II. A. The Making of Agreements
  • 1 II. A. 1. Intention to Be Bound

    • 1.1 Keller v. Holderman

      1
      Jacob F. Keller
      2
      v.
      3
      Jacob Holderman.
      4

      Where defendant gave plaintiff his check for three hundred dollars for a silver watch, worth fifteen, but the whole transaction was a mere frolic and banter, the one party not expecting to buy the watch nor he the other to sell it, it was held that no recovery could be had upon the check, notwithstanding defendant had retained the watch, and did not offer to return it until the trial.

      5

      Submitted on briefs Apr. 17, 1863.Decided May 12, 1863.

      6

       

      7

      Error to Berrien Circuit.

      8

      Action by Holderman against Keller upon a check for $300, drawn by Keller upon a banker at Niles, and not honored. The cause was tried without a jury, and the Circuit Judge found as facts, that the check was given for an old silver watch, worth about $15, which Keller took and kept till the day of trial, when he offered to return it to the plaintiff, who refused to receive it. The whole transaction was a frolic and banter--the plaintiff not expecting to sell, nor the defendant intending to buy the watch at the sum for which the check was drawn. The defendant when he drew the check had no money in the banker's hands, and had intended to insert a condition in the check that would prevent his being liable upon it; but as he had failed to do so, and had retained the watch, the judge held him liable, and judgment was rendered against him for the amount of the check. 

      9

      [249]

      10

      W. A. Moore, for plaintiff in error.

      11

      James Brown, for defendant in error.

      12
      MARTIN CH. J.:
      13

      When the court below found as a fact that “the whole transaction between the parties was a frolic and a banter, the plaintiff not expecting to sell, nor the defendant intending to buy the watch at the sum for which the check was drawn,” the conclusion should have been that no contract was ever made by the parties, and the finding should have been that no cause of action existed upon the check to the plaintiff. 

      14

      The judgment is reversed, with costs of this court and of the court below. 

      15

      The other justices concurred.

    • 1.2 Moulton v. Kershaw.

      1
      59 Wis. 316
      18 N.W. 172
      2
      MOULTON
      v.
      KERSHAW AND ANOTHER.
      3
      Supreme Court of Wisconsin.
      4
      Filed January 8, 1884.
      6

      Appeal from circuit court, Milwaukee county.

      7

      [18 N.W. 172]

      8

      Jenkins, Winkler & Smith, for respondent, J. H. Moulton.

      9

      Finches, Lynde & Miller, for appellants, Charles J. Kershaw and another.

      10

       

      11
      TAYLOR, J.
      12

      The complaint of the respondent alleges that the appellants were dealers in salt in the city of Milwaukee, including salt of the Michigan Salt Association; that the respondent was a dealer in salt in the city of La Crosse, and accustomed to buy salt in large quantities, which fact was known to the appellants; that on the nineteenth day of September, 1882, the appellants, at Milwaukee, wrote and posted to the respondent at La Crosse a letter, of which the following is a copy:

      13

      “MILWAUKEE, September 19, 1882.

      J. H. Moulton, Esq., La Crosse, Wis.--DEAR SIR: In consequence of a rupture in the salt trade, we are authorized to offer Michigan fine salt, in full car-load lots of 80 to 95 bbls., delivered at your city, at 85c. per bbl., to be shipped per C. & N. W. R. R. Co. only. At this price it is a bargain, as the price in general remains unchanged. Shall be pleased to receive your order.

      +----------------------------------+¦Yours truly,¦C. J. KERSHAW & SON.”¦+----------------------------------+

       

      14

      The balance of the complaint reads as follows:

      15

      “And this plaintiff alleges, upon information and belief, that said defendants did not send said letter and offer by authority of, or as agents of, the Michigan Salt Association, or any other party, but on their own responsibility. And the plaintiff further shows that he received said letter in due course of mail, to-wit, on the twentieth day of September, 1882, and that he, on that day, accepted the offer in said letter contained, to the amount of two thousand barrels of salt therein named, and immediately, and on said day, sent to said defendants at Milwaukee a message by telegraph, as follows:

      ‘LA CROSSE, September 20, 1882.

      To C. J. Kershaw & Son, Milwaukee, Wis.: Your letter of yesterday, received and noted. You may ship me two thousand (2,000) barrels Michigan fine salt, as offered in your letter. Answer.

      J. H. MOULTON.'

      “That said telegraphic acceptance and order was duly received by said defendants on the twentieth day of September, 1882, aforesaid; that two thousand barrels of said salt was a reasonable quantity for this plaintiff to order in response to said offer, and not in excess of the amount which the defendants, from their knowledge of the business of the plaintiff, might reasonably expect him to order in response thereto.

      16

      [18 N.W. 173]

      17

      That although said defendants received said acceptance and order of this plaintiff on said twentieth day of September, 1882, they attempted, on the twenty-first day of September, 1882, to withdraw the offer contained in their said letter of September 19, 1882, and did, on said twenty-first day of September, 1882, notify this plaintiff of the withdrawal of said offer on their part; that this plaintiff thereupon demanded of the defendants the delivery to him of two thousand barrels of Michigan fine salt, in accordance with the terms of said offer, accepted by this plaintiff as aforesaid, and offered to pay them therefor in accordance with said terms, and this plaintiff was ready to accept said two thousand barrels, and ready to pay therefor in accordance with said terms. Nevertheless, the defendants utterly refused to deliver the same, or any part thereof, by reason whereof this plaintiff sustained damage to the amount of eight hundred dollars.

