## Facts

- Providence & Worcester Railroad Co. (P&W) owned a 6.97-acre waterfront parcel in East Providence containing railroad tracks that were not in active use (abandoned), but remained rail-related property.
- In December 1985, P&W executed a purchase-and-sale agreement to sell the parcel to Promet Corp. for $100,000, subject to Rhode Island’s rail-property statute requiring P&W to give the State of Rhode Island Department of Transportation (RIDOT) a 30-day option to purchase on the same terms and conditions.
- P&W sent RIDOT the Promet agreement and notice of the statutory option.
- RIDOT responded within the option period with a January 7, 1986 letter stating it accepted the offer at $100,000, while noting that language requiring removal of the tracks (a term included in Promet’s deal) would not be appropriate for a conveyance to the state.
- The closing under the Promet agreement was postponed; RIDOT prepared to close at the scheduled time and to tender a $100,000 check.
- Without notifying RIDOT, P&W moved the closing forward and delivered a deed to Promet about an hour and a half before RIDOT arrived and tendered its check.
- RIDOT sued P&W and Promet, seeking a declaration that the deed to Promet was null and void and an order requiring P&W to convey the property to RIDOT.
- After a bench trial, the Superior Court ruled that RIDOT’s letter was a valid acceptance forming a binding contract, declared the Promet conveyance null and void, and ordered conveyance to RIDOT for $100,000.
- The Superior Court also ordered (a) RIDOT to pay prejudgment interest on the $100,000 purchase price, and (b) P&W to reimburse Promet for interest on the purchase price and for property taxes Promet paid while it possessed the parcel.
- The parties filed cross-appeals: P&W challenged contract formation and the reimbursement order; RIDOT challenged the award of prejudgment interest against the state.

## Issues

1. Whether RIDOT’s January 7, 1986 letter was a definite and unequivocal acceptance of P&W’s statutory offer, or instead a counteroffer because it objected to track-removal language.
2. Whether the Superior Court could require RIDOT to pay prejudgment interest on the purchase price absent a clear statutory waiver of sovereign immunity or an express agreement to pay such interest.
3. Whether it was proper to require P&W to reimburse Promet for interest on the purchase price and for property taxes paid during Promet’s possession after the deed was set aside.

## Decision

- The Rhode Island Supreme Court held that RIDOT’s January 7 letter was a valid acceptance: it agreed to the essential terms (including the $100,000 price), and the suggested changes regarding track removal were immaterial and did not turn the response into a counteroffer.
- Because a binding contract existed between P&W and RIDOT, the Court affirmed the judgment declaring the deed to Promet null and void and ordering P&W to convey the parcel to RIDOT for $100,000.
- The Court reversed the award of prejudgment interest against RIDOT, holding that interest may not be assessed against the state without a clear legislative waiver (or an express contractual commitment), neither of which applied.
- The Court affirmed the order requiring P&W to reimburse Promet for interest on the purchase price and for property taxes Promet paid while it was in possession, placing the financial consequences of the improper conveyance on P&W.
- Disposition: sustained in part and reversed in part.

## Legal Principles

- An acceptance is effective if it is definite and unequivocal as to the essential terms; immaterial variations or objections to nonessential provisions do not transform an acceptance into a counteroffer.
- When a statute grants the state a fixed period to exercise an option to buy rail-related property on the buyer’s terms, a timely acceptance forms a binding contract; the seller cannot defeat that right by closing early with a third party.
- Prejudgment interest cannot be imposed on the state unless the Legislature clearly authorizes it (or the state clearly agrees to it by contract); waivers of immunity are strictly construed.
- When a deed is set aside because a seller conveyed property in violation of a superior contractual/statutory right, equity may require restitution to the displaced purchaser, including reimbursement for taxes and for the time value of funds paid, charged to the seller who caused the loss.

## Conclusion

The Rhode Island Supreme Court ruled that RIDOT timely and validly accepted P&W’s statutory offer to sell rail-related property for $100,000, so P&W’s later conveyance to Promet was ineffective and the parcel had to be conveyed to the state; however, the state could not be charged prejudgment interest absent a clear waiver of immunity, and P&W was properly required to reimburse Promet for interest and taxes paid during its possession.


State of Rhode Island Department of Transportation v. Providence & Worcester Railroad Co., 674 A.2d 1239 (1996)