Sample Contract Problem

Question: On May 1, Melforth Realty Company offered to sell a property called Greenacre to Dallas, Inc, for $1,000,000. The offer was made by telegraph and stated that the offer would expire on May 15. Dallas decided to purchase the property and sent a registered letter to Melforth on May 10 accepting the offer. As a result of unexplained delays in the postal service, the letter was not received by Melforth until May 22. Melforth wishes to sell Greenacre to another buyer who is offering $1,200,000 for the tract of land. Has a contract resulted between Melforth and Dallas? Please explain. 

Legal problem.  The fact situation tells us that an offer was made to Dallas Inc.  The legal issue is whether a valid acceptance—resulting in a contract—has been made by Dallas Inc.

Legal concept.  When a valid offer has been made, the offeree must issue a timely acceptance that conforms to the requirements stated in the offer.  In this case, the only legal requirement was that the acceptance must take place before May 15.

The fact situation states that Dallas, Inc responded to the offer by sending a letter of acceptance on May 10, but because of an unusual delay, the letter of acceptance did not reach Melforth Realty Company until May 22, well beyond the acceptance deadline date of May 15.   

In this case, a valid acceptance took place on May 10.   When an offeree sends an acceptance using a reliable medium, the law regards the acceptance to have automatically taken place when it is dispatched, not when it is received. Dallas Inc sent an acceptance using a registered letter. The law regards the U.S. Mail to be a reliable medium.  For this reason, Dallas Inc’s acceptance took effect on May 10, when the letter of acceptance was sent.  A binding contract resulted at that time.