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.
Since an offer is, as a rule, revocable, while a contract is not, it is of the greatest importance to distinguish between an offer and a contract. This distinction depends upon the intention of the parties in each par-ticular case, as ascertained by the ordinary rules of construction.1 A so-called contract for grading, which is not to take effect until the contractor has examined the material and determined that it complies with the representations of the adversary party, and has notified a specified agent of the adversary party of his acceptance, is at least an offer which may be turned into a contract by acceptance before revocation.2 If the offer is made for preparing de-signs and advertising matter, subject to the approval of the adversary party, such approval to constitute an order, no contract is made until such order is approved.3 A clause in a contract for drilling a well that the driller "agrees that if a second well is drilled, to do said work and furnish everything for" a certain price per foot, is a mere offer which does not become a contract until it is accepted by the adversary party.4 If the prospective vendee gives his note to the vendor and the vendor executes a deed for the realty to be sold, and deposits such deed in the bank to be delivered on payment of the note, such transaction is a contract and not an option.5 Whether a given transaction amounts to an executory contract of sale, or to making an offer for value which is irrevocable, but which does not amount to a contract of sale, depends upon the intention of the parties as evidenced by their language and by the surrounding circumstances. An order for the purchase of goods given by the purchaser and signed by the seller's agent, which, by its terms, is subject to the acceptance and approval of the seller, is not a contract, and if the seller does not accept such order he incurs no liability thereon.6 Such order may be revoked by A at any time before B accepts it.7 A so-called contract which is entered into between A and B's agent X, which, by its terms, is not binding upon B until accepted by him, is in the meantime a mere offer on the part of A.8 Although it is called a "contract" it may be revoked by A before acceptance by B.9 The fact that the offeree has acted in reliance on the offer does not prevent the offeror from revoking the offer.10 After B has shipped goods in accordance with A's
4 Leszynsky v. Meyer (Cal.), 53 Ac. 703; Benton v. Springfield Y. M. C. A., 170 Mass. 534, 64 Am. St. Rep. 320, 49 N. E. 928.
5 Larrabee v. Bjorkman, 79 Or. 467, 155 Ac. 974.
1 See ch. LXIII.
2 Lamoreaux v. Phelan, 89 Neb. 47, 130 N. W. 988.
3 American Fine Art Co. v. Simon, 140 Fed. 529.
4 Kernan v. Carter (Ky.), 104 S. W. 308.
5 Bonanza Mining & Smelter Co. v. Ware, 78 Ark. 306, 95 S. W. 765.
6 Huber Mfg. Co. v. Wagner, 167 Ind. 98, 78 N. E. 329.
7 Arkansas. Merchants' Exch. Co. v. Sanders, 74 Ark. 16, 84 S. W. 786; Outcault Advertising Co. v. Young Hardware Co., 110 Ark. 123, 161 S. W. 142.
Georgia. Howell v Maine, 127 Ga. 574, 56 S. E. 771.
Kansas. Northwest Thresher Co. v. Lesueur, 75 Kan. 150, 88 Ac. 541; Bauman v. McManus, 75 Kan. 106, 10 L. R. A. (N.S.) 1138, 89 Ac. 15.
Kentucky. L. A. Becker Co. v. Alvey (Ky.), 86 S. W. 974.
Wisconsin. L. J. Mueller Furnace Co. v. Meiklejohn, 121 Wis. 605, 99 N. W. 332.
8 United States. Baird v. Pratt, 148 Fed. 825, 78 C. C. A. 515.
Alabama. Gould v. Cates Chair Co., 147 Ala. 629, 41 So. 675.
Arkansas. J. C. Lysle Milling Co. v. Rumph, - Ark. - , 203 S. W. 850.
Georgia. Howell v. Maine, 127 Ga. 574, 56 S. E. 771.
Illinois. Gregg v. Wooliscraft, 52 III. App. 214; Martin v. Wilms, 61 111. App. 108.
Indiana. Whitman Agricultural Co. v. Hornbrook, 24 Ind. App. 255, 55 N. E. 502.
Iowa. Thompson Mfg. Co. v. Perkins, 97 la. 607, 66 N. W. 874; Hargrove v. Crawford, 159 la. 522, 141 N. W. 423.
