Contract Formation at Common Law
Prof. Bill Long 1/17/06
Reading Poel v. Brunswick, 110 NE 619 (NY 1915)
One of the major contributions of Article 2 ("A 2") was the relaxation of some of the strict rules of common law contract formation. This does not mean that vague or indefinite words would be taken under A 2 to be signs of a valid contract; it means, however, for one thing, that A 2 eliminated the "mirror image" rule celebrated at common law. Under that rule, unless the offeree expressed assent to all the terms of the contract as mentioned by the offeror, his/her response to the offeror would be considered a counteroffer rather than an acceptance. Thus, under the common law, contracts were predicated on a fully-shared understanding of the all terms of the contract. The purpose of this essay is to show how that "old system" functioned so that the rules in 2-204 and 2-206 can more easily be understood and appreciated.
The Poel case had to do with a purported contract between Poel (Seller) and Brunswick (Buyer) for the sale of certain rubber products originating either from Brazil or Liverpool. The contract was allegedly entered into in April 1910 for delivery between January and June 1911. I use the words "alleged" and "purported" because at issue was whether a contract had, in fact, been formed. Four communications between the two parties were presented in court. Here they are.
1. April 2, 1910. Letter from Poel to Brunswick (both in NYC).
New York, April 2, 1910.
Brunswick-Balke-Collender Co., Long Island City, L.I.-Gentlemen: As per telephonic conversation with your Mr. Rogers today, this is to confirm having your offer of $2.42 per pound for 12 tons Upriver Fine Para Rubber, for shipment either from Brazil or Liverpool, in equal month parts January to June, 1911, about which we will let you know upon receipt of our cable reply on Monday morning.
Thanking you for the offer we remain,
Very truly yours,
Poel & Arnold
2. April 4, 1910. Letter from Poel to Brunswick with contract enclosed.
New York, April 4, 1910.
Brunswick-Balke-Collender Co., Long Island City, L.I.-Gentlemen: Inclosed, we beg to hand you contract for 12 tons Upriver Fine Para Rubber, as sold you today, with our thanks for the order.
Very truly yours,
Poel & Arnold,
Per W.J. Kelly.
Inclosed with this letter was the following:
Brunswick-Balke-Collender Co., Long Island City, L.I.
Sold to You:
For equal month shipments January to June, 1911, from Brazil and/or Liverpool, about twelve (12) tons Upriver Fine Para Rubber at two dollars and forty-two cents ($2.42) per pound: payable in U.S. gold or its equivalent, cash twenty (20) days from date of delivery here.
3. On April 6th Rogers sent the following order to the plaintiffs. It is party printed and partly written.
Order No. 25409
This number must appear on Invoices and Cases
[from] The Brunswick-Balke-Collender Co. of New York
Review Ave., Fox and Marsh Sts.
Long Island City, 4/6, 1910.
[to] M. Poel and Arnold, 177 Broadway, N.Y.C.
Please deliver at once the following, and send invoice with goods:
About 12 tons Upriver Fine Para Rubber at 2.42 per lb. Equal monthly shipments January to June, 1911.
Conditions on Which Above Order is Given
Goods on this order must be delivered when specified. In case you cannot comply, advise us by return mail stating earliest date of delivery you can make, and await our further orders.
The acceptance of this order which in any event you must promptly acknowledge will be considered by us as a guaranty on your part of prompt delivery within the specified time.
The Brunswick-Balke-Collender Co. of New York,
Per C.R. Rogers.
4. This letter, from Brunswick to Poel on January 7, 1911, called off the "deal," regardless of how you characterize it.
January 7, 1911.
Messrs. Poel & Arnold, No. 277 Broadway, City-Gentlemen: We beg herewith to advise you that within the past few weeks there has come to our attention through a statement made to us for the first time by Mr. Rogers, information as to certain transactions had by him with you in the past, and especially as to a transaction in April last relating to 12 tons of crude rubber. Mr. Rogers had no authority to effect any such transaction on our account, nor had we any notice or knowledge of his action until he made a voluntary statement disclosing the facts within the past few weeks.
In order that you may not be put to any unnecessary inconvenience, we feel bound to give you notice at the earliest opportunity after investigating the facts, that we shall not recognize these transactions or any others that may have been entered into with Mr. Rogers which were without our knowledge or authority.
The Brunswick-Balke-Collender Co. of New York,
Per Chas. P. Miller, Vice-Prest.
The Decision of the Court of Appeals
This case for breach of contract reached the highest court in NY in 1915. Reversing the Appellate Division, the Court of Appeals concluded that, in fact, Rogers' April 6 letter to Poel was a counteroffer and that its terms had to be expressly assented to by Poel in order for there to be a contract. Failing that, there was no contract. The court characterized the April 6 letter as asking for the following:
"Its provisions made it perfectly clear that the defendant: (1) Asked the plaintiffs to deliver rubber of a certain quality and quantity at the price specified in designated shipments; (2) it specified that the order therein given was conditional upon the receipt of its order being promptly acknowledged; and (3) upon the further condition that the plaintiffs would guarantee delivery within the time specified," 110 NE 619.
The court especially put weight on # 2 (italicized in original). When plaintiffs didn't respond (probably understandably), the court concluded:
"The plaintiffs did not acknowledge the receipt of this order and the proposal remained unaccepted. As the party making this offer deemed this provision material, and as the offer was made subject to compliance with it by the plaintiffs, it is not for the court to say that it is immaterial.
It was a decision like this that the Article 2 provisions on contract formation (especially 2-204 and 2-206) were meant to supplant. A section of Article 1 gives the general perspective clearly.
"The Uniform Commercial Code must be liberally construed and applied to promote the underlying purposes and policies, which are: (1) to simplify, clarify, and modernize the law governing commercial transactions; (2) to permit the continued expansion of commerical practices through custom, usage, and agreement of the parties..." (1-103(a)(1)-(2).
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