This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
If A and B make a valid oral contract, and subsequently A delivers to B a written contract which varies from the terms of the oral contract, B 's omission to notify A that he does not assent to the rescission of the oral contract and to the substitution therefor of the written contract, ought not to operate as a substitution of the written contract for the oral contract.1 In many classes of contracts this principle has been recognized.2 If A makes a valid oral contract with a railway company for the transportation of goods, such contract is not modified by the terms of a bill of lading subsequently issued by such railway, even though A does not refuse to accept such modified terms.3 If A and B make an oral contract by which B agrees to buy or sell stocks for A, such oral agreement is not modified by a ticket which B gives to A, which sets out terms differing from those of the oral contract, although A neither acquiesces in such modified terms, nor notifies B that he dissents therefrom.4
8 Wiggins v. Burham, 77 U. S. (10 Wall.) 129, 19 L. ed. 884.
9 In re Anglesey (1901), 2 Ch. 548; Standard Oil Co. v. Van Etten, 107 U. S. 325, 27 L. ed. 319; Perkins v. Hart, 24 U. S. (11 Wheat.) 237, 6 L. ed. 463; Spellman v. Muehlfeld, 166 N. Y. 245, 59 N. E. 817; Miller v. Ryder, 145 Wis. 526, 130 N. W. 518.
10 In re Anglesey (1901), 2 Ch. 548.
11 Miller v. Ryder, 145 Wis. 526, 130 N. W. 518.
12 Fayette Liquor Co. v. Jones, 75 W. Va, 119, 83 S. E. 726.
The rule has been stated as follows, with reference to a specific case: "When one merchant sends an account current to another residing in a different country, between whom there are mutual dealings, and he keeps it two years without making any objections, it shall be deemed a stated account, and his silence and acquiescence shall bind him, at least so far as to cast the onus probandi on him": Freeland v. Heron, 11 U. S. (7 Cranch.) 147, 3 L. ed. 297.
13 United Iron Works v. Rathskeller Co., 94 Wash. 67, L. R. A. 1917C, 445, 161 Ac. 1197.
In some types of contract, however, this principle seems to be ignored.5 In insurance contracts it has been held that if A, an insurance company, and B make an oral contract of insurance, and A subsequently delivers a written policy to B which varies from the terms of the oral agreement, B is presumed conclusively to know the terms of such written contract and to assent thereto if he retains it in his possession for a considerable period of time and pays premiums thereunder.6
In many cases of this sort, the result which is actually reached might be justified upon the theory that the oral negotiations were intended merely as preliminary to a written contract which was to be entered into between the parties thereafter; and that no binding agreement had ever, in fact, been made between the parties until such written contract was delivered by the one and accepted by the other, or on the theory that the only contract which the agent of the insurance company was authorized to make was that in writing. In some cases, however, the courts have discussed the question as though even where a valid oral contract had been made, the person to whom the written contract is subsequently sent containing a modification of the terms of the original oral contract, is bound by the terms of such written contract unless he actually dissents therefrom. Even in insurance contracts there is some authority to the effect that the written contract does not supersede the oral contract,7 but as to the effect of the transaction, the courts which deny the validity of the subsequent written contract are not in accord. It has been held that the oral contract controls and that the insured may have reformation.8 It has also been said that there is no contract and that the insured may recover premiums paid in and interest thereon.9 The latter result may be right in the particular case, since, even if there were an oral contract at the outset, repudiation by the insurance company might amount to a breach which would operate as a discharge.10
1 Picard v. Beers, 195 Mass. 419, 81 N. E. 246.
2 Picard v. Beers, 195 Mass. 419, 81 N. E. 246.
3 St. Louis Southwestern Ry. v. Elgin Condensed Milk Co., 175 III. 557, 67 Am. St. Rep. 238, 51 N. E. 911; Farns-worth v. National Express Co., 166 Mich. 676, 132 N. W. 441; Gaines v. Union Transportation and Insurance Co., 28 O. S. 418; Frasier v. Charles-town & W. C. Ry., 72 S. Car. 140, 52 S. E. 964.
This result is frequently reached on the theory that the modification of the original oral contract consists entirely of provisions in favor of the railway company, for which no consideration exists. See Sec. 589 et seq.
4 Picard v. Beers, 195 Mass. 419, 81 N. E. 246.
5 Union Central Life Ins. Co. v. Hook, 62 O. S. 256, 56 N. E. 906.
6 Johnson v. White, 120 Ga. 1010, 48 S. E. 426; McGregor v. Metropolitan Life Ins. Co., 143 Ky. 488, 136 S. W. 889; Union Central Life Ins. Co. v. Hook, 62 O. S. 256, 56 N. E. 906; Bostwick v. Mutual Life Ins. Co., 116 Wis. 392, 67 L. R. A. 705, 89 N. W. 538, 92 N. W. 246.