## Facts

- A homeowner signed a written order with a construction company for two garages at a total price of $1,800.
- The order stated it was “subject to the approval and acceptance” of the company’s office manager, making the signed order an offer until acceptance was communicated to the homeowner.
- The company’s sales representative later telephoned the homeowner’s wife and stated the order had been approved and accepted.
- Around the same time, the homeowner entered a contract with another builder for the same work and then refused to allow the company to proceed.
- The order included a clause requiring the homeowner, upon breach, to pay “liquidated damages” equal to 15% of the contract price ($270), intended to cover items such as sales, overhead, advertising, labor, and equipment.
- At trial, there was no project-specific proof of the company’s actual losses related to the garages.

## Issues

1. Whether the trial court erred by instructing the jury that the homeowner’s wife was, as a matter of law, his agent to receive notice of acceptance, making notice to her equivalent to notice to him.
2. Whether the trial court erred by instructing the jury that, upon finding a contract and breach, it must award the full 15% stated as “liquidated damages” without determining whether the clause was an enforceable liquidated-damages provision or an unenforceable penalty.

## Decision

- The Supreme Court of Minnesota reversed the order denying post-trial relief and remanded for a new trial.
- The court held it was prejudicial error to take the agency question from the jury by declaring the wife an agent as a matter of law.
- The court held it was error to require an automatic award of 15% liquidated damages without instructing the jury to evaluate the clause’s enforceability under the liquidated-damages versus penalty standards.

## Legal Principles

- A written order “subject to approval and acceptance” by the seller’s home office or designated manager is an offer and becomes a contract only when acceptance is effectively communicated to the offeror.
- Whether a spouse is an agent authorized to receive notice of acceptance is ordinarily a fact question for the jury unless the evidence is conclusive.
- A liquidated-damages clause is enforceable only if it represents a reasonable forecast of probable loss at the time of contracting and is not a penalty; the factfinder must be properly instructed to make that determination and cannot be directed to award the stipulated amount automatically.

## Conclusion

The court ordered a new trial because the jury was improperly instructed on both contract formation (agency for communication of acceptance) and damages (automatic enforcement of a 15% “liquidated damages” clause without a penalty analysis), errors that could affect liability and the measure of recovery.


Gorco Constr. Co. v. Stein, 256 Minn. 476 (Minn. 1959)