HITE & RAFETTO v. SAVANNAH ELECTRIC CO., 164 F. 944

SHELBY, Circuit Judge (after stating the facts as above). The written offer of Hite & Rafetto, dated September 18, 1905, to sell the Monarch coal to the Savannah Electric Company, was accepted by the company. The terms of the contract were clearly shown by the written offer and the verbal acceptance. The sellers failing to furnish the coal as offered, the buyer bought elsewhere at an advanced price, and this action is to recover the difference between the agreed price and the price paid. The difference was $10,748.07, for which verdict and judgment were, given.

It is true that the written offer and the acceptance, if nothing more had occurred, would have made a valid contract. The case turns on occurrences which followed. It was agreed that the contract should be drafted in a more formal manner, and that several copies should be made, and that it should be signed by the parties to it. Mr. Nash, the agent of the buyer, it was agreed, was to rewrite the contract. It does not appear from the evidence admitted on the trial that Nash was authorized to make material alterations in the terms of tlie contract.

On September 19, 1905, the. day after the acceptance of the offer, Nash, having prepared the formal contract, sent it to the Dixon Lumber Company, and on Septem-her 21, 1905, a copy 'was sent to the sellers, Hite & Rafetto, at Baltimore, Md. The formal contract, as prepared by Nash, differed materially from the offer of September 18th. The several material variations are fully shown in the preceding statement of the case. The departures were to the advantage of the buyer, for whom Nash was the agent, and to the detriment of the sellers.

On October 14, 1905, the sellers wrote to the buyer, declining to accept the contract prepared by Nash, saying: “The form of contract which you sent us differs materially from the proposition as submitted by us under date of September 18th, and we cannot accept it, and, therefore, return it to you and withdraw our proposition.” The case depends on the question as to whether or not the sellers, on the facts, had the right to withdraw their proposition; or, to state the question differently, whether or not, on the facts, a contract of sale was made, which remains in force, by the offer and acceptance of September 18th.

A common method of entering into a contract is for one person to make an offer to another, and, if the latter accepts it, the contract is perfected. When a contract is claimed to have been made by correspondence, and not in a writing formally signed, the whole of what passes between the parties must be considered. Applying this rule, it has been held by the House of Lords that, though the first two letters of a correspondence seemed to constitute a complete contract, the court might consider subsequent letters and conversations, and reach the conclusion that no complete contract was established. Hussey v.

Horne-Payne, 4 App. Cas. 311. Where the parties orally, or otherwise, agree upon the terms of a contract, and there is final assent to it, the further agreement or intention to reduce it to a formal writing at a subsequent time does not, of itself, show that the contract is not to be binding unless formally reduced to writing and signed. Hodges v. Sublett, 91 Ala. 588, 8 South. 800.

Of course, when it appears, notwithstanding the meeting of the minds in verbal or other negotiations, that neither party is to be bound until a formal written contract is made and signed, in such case no contract would be in force until the formal writing was made and signed. Fredericks v. Fasnacht, 30 La. Ann. 117. The fact that it was agreed that Nash was to reduce the offer and acceptance to a formal writing, to be signed by the parties, did not suspend or rescind the contract, if one was made by the offer and acceptance.

If he had prepared a contract precisely in the terms of the written offer which he had before him, or if he had prepared one without material variance from the offer, and the seller had refused to accept it, the original offer and acceptance would not have been affected. The agreement to have the more formal writing, it has been held, could be looked to as evidence tending to show that the parties did not intend to bind themselves till the negotiations had been reduced to form. Ridgway v. Wharton, 6 H. L. Cas. 238; Wharton v. Stoutenburgh, 35 N. J. Eq. 266.

But, in the case at bar, there seems to have been sufficient reason for making a formal writing and several copies, and it could not be reasonably inferred that any agreement that had been made was to be in abeyance till the for-raal writing was signed. In Sanders v. Pottlitzer Bros. Fruit Co., 144 N. Y. 209, 39 N. E. 75, 29 L. R. A. 431, 43 Am. St.

Rep. 757, it was held, by a divided court, that letters and telegrams which constitute an offer and acceptance of a proposition complete in its terms may constitute a binding contract, although there is an understanding that the agreement shall be expressed in a formal writing, and one of the parties afterwards refuses to sign such an agreement without material modifications.

In that case, it appears from the statement in the opinion that the “plaintiffs did prepare and send on the contract precisely in the terms embraced in the foregoing correspondence.” The defendant was not satisfied with this, and returned it to the plaintiff. The court held the contract made by the previous correspondence binding. When Nash was authorized to reduce the offer and acceptance to a formal writing to be signed by the parties, it was, of course, incumbent on him to do it fairly and in good faith. He had the written proposition of sale to guide him,.

