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.
Whether the contract which is made by the acceptance of an offer dates from the acceptance or whether it relates back to the date of the original offer, is a question upon which there has been some conflict of authority, and which depends chiefly upon the purpose for which it is sought to make the acceptance relate back to the time of making the original offer.
For some purposes the contract dates from the acceptance, and does not relate back to the date of the original offer. If improvements on realty have been destroyed between the dates of offer and acceptance the offeree can not have a decree for specific performance with the improvements restored, nor can he have an abatement from the price offered,1 and he is not entitled to the insurance.2 This principle is applied to offers for value,3 and it would undoubtedly apply to offers not for value.
For some purposes such acceptance relates back. If an option for value is accepted, the vendee may have specific performance against one who, knowing of such option, acquires an interest in such land between the time that such option is given and the time that it is accepted, without giving value for such interest.4
In other cases there is a conflict of authority as to the retroactive effect of the acceptance. If an offer for the sale of real property has been given for value or under seal, the death of the offeror does not cause such offer to lapse;5 and if the offeree accepts such offer after the death of the offeror, the question is then presented whether such acceptance relates back to the date of the original offer so as to work an equitable conversion of such realty, in which case the purchase money should be paid to the personal representative of the offeror; or whether such acceptance does not retroact, in which case the doctrine of equitable conversion will not apply and the purchase money will be payable to the heirs of the offeror. In England and a few of the jurisdictions of this country the doctrine of conversion is applied; and it is held that the purchase money must be paid to the administrator of the offeror if the offer is accepted before it lapses by efflux of time, no matter what period of time has intervened since the death of the offeror.6 In most of the states of this country, however, the technical doctrine of conversion is not applied; and it is held that if the offeree elects to accept the offer, his acceptance is not to be regarded for this purpose as relating back to the date of making the offer; and the purchase money is to be paid to the heirs or devisees to whom such realty passed upon the death of the offeror.7 An acceptance of an offer which is made by giving an order for a deposit, as security, relates back to the time when such deposit was made so as to protect the rights of the creditor.8
22 Fearnley v. Fearnley, 44 Colo. 417, 98 Ac. 819.
23Baird Bros. v. Pratt, 6 Ind. Ter. 38, 80 S. W. 648.
1 Caldwell v. Frazier, 65 Kan. 24, 68 Ac. 1076; Gamble v. Garlock, 116 Minn. 59, 133 N. W. 175.
The question of the effect of injury to the realty after the contract is made and before the legal title is conveyed is not considered here.
2 Edwards v. West, L. R. 7 Ch. Div. 858; Gilbert v. Port, 28 0. S. 276.
Contra: Williams v. Lilley, 67 Conn. 50, 37 L. R. A. 150, 34 Atl. 765.
3 Caldwell v. Frazier, 65 Kan. 24, 68 Ac. 1076; Gamble v. Garlock, 116 Minn. 59, 133 N. W. 175; Gilbert v. Port, 28 0. S. 276.
4 Smith v. Bangham, 156 Cal. 359, 28 L. R. A. (N.S.) 522, 104 Ac. 689; Donaldson v. Thousand Springs Power Co., 29 Ida. 735, 162 Ac. 334; Sizer V. Clark, 116 Wis. 534, 93 N. W. 539.
5 See Sec. 147.