      Wherefore the plaintiff demands judgment against the defendants for the sum of eight hundred dollars, with interest from the twenty-first day of September, 1882, besides the costs of this action.”

      18

      To this complaint the appellants interposed a general demurrer. The circuit court overruled the demurrer, and from the order overruling the same the defendants appeal to this court.

      19

      The only question presented is whether the appellant's letter, and the telegram sent by the respondent in reply thereto, constitute a contract for the sale of 2,000 barrels of Michigan fine salt by the appellants to the respondent at the price named in such letter. We are very clear that no contract was perfected by the order telegraphed by the respondent in answer to appellants' letter. The learned counsel for the respondent clearly appreciated the necessity of putting a construction upon the letter which is not apparent on its face, and in their complaint have interpreted the letter to mean that the appellants by said letter made an express offer to sell the respondent, on the terms stated, such reasonable amount of salt as he might order, and as the appellants might reasonably expect him to order, in response thereto. If in order to entitle the plaintiff to recover in this action it is necessary to prove the allegations, then it seems clear to us that the writings between the parties do not show the contract. It is not insisted by the learned counsel for the respondent that any recovery can be had unless a proper construction of the letter and telegram constitute a binding contract between the parties. The alleged contract being for the sale and delivery of personal property of a value exceeding $50, is void by the statute of frauds, unless in writing. Section 2308, Rev. St. 1878. The counsel for the respondent claims that the letter of the appellants is an offer to sell to the respondent, on the terms mentioned, any reasonable quantity of Michigan fine salt that he might see fit to order, not less than one car-load. On the other hand, the counsel for the appellants claim that the letter is not an offer to sell any specific quantity of salt, but simply a letter such as a business man would send out to customers or those with whom he desired to trade, soliciting their patronage. To give the letter of the appellants the construction claimed for it by the learned counsel for the respondent, would introduce such an element of uncertainty into the contract as would necessarily render its enforcement a matter of difficulty, and in every case the jury trying the case would be called upon to determine whether the quantity ordered was such as the appellants might reasonably expect from the party. This question would necessarily involve an inquiry into the nature and extent of the business of the person to whom the letter was addressed, as well as to the extent of the business of the appellants. So that it would be a question of fact for the jury in each case to determine whether there was a binding contract between the parties. And this question would not in any way depend upon the language used in the written contract, but upon proofs to be made outside of the writings. As the only communications between the parties, upon which a contract can be

      20

      [18 N.W. 174]

      21

      predicated, are the letter and the reply of the respondent, we must look to them, and nothing else, in order to determine whether there was a contract in fact. We are not at liberty to help out the written contract, if there be one, by adding by parol evidence additional facts to help out the writing so as to make out a contract not expressed therein. If the letter of the appellants is an offer to sell salt to the respondent on the terms stated, then it must be held to be an offer to sell any quantity at the option of the respondent not less than one car-load. The difficulty and injustice of construing the letter into such an offer is so apparent that the learned counsel for the respondent do not insist upon it, and consequently insist that it ought to be construed as an offer to sell such quantity as the appellants, from their knowledge of the business of the respondent, might reasonably expect him to order. Rather than introduce such an element of uncertainty into the contract, we deem it much more reasonable to construe the letter as a simple notice to those dealing in salt that the appellants were in a condition to supply that article for the prices named, and requesting the person to whom it was addressed to deal with them. This case is one where it is eminently proper to heed the injunction of Justice FOSTER in the opinion in Lyman v. Robinson, 14 Allen, 254: “That care should always be taken not to construe as an agreement letters which the parties intended only as preliminary negotiations.”

      22

      We do not wish to be understood as holding that a party may not be bound by an offer to sell personal property, where the amount or quantity is left to be fixed by the person to whom the offer is made, when the offer is accepted and the amount or quantity fixed before the offer is withdrawn. We simply hold that the letter of the appellants in this case was not such an offer. If the letter had said to the respondent we will sell you all the Michigan fine salt you will order, at the price and on the terms named, then it is undoubtedly the law that the appellants would have been bound to deliver any reasonable amount the appellant might have ordered, possibly any amount, or make good their default in damages. The case cited by the counsel decided by the California supreme court ( Kleler v. Ybarru, 3 Cal. 147) was an offer of this kind with an additional limitation. The defendant in that case had a crop of growing grapes, and he offered to pick from the vines and deliver to the plaintiff, at defendant's vineyard, so many grapes then growing in said vineyard as the plaintiff should wish to take during the present year at 10 cents per pound on delivery. The plaintiff, within the time and before the offer was withdrawn, notified the defendant that he wished to take 1,900 pounds of his grapes on the terms stated. The court held there was a contract to deliver the 1,900 pounds. In this case the fixing of the quantity was left to the person to whom the offer was made, but the amount which the defendant offered, beyond which he could not be bound, was also fixed by the amount of grapes he might have in his vineyard in that year. The case is quite different in its facts from the case at bar. The cases cited by the learned counsel for the appellant, (Beaupre v. R. & A. Tile Co. 21 Minn. 155, and Kinghorne v. Montreal Tel. Co. U. C.,18 Q. B. 60,) are nearer in their main facts to the case at bar, and in both it was held there was no contract. We, however, place our opinion upon the language of the letter of the appellants, and hold that it cannot be fairly construed into an offer to sell to the respondent any quantity of salt he might order, nor any reasonable amount he might see fit to order. The language is not such as a business man would use in making an offer to sell to an individual a definite amount of property. The word “sell” is not used. They say, “we are authorized to offer Michigan fine salt,” etc., and volunteer an opinion that at the terms stated it is a bargain. They do not say, we offer to sell to you. They use general language proper to be addressed generally to those who were interested in the salt trade. It is clearly in the nature of an advertisement or business circular, to attract the attention of those interested in that business