Immaterial variations would have been of no consequence. But, as we have seen, Nash prepared and presented a contract differing in several material points from the offer submitted to the buyer, and these differences were of a kind which were to the disadvantage of the sellers. The formal contract which he prepared is certainly not die proposhion and acceptance of September 18th. If we assume that the offer and acceptance is, prima facie, evidence of a contract, it is, of course, the contract embraced by the written offer and no other.

What is to be inferred by the preparation and presentation by Flash of the formal writing differing- in terms from the offer accepted? If he was acting in good faith, the writing prepared by him must be his

interpretation and construction of the offer to sell which had been accepted, and if that be true, with the written offer before us, we would be forced to conclude that there was nothing to show that the sellers had made the agreement as construed by Nash. This would lead to the conclusion that the minds of the contracting- parties had not met, and that, although the offer and its acceptance was apparently a completed contract, the subsequent occurrences showed that, in fact, there had not been an agreement.

But if the offer and its acceptance did, as matter of law, make a contract, it should not be held, and we do not hold, that the subsequent action of the buyer rescinded or canceled it. This plainly could not be done against the wishes of the sellers. Such action could not do more than extend to the sellers the opportunity to withdraw their offer.

If, on the other hand, we infer that the offer was so plain that Nash must have understood its terms, and that the formal writing prepared by him does not present his construction of the offer, hut that it is a counter proposition made by him, or an effort to obtain better terms than those embraced in the offer, what then should follow? If the offer and its acceptance was not binding on the buyer, it was not binding on the sellers; for it is axiomatic that, unless both are hound, neither will he bound. Bishop on Contracts, § 78. If the buyer was free to propose new terms, the sellers were free to decline them.

In suggesting new terms, the buyer, in effect, said that the offer and acceptance was not final. If not final as to the buyer, it could not be conclusive as to the sellers, and they were free to withdraw from the negotiations. Bristol, etc., Co. v. Maggs, 44 Ch. Div. L. R. 618; Johnson v. Latimer, 71 Ga. 470. See, also, Bellamy v. Debenham, 45 Ch. Div. R. R. 481; s. c., on appeal, 1 Ch. Div.

(1891) L. R. 412. The buyer should not be permitted to treat the negotiations as open for the purpose of seeking better terms, and, at the same time, hold them closed so as to bind the sellers if they fail to accept the proposed changes. When it proposes a contract materially variant from the offer, it takes the position that the acceptance of the offer was not unconditional and conclusive. The contract for the breach of which this suit is brought is the offer to sell and the acceptance of the offer. If they stood alone, as we have said, they would contain apparently all the elements of a contract.

It seems to us that we cannot be required to stop at the acceptance and refuse to consider what followed. Nash immediately proceeded to prepare the formal writing. It was ready for signing on the next day. If it could have been finished instantly when the offer was accepted, and if Nash could have handed the sellers his draft of the formal contract at the moment of acceptance, the acts all taken together would have meant an acceptance of the offer, with the understanding that it be construed to mean what Nash proposed in the new writing.

Clearly, the first offer would not bind the buyer until it was unconditionally accepted, and the new writing would not bind the sellers, it containing new terms,, until they agreed to it. Crossley v. Maycock, 18 Eq. Cas. 180. If the sellers, after they received the writing prepared by Nash, had shipped the coal, it would have been uncertain whether they acted on their proposal and its acceptance, or on their consent to the terms of the new instrument. Something remained for them to do to make the situation certain.

They must accept the new agreement, or reject it and stand by the first offer and acceptance, or there is uncertainty. The buyer, by tendering a different agreement, had shown that it did not wish to be bound by the first, and it is reasonable and just that this made the sellers free to consent that the buyer should not be bound, thereby obtaining their own release by merely agreeing with the buyer that the first proposal and its acceptance was not final and binding.

It would encourage sharp practice and unfair dealing to hold that the buyer could, under pretense of reducing the agreement to a more formal writing, tender a contract much more onerous on the sellers and take the chances of getting it signed, and at the same time keep in force the original agreement with which it was content if it failed to get the better bargain. The buyer should not be allowed to say by its acts that the agreement is not binding as to it, but is conclusive as to the sellers.

If it was open to the buyer to disregard its acceptance and to make a new offer, it was open to the sellers to withdraw the one they had made. The judgment of the Circuit Court is reversed, and the case remanded for a new trial.