be withdrawn before the act requested to be done has been performed.
If the offeror can say "I revoke" before the offeree accepts, however brief the interval of time between the two acts, there is no escape from the conclusion that the offer is terminated.
An offer to sell property may be withdrawn before acceptance without any formal notice to the person to whom the offer is made.
We think that in this particular instance the offer of the D was withdrawn before it became a binding promise, and no contract was ever made for the breach that the P claims.
Dissent:
It is a principle of fundamental justice that if a promisor is himself the cause of the failure of performance wither of an obligation due him or of a condition upon which his own liability depends, he cannot take advantage of the failure.
If the D intended to induce payment and yet reserve the right to refuse payment when offered, he should have used a phrase better calculated to express his meaning than the words "I agree to accept".
Notes:
This rule is deprecated; this case would be decided differently today.
From the First Restatement...
§ 45. Revocation of Offer for Unilateral Contract; Effect of Part Performance or Tender. "If an offer for a unilateral contract is made, and part of the consideration requested in the offer is given or tendered by the offeree in response thereto, the offeror is bound by a contract, the duty of immediate performance of which is conditional on the full consideration being given or tendered within the time stated in the offer, or, if no time is stated, within a reasonable time."