      23

      [18 N.W. 175]

      24

      to the fact that good bargains in salt could be had by applying to them, and not as an offer by which they were to be bound, if accepted, for any amount the persons to whom it was addressed might see fit to order. We think the complaint fails to show any contract between the parties, and the demurrer should have been sustained.

      25

      The order of the circuit court is reversed, and the cause remanded for further proceedings, according to law.

    • 1.3 Texaco Inc. v. Pennzoil Co.

      1
      729 S.W.2d 768 (1987)
      2
      TEXACO, INC., Appellant,
      v.
      PENNZOIL, CO., Appellee.
      3
      No. 01-86-0216-CV.
      4

      Court of Appeals of Texas, Houston (1st Dist.).

      5
      February 12, 1987.
      6
      Rehearings Denied April 24 and May 26, 1987.
      7

      [784] Russell H. McMains, McMains & Constant, Corpus Christi, Gibson Gayle, Jr., James B. Sales, Fulbright & Jaworski, Richard B. Miller, Richard P. Keeton, Miller, Keeton, Bristow & Brown, Houston, William R. Edwards, Edwards & Terry, Corpus Christi, for appellant.

      8

      Joseph D. Jamail, Jamail & Kolius, John L. Jeffers, G. Irvin Terrell, Randall A. Hopkins, Baker & Botts, W. James Kronzer, Law Offices of W. James Kronzer, Harry M. Reasoner, Vinson & Elkins, Houston, Luther H. Soules, III, Soules & Reed, San Antonio, Royal H. Brin, Jr., Thomas C. Unis, Strasburger & Price, Dallas, Louis S. Muldrow, Waco, for appellee.

      9

      Before WARREN, JACK SMITH and SAM BASS, JJ.

      10
      OPINION
      11
      WARREN, Justice.
      12

      This is an appeal from a judgment awarding Pennzoil damages for Texaco's tortious interference with a contract between Pennzoil and the "Getty entities" (Getty Oil Company, the Sarah C. Getty Trust, and the J. Paul Getty Museum).

      13

      The jury found, among other things, that:

      14

      (1) At the end of a board meeting on January 3, 1984, the Getty entities intended to bind themselves to an agreement providing for the purchase of Getty Oil stock, whereby the Sarah C. Getty Trust would own 4/7th of the stock and Pennzoil the remaining 3/7th; and providing for a division of Getty Oil's assets, according to their respective ownership if the Trust and Pennzoil were unable to agree on a restructuring of Getty Oil by December 31, 1984;

      15

      (2) Texaco knowingly interfered with the agreement between Pennzoil and the Getty entities;

      16

      (3) As a result of Texaco's interference, Pennzoil suffered damages of $7.53 billion;

      17

      (4) Texaco's actions were intentional, willful, and in wanton disregard of Pennzoil's rights; and,

      18

      (5) Pennzoil was entitled to punitive damages of $3 billion.

      19

      The main questions for our determination are: (1) whether the evidence supports the jury's finding that there was a binding contract between the Getty entities and Pennzoil, and that Texaco knowingly induced a breach of such contract; (2) whether the trial court properly instructed the [785] jury on the law pertinent to the case; (3) whether the evidence supported the jury's damage awards; (4) whether the trial court committed reversible error in its admission and exclusion of certain evidence; (5) whether the conduct and posture of the trial judge denied Texaco a fair trial; and (6) whether the judgment violates certain articles of the United States Constitution.

      20

      Though many facts are disputed, the parties' main conflicts are over the inferences to be drawn from, and the legal significance of, these facts. There is evidence that for several months in late 1983, Pennzoil had followed with interest the well-publicized dissension between the board of directors of Getty Oil Company and Gordon Getty, who was a director of Getty Oil and also the owner, as trustee, of approximately 40.2% of the outstanding shares of Getty Oil. On December 28, 1983, Pennzoil announced an unsolicited, public tender offer for 16 million shares of Getty Oil at $100 each.

      21

      Soon afterwards, Pennzoil contacted both Gordon Getty and a representative of the J. Paul Getty Museum, which held approximately 11.8% of the shares of Getty Oil, to discuss the tender offer and the possible purchase of Getty Oil. In the first two days of January 1984, a "Memorandum of Agreement" was drafted to reflect the terms that had been reached in conversations between representatives of Pennzoil, Gordon Getty, and the Museum.

