Facts
- International Filter Co., an Illinois manufacturer, offered to sell Conroe Gin, Ice & Light Co., a Texas company, a water softener and filter for $1,230, f.o.b. Chicago.
- The written proposal stated it “becomes a contract when accepted by the purchaser and approved by an executive officer of the [seller], at its office in Chicago,” and that modifications required a signed supplementary agreement.
- On February 10, 1920, Conroe accepted in writing on the proposal and added “Make shipment by March 10.”
- The signed proposal was sent to the seller’s Chicago office.
- On February 13, 1920, the seller’s president endorsed the proposal “O.K.” and dated it.
- On February 14, 1920, the seller mailed a letter acknowledging the order, confirming the March 10 shipment date, and requesting a water sample for analysis.
- On February 28 and March 4, 1920, Conroe attempted to cancel the order; the seller treated the agreement as binding and refused cancellation.
- The seller sued for breach; the trial court and intermediate appellate court ruled for Conroe on the theory that no contract formed because approval was not effectively communicated.
Issues
- Whether the proposal became a binding contract when the buyer accepted and the seller’s executive officer approved it in Chicago, even if approval was not separately communicated at that moment.
- Whether the proposal’s language made notice to the purchaser of the executive’s approval a condition to contract formation.
Decision
- The Commission of Appeals reversed and remanded (judgment adopted).
- The executive’s “O.K.” endorsement in Chicago constituted the required approval, and the proposal became a contract at that time under its terms.
- The proposal did not require separate notice of executive approval to the purchaser as a condition of contract formation.
- Even if notice were required, the seller’s February 14 confirmation letter would satisfy it.
- Conroe’s later attempted cancellation occurred after contract formation and could not prevent the contract from arising.
Legal Principles
- An offeror may define the exclusive acts that constitute acceptance and specify when and where contract formation occurs.
- When an offer states that it “becomes a contract when” specified acts occur (including internal approval at a named office), the contract forms upon performance of those acts unless the offer expressly requires additional notice.
- Courts apply the plain meaning of the offer’s formation clause and will not add a notice requirement not stated in the offer.
Conclusion
A sales contract formed when Conroe accepted the proposal and International Filter’s executive approved it in Chicago, and the buyer could not avoid liability by asserting that approval had to be separately communicated where the written terms did not make notice a condition of formation.