Kentucky. L. A. Becker Co. v. Alvey (Ky.), 86 S. W. 974.
Nebraska. Robinson v. Ralph, 74
Neb. 55, 103 N. W. 1044; Northwestern Thresher Co. v. Kubicek, 82 Neb. 485, 118 N. W. 94.
South Dakota. A. A. Cooper Wagon & Buggy Co. v. Stedronsky Bros. Co., 24 S. D. 381, 123 N. W. 846; Thomas Mfg. Co. v. Lyons, 29 S. D. 600, 137 N. W. 340.
9 Arkansas. Merchants' Exchange Co. v. Sanders, 74 Ark. 16, 84 S. W. 786.
Georgia. Barnes Cycle Co. v. Scho-field, 111 Ga. 880, 36 S. E. 965; Howell v. Maine, 127 Ga. 574, 56 S. E. 771.
Iowa. McCormick, etc., Machine Co. v. Richardson, 89 la. 525, 56 N. W. 682.
Kansas. Northwest Thresher Co. v. Lesueur, 75 Kan. 150, 88 Ac. 541: Bauman v. McManus, 75 Kan. 106, 10 L. R. A. (N.S.) 1138, 89 Ac. 15.
Michigan. Bronson v. Herbert, 95 Mich. 478, 55 N. W. 359.
Minnesota. Reid v. Wagon Co., 79 Minn. 369, 82 N. W. 672.
10 District of Columbia. Curtis v. Register Co., 38 D. C. App. 115.
Kentucky. Rehm-Zeiher Co. v. F. G. Walker Co., 156 Ky. 6, 49 L. R. A. (N.S.) 694, 160 S. W. 777.
Minnesota. Stensgaard v. Smith, 43 Minn. 11, 44 N. W. 669.
Mississippi. Kolb v. J. E. Bennett Land Co., 74 Miss. 567, 21 So. 233.
New York. White v. Corlies, 46 N. Y. 467.
Pennsylvania. Bosshardt & Wilson Co. v. Crescent Oil Co., 171 Pa. St. 109, 32 Atl. 1120.
offer, and has notified A, the contract is complete.11 In contracts of guaranty, a written communication by A to B agreeing to guarantee X's debt to B, may be an acceptance of a proposition by B to A to lend money to X if A will guarantee it; and in such case A's acceptance completes the contract, and B may hold A on such contract, the other elements, of a valid contract being present, without acceptance by B.12 On the other hand, it may be an offer by A to B to induce B to make the loan to X. In such case, B must accept the offer to hold A. A's loan to X without such acceptance is not sufficient.13 A bid at the ordinary auction is an offer, not an acceptance; and accordingly it may be withdrawn before the property is knocked down to the bidder.14 Under the Roman-Dutch law of Guiana, an auction sale in which the auctioneer calls for bids which he hopes will be increased as bidding continues, does not amount to a contract until the bid has been accepted by the auctioneer. The highest bidder can not compel the vendor to convey the property unless his bid is accepted.15 A's appointment of
11 Burwell & Dunn Co. v. Chapman, 59 S. Car. 681, 38 S. E. 222; Embree-McLean Carriage Co. v. Lusk, 11 Tex. Civ. App. 493, 33 S. W. 164.
12 United States. Davis Sewing Machine Co. v. Richards, 115 U. S. 524, 29 L. ed. 480; Davis v. Wells, 104 U. S. 159, 26 L. ed. 686.
Illinois. Cook v. Orne, 37 111. 186.
Iowa. German Savings Bank v. Roofing Co., 112 la. 184, 84 Am. St. Rep. 335, 51 L. R. A. 758, 83 N. W. 960.
Massachusetts. Lennox v. Murphy, 171 Mass. 370, 50 N. E. 644; Bishop v. Eaton, 161 Mass. 496, 42 Am. St Rep. 437, 37 N. E. 665.
New Hampshire. Beebe v. Dudley, 26 N. H. 249, 59 Am. Dec. 341.
13 Delaware. Farmers' Bank v. Tat-nail, 7 Houst. (Del.) 287.
Iowa. German Savings Bank v. Roofing Co., 112 la. 184, 84 Am. St. Rep. 335, 51 L. R. A. 758, 83 N. W. 960.