      22

      Under the plan set out in the Memorandum of Agreement, Pennzoil and the Trust (with Gordon Getty as trustee) were to become partners on a 3/7ths to 4/7ths basis respectively, in owning and operating Getty Oil. Gordon Getty was to become chairman of the board, and Hugh Liedtke, the chief executive officer of Pennzoil, was to become chief executive officer of the new company.

      23

      The Memorandum of Agreement further provided that the Museum was to receive $110 per share for its 11.8% ownership, and that all other outstanding public shares were to be cashed in by the company at $110 per share. Pennzoil was given an option to buy an additional 8 million shares to achieve the desired ownership ratio. The plan also provided that Pennzoil and the Trust were to try in good faith to agree upon a plan to restructure Getty Oil within a year, but if they could not reach an agreement, the assets of Getty Oil were to be divided between them, 3/7ths to Pennzoil and 4/7ths to the Trust.

      24

      The Memorandum of Agreement stated that it was subject to approval of the board of Getty Oil, and it was to expire by its own terms if not approved at the board meeting that was to begin on January 2. Pennzoil's CEO, Liedtke, and Gordon Getty, for the Trust, signed the Memorandum of Agreement before the Getty Oil board meeting on January 2, and Harold Williams, the president of the Museum, signed it shortly after the board meeting began. Thus, before it was submitted to the Getty Oil board, the Memorandum of Agreement had been executed by parties who together controlled a majority of the outstanding shares of Getty Oil.

      25

      The Memorandum of Agreement was then presented to the Getty Oil board, which had previously held discussions on how the company should respond to Pennzoil's public tender offer. A self-tender by the company to shareholders at $110 per share had been proposed to defeat Pennzoil's tender offer at $100 per share, but no consensus was reached.

      26

      The board voted to reject recommending Pennzoil's tender offer to Getty's shareholders, then later also rejected the Memorandum of Agreement price of $110 per share as too low. Before recessing at 3 a.m., the board decided to make a counter-proposal to Pennzoil of $110 per share plus a $10 debenture. Pennzoil's investment banker reacted to this price negatively. In the morning of January 3, Getty Oil's investment banker, Geoffrey Boisi, began calling other companies, seeking a higher bid than Pennzoil's for the Getty Oil shares.

      27

      When the board reconvened at 3 p.m. on January 3, a revised Pennzoil proposal was presented, offering $110 per share plus a $3 "stub" that was to be paid after the sale of a Getty Oil subsidiary ("ERC"), from the [786] excess proceeds over $1 billion. Each shareholder was to receive a pro rata share of these excess proceeds, but in any case, a minimum of $3 per share at the end of five years. During the meeting, Boisi briefly informed the board of the status of his inquiries of other companies that might be interested in bidding for the company. He reported some preliminary indications of interest, but no definite bid yet.

      28

      The Museum's lawyer told the board that, based on his discussions with Pennzoil, he believed that if the board went back "firm" with an offer of $110 plus a $5 stub, Pennzoil would accept it. After a recess, the Museum's president (also a director of Getty Oil) moved that the Getty board should accept Pennzoil's proposal provided that the stub be raised to $5, and the board voted 15 to 1 to approve this counter-proposal to Pennzoil. The board then voted themselves and Getty's officers and advisors indemnity for any liability arising from the events of the past few months. Additionally, the board authorized its executive compensation committee to give "golden parachutes" (generous termination benefits) to the top executives whose positions "were likely to be affected" by the change in management. There was evidence that during another brief recess of the board meeting, the counter-offer of $110 plus a $5 stub was presented to and accepted by Pennzoil. After Pennzoil's acceptance was conveyed to the Getty board, the meeting was adjourned, and most board members left town for their respective homes.

      29

      That evening, the lawyers and public relations staff of Getty Oil and the Museum drafted a press release describing the transaction between Pennzoil and the Getty entities. The press release, announcing an agreement in principle on the terms of the Memorandum of Agreement but with a price of $110 plus a $5 stub, was issued on Getty Oil letterhead the next morning, January 4, and later that day, Pennzoil issued an identical press release.

      30

      On January 4, Boisi continued to contact other companies, looking for a higher price than Pennzoil had offered. After talking briefly with Boisi, Texaco management called several meetings with its in-house financial planning group, which over the course of the day studied and reported to management on the value of Getty Oil, the Pennzoil offer terms, and a feasible price range at which Getty might be acquired. Later in the day, Texaco hired an investment banker, First Boston, to represent it with respect to a possible acquisition of Getty Oil. Meanwhile, also on January 4, Pennzoil's lawyers were working on a draft of a formal "transaction agreement" that described the transaction in more detail than the outline of terms contained in the Memorandum of Agreement and press release.

      31

      On January 5, the Wall Street Journal reported on an agreement reached between Pennzoil and the Getty entities, describing essentially the terms contained in the Memorandum of Agreement. The Pennzoil board met to ratify the actions of its officers in negotiating an agreement with the Getty entities, and Pennzoil's attorneys periodically attempted to contact the other parties' advisors and attorneys to continue work on the transaction agreement.

