Perry v. Ronan (CA1 6/22/10)

In this special action the Court of Appeals thinks it has found a new wrinkle in the law of contracts.

Perry sued Bennett (Ronan was the trial court judge). At mediation, Perry agreed to settle for $400,000 but Bennett didn’t. Bennett later told his lawyer to tell the mediator that he would pay that after all if Perry agreed to the settlement by a certain date, which was five days later. The lawyer told the mediator of Bennett’s change of heart but for some reason didn’t mention the deadline. By the time the mediator told Perry’s lawyers that Bennett would pay the money – to which Perry promptly agreed – the deadline had passed. Bennett refused to settle.

Perry moved to enforce the “settlement agreement.” The trial court denied the motion and set the case for trial. Perry took special action, which the court accepted on the grounds that this is an issue of first impression and of statewide importance.

Perry relied on Restatement (Second) of Contracts §49, which says that when communication of an offer is delayed, “if the delay is due to the fault of the offeror or to the means of transmission adopted by him, and the offeree neither knows nor has reason to know that there has been delay, a contract can be created by acceptance within the period which would have been permissible if the offer had been dispatched at the time that its arrival seems to indicate.” That means, says the court, that acceptance after a deadline is possible if the offer is delayed. Perry therefore had five days to accept the offer, its acceptance was within that period, so there was a settlement contract.

Perhaps. That does, though, assume the conclusion. It also changes the facts. Bennett didn’t say “five days”; he said acceptance had to be made by a certain date. What if he actually meant it? What if, for example, he had a deadline of his own from other creditors and after Perry’s deadline passed had to pay all his money to someone else? Would that make a difference? Not to this court’s reasoning.

The court admits that neither of the only two other cases that cite §49 apply it as this opinion does. One case held that §49 didn’t apply because the offeree knew of the delay (the postmark on the offer letter told him).  In the other case, an offeror delivered an offer to the offeree after the deadline stated in the offer; the court ruled that by doing so the offeror waived it. Restatement §49, it said, applies only when the offer is made late but within the deadline (so that, for example, if the offer says “five days” and the offeree doesn’t get it until the fourth day but for some reason doesn’t know there has been a delay, the offeree still has five days). Our Court of Appeals thinks that the language of the section doesn’t say that – in which event it thinks that one can “extend” a deadline that has already passed, a position another court would not have been unreasonable to doubt.

This court also thinks it would be unfair if Bennett could refuse the settlement because he would then be able to negotiate further, knowing that Perry would settle for $400,000. But Bennett already knew that; he learned it at the arbitration. And how is that unfair? As far as these facts show, Perry would have settled for $300,000, or $200,000, or fifty cents. Doesn’t a factual conclusion require facts?

Bennett, according to the court, didn’t brief §49. So, the court accepted special action on an issue of first impression (viz., §49) and of statewide importance based on incomplete briefing. The court points out in a footnote that it could consider Bennett as having confessed error “but we decline to do so.” How magnanimous of it, not to decide an issue of first impression and of statewide importance by default. Now, you obviously shouldn’t be able to block your opponent’s special action by the simple expedient of not briefing the issues. But the court was really reaching to take this, and clearly did so because it thought it saw an easy solution that would make some law along the way.

What did Bennet brief instead? The question of authority. His argument (reading between the lines a bit) was that he never gave anyone actual authority, and no one had apparent authority, to settle the case after the deadline. The court mentions in a footnote that it need not address that argument because §49 solves the case.

But does it? Why didn’t Bennett brief §49? Well, we can only assume. We assume his lawyer realized that authority was the anterior question. §49 says nothing of authority (about which the Restatement is elsewhere quite specific). How does delay create authority or apparent authority? If there is an answer to that question then it was incumbent on this court to explain it – because if there isn’t, this whole thing is wrong.


(link to opinion)

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