Facts
- Beulah Friedman sponsored an offering plan to convert a 360-unit residential apartment building to cooperative ownership.
- Under the plan, tenants could acquire their apartments by purchasing shares (securities) in the cooperative corporation and receiving proprietary leases.
- On April 14, 1981, Friedman issued the sixteenth amendment to the offering plan, increasing the purchase prices for unsold apartments.
- The same amendment stated: “each tenant is granted the nonexclusive right to purchase his or her apartment at the [former] price . . . for a period of thirty (30) days from the presentation of this Sixteenth Amendment.”
- Before the 30-day period expired and before Viola Sommer (a tenant) accepted, Friedman orally told Sommer that the offer for Sommer’s apartment was withdrawn.
- On May 12, 1981—still within 30 days—Sommer sent a letter attempting to accept the amendment’s offer at the former price.
- Friedman refused to sell at the former price, and Sommer sued for specific performance or damages for breach of contract.
- The trial court granted summary judgment to Sommer, and the Appellate Division affirmed.
- Friedman appealed to the New York Court of Appeals.
Issues
- Whether the sponsor’s signed, 30-day “nonexclusive right to purchase” was an irrevocable firm offer under U.C.C. § 2-205, despite no consideration.
- Whether an agreement to purchase a cooperative apartment is governed by the Uniform Commercial Code (as a sale of securities) rather than traditional real property contract rules.
- Whether the sponsor’s revocation, communicated before the tenant’s acceptance, terminated the tenant’s power of acceptance so that no contract was formed.
Decision
- The Court of Appeals reversed the Appellate Division, with costs.
- The court granted summary judgment to Friedman and dismissed Sommer’s complaint.
- The court held that the sponsor’s April 14 offer was revocable and was effectively withdrawn before Sommer’s attempted acceptance.
- The court concluded the amendment did not give the statutory “assurance” required for a U.C.C. § 2-205 firm offer because it expressly made the tenant’s right “nonexclusive.”
Legal Principles
- A contract to purchase a cooperative apartment is treated as a sale of securities in a cooperative corporation and is governed by the Uniform Commercial Code.
- At common law, an option to keep an offer open requires consideration; the parties conceded there was no consideration here, so the offer was revocable unless made irrevocable by statute.
- Under U.C.C. § 2-205, an offer by a merchant in a signed writing is not revocable for lack of consideration only if the writing “by its terms gives assurance that it will be held open” for the stated time.
- Language granting a “nonexclusive” right to purchase is inconsistent with the assurance required by U.C.C. § 2-205 because it reserves to the offeror the ability to sell to others during the stated period.
- A communicated revocation made before acceptance terminates the offeree’s power of acceptance; a later attempted acceptance does not form a contract.
- Even where merchant status is not disputed, the firm-offer rule does not apply unless the writing clearly states that the offer will be held open.
Conclusion
The New York Court of Appeals held that the sponsor’s 30-day “nonexclusive” tenant right to buy at the former price was a revocable offer, not an irrevocable firm offer under U.C.C. § 2-205, and because the sponsor withdrew the offer before the tenant accepted, no enforceable contract was created.