      32

      The board of Texaco also met on January 5, authorizing its officers to make an offer for 100% of Getty Oil and to take any necessary action in connection therewith. Texaco first contacted the Museum's lawyer, Lipton, and arranged a meeting to discuss the sale of the Museum's shares of Getty Oil to Texaco. Lipton instructed his associate, on her way to the meeting in progress of the lawyers drafting merger documents for the Pennzoil/Getty transaction, to not attend that meeting, because he needed her at his meeting with Texaco. At the meeting with Texaco, the Museum outlined various issues it wanted resolved in any transaction with Texaco, and then agreed to sell its 11.8% ownership in Getty Oil.

      33

      That evening, Texaco met with Gordon Getty to discuss the sale of the Trust's shares. He was informed that the Museum had agreed to sell its shares to Texaco. Gordon Getty's advisors had previously warned him that the Trust shares might be "locked out" in a minority position if Texaco [787] bought, in addition to the Museum's shares, enough of the public shares to achieve over 50% ownership of the company. Gordon Getty accepted Texaco's offer of $125 per share and signed a letter of his intent to sell his stock to Texaco, as soon as a California temporary restraining order against his actions as trustee was lifted.

      34

      At noon on January 6, Getty Oil held a telephone board meeting to discuss the Texaco offer. The board voted to withdraw its previous counter-proposal to Pennzoil and unanimously voted to accept Texaco's offer. Texaco immediately issued a press release announcing that Getty Oil and Texaco would merge.

      35

      Soon after the Texaco press release appeared, Pennzoil telexed the Getty entities, demanding that they honor their agreement with Pennzoil. Later that day, prompted by the telex, Getty Oil filed a suit in Delaware for declaratory judgment that it was not bound to any contract with Pennzoil. The merger agreement between Texaco and Getty Oil was signed on January 6; the stock purchase agreement with the Museum was signed on January 6; and the stock exchange agreement with the Trust was signed on January 8, 1984.

      36
      INSUFFICIENCY OF THE EVIDENCE
      37

      In Points of Error 46 through 56, Texaco contends that the evidence at trial was legally and factually insufficient to support the jury's answers to Special Issues 1 and 2.

      38

      The parties agree that in our review, we are required to apply the substantive law of New York and the procedural law of Texas.

      39

      There are two standards of review for questions attacking the sufficiency of the evidence: (1) legal insufficiency and (2) factual insufficiency review. In reviewing legal insufficiency points or "no evidence" points, we must consider only the evidence tending to support the finding, viewing it in the light most favorable to the finding, giving effect to all reasonable inferences that may properly be drawn from that evidence, and disregarding all contrary or conflicting evidence. King v. Bauer, 688 S.W.2d 845 (Tex.1985); Garza v. Alviar, 395 S.W.2d 821 (Tex.1965). A "no evidence" point must be sustained if we find a complete absence of evidence of probative force or only a scintilla of evidence to support the finding, or if the evidence tending to support the finding must be disregarded because it is legally incompetent. If there is more than a scintilla of probative evidence to support the finding, the point must be overruled. Calvert, "No Evidence" and "Insufficient Evidence" Points of Error, 38 Texas L.Rev. 361 (1960).

      40

      In reviewing factual insufficiency points, we must consider all of the evidence in the record that is relevant to the fact finding being challenged. In re King's Estate, 150 Tex. 662, 244 S.W.2d 660 (1951). We must sustain a "factual insufficiency" point if we determine that the finding of a vital fact is so contrary to the great weight and preponderance of the evidence as to be clearly wrong. Id., 150 Tex. at 664-65, 244 S.W.2d at 661; Calvert, 38 Tex.L.Rev. 361.

      41

      Texaco argues first that there was no evidence or there was insufficient evidence to support the jury's answers to Special Issue No. 1. The jury found that the Trust, the Museum, and Getty Oil Company intended to bind themselves to an agreement with Pennzoil containing certain enumerated terms at the end of the Getty Oil Company board meeting on January 3, 1984. Texaco claims that not only is there insufficient evidence of any intent to be bound but also that the "agreement" referred to in Special Issue No. 1 is too indefinite to be a legally enforceable contract.

      42

      Second, Texaco asserts that the evidence is legally and factually insufficient to support the jury's answer to Special Issue No. 2, which inquired whether Texaco knowingly interfered with any agreement that the jury had found between Pennzoil and the Getty entities. Texaco contends that there is insufficient evidence that it had actual knowledge of a legally enforceable contract, or that Texaco actively induced a breach of the alleged contract. Texaco further asserts that the alleged contract was [788] not valid and enforceable, because it was based on a mutual mistake, because it would violate SEC Rule 10b-13 and the statute of frauds, and because it would be a breach by Gordon Getty and by the Getty Oil directors of their fiduciary duties; thus, Texaco argues, the alleged contract will not support a tort action for inducement of breach.

      43
      SPECIAL ISSUE NO. 1
      44

      Texaco contends that under controlling principles of New York law, there was insufficient evidence to support the jury's finding that at the end of the Getty Oil board meeting on January 3, the Getty entities intended to bind themselves to an agreement with Pennzoil.

      45

      Pennzoil responds that the question of the parties' intent is a fact question, and the jury was free to accept or reject Texaco's after-the-fact testimony of subjective intent. Pennzoil contends that the evidence showed that the parties intended to be bound to the terms in the Memorandum of Agreement plus a price terms of $110 plus a $5 stub, even though the parties may have contemplated a later, more formal document to memorialize the agreement already reached. Pennzoil also argues that the binding effect of the Memorandum of Agreement was conditioned only upon approval of the board, not also upon execution of the agreement by a Getty signator.

      46

      Under New York law, if parties do not intend to be bound to an agreement until it is reduced to writing and signed by both parties, then there is no contract until that event occurs. Scheck v. Francis, 26 N.Y.2d 466, 311 N.Y.S.2d 841, 260 N.E.2d 493 (1970). If there is no understanding that a signed writing is necessary before the parties will be bound, and the parties have agreed upon all substantial terms, then an informal agreement can be binding, even though the parties contemplate evidencing their agreement in a formal document later. Municipal Consultants & Publishers, Inc. v. Town of Ramapo, 47 N.Y.2d 144, 417 N.Y.S.2d 218, 220, 390 N.E.2d 1143, 1145 (1979); R.G. Group, Inc. v. Horn & Hardart Co., 751 F.2d 69, 74 (2d Cir.1984).

      47

      If the parties do intend to contract orally, the mere intention to commit the agreement to writing does not prevent contract formation before execution of that writing, Winston v. Mediafare Entertainment Corp., 777 F.2d 78, 80 (2d Cir.1985), and even a failure to reduce their promises to writing is immaterial to whether they are bound. Schwartz v. Greenberg, 304 N.Y. 250, 107 N.E.2d 65 (1952).

      48

      However, if either party communicates the intent not to be bound before a final formal document is executed, then no oral expression of agreement to specific terms will constitute a binding contract. Winston, 777 F.2d at 80; R.G. Group, 751 F.2d at 74.

      49

      Thus, under New York law, the parties are given the power to obligate themselves informally or only by a formal signed writing, as they wish. R.G. Group, 751 F.2d at 74. The emphasis in deciding when a binding contract exists is on intent rather than on form. Reprosystem, B.V. v. SCM Corp., 727 F.2d 257, 261 (2d Cir.), cert. denied, 469 U.S. 828, 105 S.Ct. 110, 83 L.Ed.2d 54 (1984).

      50

      It is the parties' expressed intent that controls which rule of contract formation applies. To determine intent, a court must examine the words and deeds of the parties, because these constitute the objective signs of such intent. Winston, 777 F.2d at 80; R.G. Group, 751 F.2d at 74. Only the outward expressions of intent are considered—secret or subjective intent is immaterial to the question of whether the parties were bound. Porter v. Commercial Casualty Insurance Co., 292 N.Y. 176, 54 N.E.2d 353 (1944).

      51

      Several factors have been articulated to help determine whether the parties intended to be bound only by a formal, signed writing: (1) whether a party expressly reserved the right to be bound only when a written agreement is signed; (2) whether there was any partial performance by one party that the party disclaiming the contract accepted; (3) whether all essential terms of the alleged contract had been [789] agreed upon; and (4) whether the complexity or magnitude of the transaction was such that a formal, executed writing would normally be expected. Winston, 777 F.2d at 80; R.G. Group, 751 F.2d at 76.

      52

      Evaluating the first factor, Texaco contends that the evidence of expressed intent not to be bound establishes conclusively that there was no contract at the time of Texaco's alleged inducement of breach. Texaco argues that this expressed intent is contained in (1) the press releases issued by the Getty entities and Pennzoil, which stated that "the transaction is subject to execution of a definitive merger agreement"; (2) the phrasing of drafts of the transaction agreement, which Texaco alleges "carefully stated that the parties' obligations would become binding only `after the execution and delivery of this Agreement'"; and (3) the deliberate reference by the press releases to the parties' understanding as an "agreement in principle."

      53

      In its brief, Texaco asserts that, as a matter of black letter New York law, the "subject to" language in the press release established that the parties were not then bound and intended to be bound only after signing a definitive agreement, citing Banking & Trading Corp. v. Reconstruction Finance Corp., 147 F.Supp. 193, 204 (S.D.N.Y.1956), aff'd, 257 F.2d 765 (2d Cir. 1958). The court in that case stated that "if the agreement is expressly subject to the execution of a formal contract, this intent must be respected and no contract found until then." However, the court went on to say that where intent is less sharply expressed, the trier of fact must determine it as best he can. Id. at 204-05. Although the intent to formalize an agreement is some evidence of an intent not to be bound before signing such a writing, it is not conclusive. Id. at 204. The issue of when the parties intended to be bound is a fact question to be decided from the parties' acts and communications. Id.; see Chromalloy American Corp. v. Universal Housing Systems of America, Inc., 495 F.Supp. 544, 550 (S.D.N.Y.1980), aff'd, 697 F.2d 289 (2d Cir.1982).

      54

      The press release issued first by Getty, then by Pennzoil, on January 4, 1984, stated:

      55

      Getty Oil Company, The J. Paul Getty Museum and Gordon Getty, as Trustee of the Sarah C. Getty Trust, announced today that they have agreed in principle with Pennzoil Company to a merger of Getty Oil and a newly formed entity owned by Pennzoil and the Trustee.

      56

      In connection with the transaction, the shareholders of Getty Oil ... will receive $110 per share cash plus the right to receive a deferred cash consideration in a formula amount. The deferred consideration will be equal to a pro rata share of the ... proceeds, in excess of $1 billion,... of ERC Corporation, ... and will be paid upon the disposition. In any event, under the formula, each shareholder will receive at least $5 per share within five years.

      57

      Prior to the merger, Pennzoil will contribute approximately $2.6 billion in cash and the Trustee and Pennzoil will contribute the Getty Oil shares owned by them to the new entity. Upon execution of a definitive merger agreement, the ... tender offer by a Pennzoil subsidiary for shares of Getty Oil stock will be withdrawn.

      58

      The agreement in principle also provides that Getty Oil will grant to Pennzoil an option to purchase eight million treasury shares for $110 per share.

      59

      The transaction is subject to execution of a definitive merger agreement, approval by the stockholders of Getty Oil and completion of various governmental filing and waiting period requirements.

      60

      Following consummation of the merger, the Trust will own 4/7ths of the ... stock of Getty Oil and Pennzoil will own 3/7ths. The Trust and Pennzoil have also agreed in principle that following consummation of the merger they will endeavor in good faith to agree upon a plan for restructuring Getty Oil [within a year] and that if they are unable to reach such an agreement then they will cause a division of assets of the company. (Emphasis added.)

      61

      [790] Any intent of the parties not to be bound before signing a formal document is not so clearly expressed in the press release to establish, as a matter of law, that there was no contract at that time. The press release does refer to an agreement "in principle" and states that the "transaction" is subject to execution of a definitive merger agreement. But the release as a whole is worded in indicative terms, not in subjunctive or hypothetical ones. The press release describes what shareholders will receive, what Pennzoil will contribute, that Pennzoil will be granted an option, etc.

      62

      The description of the transaction as subject to a definitive merger agreement also includes the need for stockholder approval and the completion of various governmental filing and waiting requirements. There was evidence that this was a paragraph of routine details, that the referred to merger agreement was a standard formal document required in such a transaction under Delaware law, and that the parties considered these technical requirements of little consequence.

      63

      There is also an arguable difference between a "transaction" being subject to various requirements and the formation of the agreement itself being dependent upon completion of these matters. In F. W. Berk & Co. v. Derecktor, 301 N.Y. 110, 92 N.E.2d 914 (1950), cited in Texaco's brief, the defendant's very acceptance of the plaintiff's order was made subject to the occurrence of certain events. The court defined the phrase "subject to" as being the equivalent of "conditional upon or depending on" and held that making the acceptance of an offer subject to a condition was not the kind of assent required to make it a binding promise. However, making the acceptance of an offer conditional, or expressly making an agreement itself conditional, is a much clearer expression of an intent not to be bound than the use of the more ambiguous word "transaction."

      64

      Other cases cited by Texaco involved writings that specifically stated that no party would be committed until a written contract was executed. See, e.g., Reprosystem, B.V., 727 F.2d at 260 (draft agreements clearly stated that formal execution was required before the contract would have any binding effect); Chromalloy American Corp., 495 F.Supp. at 547-48 (letter of intent stated that neither party would be committed until a contract was executed). Yet, despite the clear language of reservation in those cases, the parties' intent to be bound was still evaluated as a question of fact to be determined from all the circumstances of the case. Reprosystem, B. V., 727 F.2d at 261-62; Chromalloy American Corp., 495 F.Supp. at 550.

      65

      So it is here. Regardless of what interpretation we give to the conditional language in the press release, we conclude that it did not so clearly express the intent of the parties not to be bound to conclusively resolve that issue, as Texaco asserts.

      66

      Texaco also contends that explicit language of reservation in drafts of Pennzoil's transaction agreement indicates the parties' expressed intent not to be bound without a signed writing. Texaco asserts that "Pennzoil's lawyers carefully stated that the parties' obligations would become binding only `after the execution and delivery of this Agreement.'"

      67

      That assertion is not accurate. In fact, "after the execution and delivery of this Agreement" was merely used as an introductory phrase before each party's obligations were described, e.g., after the execution and delivery of this Agreement, Pennzoil shall terminate the tender offer;... Pennzoil and the Company shall terminate all legal proceedings; ... the Company shall purchase all shares held by the Museum; etc. Other clauses in the transaction agreement did not contain that phrase, e.g., the Company hereby grants to Pennzoil the option to purchase up to 8 million shares of treasury stock; on or prior to the effective date, Pennzoil and the Trustee shall form the merging company; etc.

      68

      A reasonable conclusion from reading the entire drafts is that the phrase "after the execution and delivery of this Agreement" was used chiefly to indicate the timing of various acts that were to occur, and not to impose an express precondition to [791] the formation of a contract. Compare Reprosystem, B.V., 727 F.2d at 262 ("when executed and delivered," the agreement would become "a valid and binding agreement"). Again, the language upon which Texaco relies does not so clearly express an intent not to be bound to resolve that issue or to remove the question from the ambit of the trier of fact.