Kentucky. Gano v. Bank, 103 Ky. 508, 82 Am. St. Rep. 596, 45 S. W. 519; Thompson v. Glover, 78 Ky. 193, 39 Am. Rep. 220; Lowe v. Beckwith, 53
Ky. (14 B. Mon.) 184, 58 Am. Dec. 659; Kincheloe v. Holmes, 46 Ky. (7
B. Mon.) 5, 45 Am. Dec. 41. Michigan. De Cremer v. Anderson,
113 Mich. 578, 71 N. W. 1090.
Pennsylvania. Acme Mfg. Co. v. Reed, 197 Pa. St. 359, 80 Am. St. Rep. 832, 47 Atl. 205.
"A contract of guaranty, like every other contract, can only be made by the mutual assent of the parties. If the guaranty is signed by the guarantor without any previous request of the other party, and in his absence, for no consideration moving between them, except future advances to be made to the principal debtor, the guaranty is, in legal effect, an offer or proposal on the part of the guarantor, needing an acceptance by the other party to com plete the contract": Davis Sewing Machine Co. v. Richards, 115 U. S. 584, 29 L. ed. 480 [quoted in German Savings Bank v. Roofing Co., 112 la. 184, 84 Am. St. Rep. 335, 51 L. R. A. 758, 83 N. W. 960].
14 See Sec. 120.
15 Demerara Turf Club v. Wight, A.
C. (1918) 605.
B as A's exclusive agent to sell A's land at a certain price during a certain time is not an option to B to buy such land.16
It has been said that in case of doubt, a transaction is to be construed as an executory contract rather than as an option.17 If the money which is paid to the offeror is to be part of the purchase price, and if the offeree promises to pay the rest of the purchase price, the transaction is prima facie to be regarded as an executory contract of sale rather than as an option.18 If a transaction, whereby a vendor agrees to convey and the vendee agrees to pay, contains a provision to the effect that if the vendee fails to make the subsequent payments, the first payment shall be retained by the vendor as liquidated damages, the courts have disagreed as to its legal effect; it being held in some jurisdictions that such transaction is an option or offer for value,19 and in other jurisdictions, that it is an executory contract.20 This question is usually presented not between the parties to the transaction, but in an action by a real estate agent against the vendor to recover a commission for making such contract. If the contract provides that one party may at his option end the contract if the other party fails to perform, it is not regarded as an offer for value.21 If it is doubtful whether a certain instrument is an offer or a contract, the fact that the parties thereto have always regarded it as an option, should be decisive.22 Many other illustrations of the distinction between an offer and a contract have been considered elsewhere.23 The same instrument may give an option to buy at a certain price and provide that if the adversary party shall find a purchaser to whom he wishes to have the land conveyed, he shall receive as compensation the amount for which such property is sold, in excess of a specified sum.24
If an offer has been accepted and it contains all the elements necessary to a binding contract, the fact that it purports to be an
16 Faraday Coal & Coke Co. v. Owens (Ky.), 80 S. W. 1171.
17 Abel v. Gill, 95 Neb. 279, 146 N. W. 637 [opinion modified and motion for rehearing overruled, 95 Neb. 279 at 285,147 N. W. 686]; Dillinger v. Ogden, 244 Pa. St. 20, 90 Atl. 446. See also, Solomon v. Shewitz, 185 Mich. 620, 152 N. W. 196.
18 Williams v. Renza, 4 Alaska 154; Solomon v. Shewitz, 185 Mich. 620, 152 N. W. 196.
19 Scott v. Merrill's Estate, 74 Or. 568, 146 Ac. 99.
20 Davis v. Roseberry, 95 Kan. 411, 148 Ac. 629; Gilder v. Davis, 137 N. Y. 504, 20 L. R. A. 398, 33 N. E. 599.
21 Berry v. Humphreys, 76 W. Va. 668, 86 S. E. 568.
22 Standiford v. Thompson, 135 Fed. 991, 68 C. C. A. 425.
23 See Sec. 118 et seq.
24 Carter v. Love, 206 III. 310, 96 N. E. 85.
"order," does not prevent it from taking effect as a contract25 If the written order is an acceptance of a prior offer, the contract is complete.26
 
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