ORAL AGREEMENT PRELIMINARY TO WRITTEN CONTRACT.—Another case of the same nature that comes up not infrequently is this: Parties talk over a business arrangement and then they say, "As this is an important matter let us put it down in writing; let us have a written contract containing what has been agreed upon." When it comes to drawing up the contract, however, they cannot agree. One party then says, "Well, we made a definite oral agreement any way; let us carry that out." The other replies, "Why, no, all that was dependent on our making a written agreement." The settlement of their dispute depends on how definite and absolute the oral agreement was. It is possible to make an oral agreement binding, although the parties do agree and do contemplate that it shall subsequently be reduced to writing, but generally the inference is that the oral agreement was merely a preliminary chaffering to fix the terms of the writing, and that everything is tentative until the writing is made and signed.
AUCTION SALES.—Another state of affairs involving preliminary invitations is presented by auction sales. The auctioneer puts goods up for sale, a bid is made, the auctioneer gets no other bid, and then says, "I will withdraw this from sale." Is the auctioneer liable? Has he made a contract to sell that article to the highest bidder? When the transaction is analyzed, is this what the auctioneer says in effect: "I offer to sell these goods to the highest bidder?" If this is the correct interpretation, then when the highest bidder says, in effect, "I agree to buy them," there would be a contract. On the other hand, if what the auctioneer says is in effect like what the advertiser says: "Here are some goods for sale, what do you bid, gentlemen," then the auctioneer is not making an offer himself. He is inviting offers from the people before him, and until he accepts one of those offers from the bidders before him there would be no contract; and until then the auctioneer could withdraw the goods. And that is the construction put upon the auction sale—that the auctioneer is not making an offer, but is simply inviting offers. Even if the auctioneer promises that he will accept the highest offer, that is, that he will sell to the highest bidder, his promise to accept the highest bid, not being paid for, would not be binding upon him were it not for a statute in some States which, in the sale of goods, would make an auctioneer bound to keep a promise to sell without reserve, that is, to the highest bidder, if he made such a promise.
BIDS OR TENDERS.—Somewhat similar to the case of the auctioneer is the case of tenders or bids for the construction of buildings, or for the sale of goods to a city or to a corporation. There, too, the corporation or the city is simply inviting offers. They do not say, "We offer to enter into a contract with anyone who makes the lowest bid," but rather, "We are thinking of entering into a contract, and we want to receive offers in regard to it." When the offers are made by the bids or tenders, any or none of them may be accepted, according as the receiver thinks best. It is sometimes required by law that public corporations, like cities or counties, shall accept the bid of the lowest responsible bidder, but, aside from such statutes, any or none of the bids may be accepted.
IMPLIED CONTRACTS.—An offer and acceptance are ordinarily made by words either spoken or written; but any method of communication which would convey to a reasonable man a clear meaning will serve as well as words. If A goes to his grocer and says "Send me a barrel of flour," he has in terms made no promise to pay for the flour, but the natural meaning of his words is that he agrees to pay. In this case A used words, though not words of promise; but the same result might follow where no words at all were used. Suppose A went into a shop where he was known, picked up an article from the counter, held it up so the proprietor could see what he was taking, and went out; this would be in legal effect a promise by A to pay for the article. A contract, where the promises of the parties are to be inferred not from express words of promise but from conduct or from language not in terms promissory, is called an implied promise or contract, as distinct from an express promise or contract, which is one where the undertaking is in express language. This difference between express and implied contracts relates merely to the mode of proving them. There is the same element of mutual assent in both cases, and the legal effect of the two kinds of obligations is identical. There is, however, another kind of obligation which is frequently called an implied contract, but sometimes called a quasi-contract, because it is not really a contract at all, though the obligation imposed is similar. If a husband fails to support his wife, for instance, she may bind him by purchases of goods necessary for her support. She may do this even though he directly forbids the sales to her. There is obviously no mutual assent in this case; the husband emphatically dissents and expresses his dissent, but he is bound just as if he had contracted.
TERMINATION OF OFFER BY REVOCATION OR REJECTION.—Since offers do not become binding until accepted according to their terms, up to that time they may be terminated without liability. This may happen in several ways. In the first place an offer may be revoked by the offerer. To effect a revocation he must actually notify the other party of his change of mind, before the latter has accepted. We have already stated that offers may be rejected by the person to whom they are made. For instance, we say, "We offer you one hundred shares of stock at a certain price, and you may have a week to think it over." You say, "I do not care for that offer, I reject it." You come around the next day and say, "On reflection I have concluded to accept that offer." The acceptance is within the seven days which we originally said might be used for reflection, but the offer has been terminated by the rejection. There is no longer any offer open, and consequently the acceptance amounts to nothing. A troublesome question in regard to the revocation of an offer for a unilateral contract is this: Suppose A offers B $5 for a book and B starts to get it but when he reaches the door, then A refuses to take the book. The general disposition is to try to hold that promise binding, and yet the difficulty is that the offeree has not fully done what he was asked to do, and if he chose to turn back and take the book away he could do so without liability. He could say, "I did not promise to bring the book. I brought it part way, the walk was long and I am going to take it back." If he is thus free to withdraw it seems impossible to deny that the other party is equally free. Bilateral contracts are more desirable than unilateral because in bilateral contracts the mutual promises bind the parties before they begin to perform and both parties are therefore protected while they are performing. In unilateral contracts, the contract is not completed until the act requested is fully done. Until then, therefore, either party may withdraw.
A COUNTER OFFER IS A REJECTION.—Another way in which offers may be terminated is by a counter offer on the part of the person to whom the offer was made. We say, "We will sell you stock for $100 a share, and you may have a week to think it over." You say, "I will give you $99 a share." We say, "No, we will not take it." You say, "Well, I will give you $100." You are too late; you rejected our offer of sale at $100 by saying you would give us $99. The minute you say you will give us $99, our offer is rejected. Of course, when you make the counter offer of $99, if we say we will accept your offer to buy, that would make a contract. Offers are constantly rejected by counter offers by people who really intend to enter into a contract. Suppose A says, "I will lease you my house a year for $800." You say, "All right, I will take it if you paper the dining-room." That rejects the offer. A new offer has been made by the person addressed, who offers, if the dining-room is papered, to take the house at $800.
TERMINATION OF OFFER BY DEATH OR INSANITY.—An offer is also terminated by the death or insanity of either party before acceptance. After a contract has once been formed neither subsequent death nor insanity terminates liability upon it unless the contract is of such a personal character that only performance by the contractor in person will fulfil it.
ILLUSTRATION.—In Beach v. First Methodist Episcopal Church, 96 Ill. 177, a fund was being raised to build a new church, and a subscription paper, as follows, was signed by Lorenzo Beach:
"Fairbury, Feb. 14, 1874.
"We, the undersigned, agree to pay the sum set opposite our respective names, for the purpose of erecting a new M. E. church in this place, said sums to be paid as follows: One-third to be paid when contract is let, one-third when building is enclosed, one-third when building is completed. Probable cost of said church from ten thousand dollars ($10,000) to twelve thousand dollars ($12,000)."
Mr. Beach attached and subscribed to that paper the following: