Quick Summary
John Petterson (the plaintiff) owned a piece of land, and Pattberg (the defendant), owned a bond signed by Petterson that was backed by a mortgage on the land. In April, Pattberg offers Petterson a deal to take $780 off the total amount if Petterson pays the remaining principal of $5,450 in cash before the end of May. Petterson went to the defendant’s house to pay off the mortgage, but the defendant had already sold the bond. As a result, Petterson had to pay the third party the total amount of the bond and mortgage. He filed a lawsuit against Pattberg for the $780, which the defendant had agreed to discount from the bond and mortgage if he paid off the principal before May.
The issue discussed in the court was whether an offeror could decide to back out of a deal before it is finalized.
The court ruled that the defendant had the right to withdraw the proposal before it was accepted. Since the defendant withdrew the offer before it was accepted and sold the bond and mortgage to someone else, no contract was formed, therefore Petterson was not entitled to the $780 discount from the bond and mortgage that was agreed upon.
Rule of Law
When an offeree is considering the offer, before acceptance, the offeror may withdraw a proposal at any time.
Facts of the Case
The plaintiff, John Petterson, owned a piece of land. The defendant, Pattberg, was the owner of a bond signed by Petterson that was backed by a mortgage on the land. In April, the amount that was still owed on the principal was $5,450. Defendant made a deal with Petterson that he would take $780 off the total amount if Petterson paid the rest of the principal in cash before the end of May. Plaintiff went to the defendant’s house at the end of the next month, in May, to pay off the mortgage as agreed.
The defendant refused to take the money and told Petterson that he had sold the bond and mortgage to someone else. Because of this, Petterson had to pay the third party the total amount of the bond and mortgage.
Plaintiff sued the defendant for the $780, which the defendant had agreed to discount from the bond and mortgage if he paid off the principal before May. The trial court sided with the plaintiff, and the appeals court upheld that decision. The defendant filed an appeal.
Issue
Can an offeror decide to back out of the deal before it is finalized?
Holding and Conclusion
Yes.
The court concluded that due to the one-sided nature of the conditions of the contract, the bond owner possessed the legal ability to withdraw the offer before the act’s completion. A unilateral contract offer is not accepted unless the requested action is carried out. In this instance, the court determined that defendant’s letter constituted an offer to enter into a unilateral contract.
An offer to sign a one-sided contract may be withdrawn before acceptance. Based on these circumstances, the court concluded that the defendant canceled the offer before Petterson’s acceptance when the defendant informed Petterson that the bond and mortgage had been sold before receiving the principal payment from Petterson. Because the terms of the contract were unilateral, the court ruled that the bondholder withdraws from the agreement before the deal’s completion. Therefore, the plaintiff was required to repay the debt with no interest break.
Reasoning and Analysis
A person can revoke an offer of a reward in exchange for performing an action before the activity has been performed. When the offeree approaches the offeror to make a performance offer, but the offer is withdrawn before the performance, an intriguing situation occurs. You do not need to submit a formal notice to the opposing party to withdraw an offer to sell the property before acceptance. We are of the opinion that the defendant, in this case, retracted his offer just before it became a legally binding commitment, and as a result, no contract was ever formed.
Offers to sign one-sided contracts can be taken back at any time before the action asked for is done. According to the court’s decision, Petterson was not paid because the defendant broke the deal before the agreed-upon date.
But it’s important to keep in mind that the law used in this case was not the current law set out in the Restatement 2nd of Contracts.
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References
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