      69

      Next, Texaco states that the use of the term "agreement in principle" in the press release was a conscious and deliberate choice of words to convey that there was not yet any binding agreement. Texaco refers to defense testimony that lawyers for Getty Oil and the Museum changed the initial wording of the press release from "agreement" to "agreement in principle" because they understood and intended that phrase to mean that there was no binding contract with Pennzoil.

      70

      Texaco cites Mine Safety Appliance Co. v. Energetics Science, Inc., No. 75 Civ. 4925, slip op. at 3, n. 2 (S.D.N.Y., Feb. 5, 1980), an unreported case where the court in dicta characterized an agreement in principle as "a far cry from a final contract." However, the court in that case acknowledged that intent to be bound was a fact issue. A motion to declare an alleged agreement binding and enforceable was denied, because the court found that a question of material fact had been raised on whether the non-movants intended to be bound. In another of Texaco's cited cases, Debreceni v. Outlet Co., 784 F.2d 13, 18 (1st Cir.1986), an offer was subject to the execution of definitive agreements of sale, and the agreement itself provided that it would become a binding obligation only after execution. Applying New York law, the court stated that the parties would not be bound until a written agreement was executed if that was their intention.

      71

      Pennzoil and Texaco presented conflicting evidence at trial on the common business usage and understanding of the term "agreement in principle." Texaco's witnesses testified that the term is used to convey an invitation to bid or that there is no binding contract. Pennzoil's witnesses testified that when business people use "agreement in principle," it means that the parties have reached a meeting of the minds with only details left to be resolved. There was testimony by Sidney Petersen, Getty Oil's chief executive officer, that an "agreement in principle" requires the parties to proceed to try to implement the details of the agreement in good faith, and that that was the case with the agreement in principle with Pennzoil.

      72

      The jury was the sole judge of the credibility of the witnesses and was entitled to accept or reject any testimony it wished, as well as to decide what weight to give the testimony. Rego Co. v. Brannon, 682 S.W.2d 677, 680 (Tex.App.—Houston [1st Dist] 1984, writ ref'd n.r.e.). There was sufficient evidence at trial on the common business usage of the expression "agreement in principle" and on its meaning in this case for the jury reasonably to decide that its use in the press release did not necessarily establish that the parties did not intend to be bound before signing a formal document.

      73

      A second factor that may indicate whether the parties intended to be bound only by a signed, formal writing is whether there was partial performance by one party that the party disclaiming the contract accepted. Winston, 777 F.2d at 80; R.G. Group, 751 F.2d at 76.

      74

      Texaco asserts that there was no partial performance that would indicate an intent to be bound, but conversely, that the conduct of the parties here was inconsistent with the existence of a binding contract.

      75

      Texaco points out that Pennzoil amended its tender offer statement with the SEC on January 4, stating its intent to withdraw the tender offer "if" a definitive merger agreement was executed. Pennzoil filed a copy of the press release to update its SEC statement. Texaco claims that Pennzoil would have been required to withdraw the tender offer under SEC rule 10b-13, 17 C.F.R. § 240.10b-13 (1985), if a binding contract had existed on that date. These contentions will be discussed later in this opinion. Texaco also argues that Getty Oil and the other Getty entities demonstrated a belief that no contract existed yet by actively [792] soliciting other bids for the purchase of Getty Oil and by representing to Texaco that they were free to deal.

      76

      Pennzoil points out that Texaco's alleged interference with Pennzoil's agreement occurred scarcely 48 hours after the agreement came into existence, and there was very little time for any performance under the agreement to have occurred. Pennzoil asserts that there was affirmative partial performance nevertheless, in that representatives of Pennzoil and the Trust worked to coordinate the issuance of a joint press release, as provided by the Memorandum of Agreement upon approval of the plan, and also in that Pennzoil made arrangements to have $1 billion in cash available for the payment of the Museum's shares in escrow.

      77

      Other than the preliminary financial arrangements made by Pennzoil, we find little relevant partial performance in this case that might show that the parties believed that they were bound by a contract. However, the absence of relevant part performance in this short period of time does not compel the conclusion that no contract existed. Texaco has pointed out that there was some conduct inconsistent with the existence of an intent to be bound to a contract. But partial performance, and on the other hand, conduct that is inconsistent with an intent to be bound, are again merely circumstances that the finder of fact could consider in reaching a decision on whether the parties intended to be bound. The evidence on the parties' conduct was presented to the jury, which could either accept or reject the inferences the parties asked it to draw from these facts.

      78

      The next factor showing intent to be bound is whether there was agreement on all essential terms of the alleged agreement. Texaco contends that numerous items of "obvious importance" were still being negotiated at the time Pennzoil claims a contract had been formed.

      79

      First, Texaco asserts that there was no agreement on which party would buy the Museum's stock. Pennzoil contends that its contract was formed on January 3, and that intent to be bound must be determined as of that date. The jury specifically found, in response to Special Issue No. 6, that at the end of the January 3 board meeting, the Getty Oil Company, the Museum, the Trust, and Pennzoil each intended to be bound to an agreement that provided that Getty Oil would purchase the Museum's shares forthwith as provided in the Memorandum of Agreement. There is evidence in the record to support this finding.

      80

      The Copley notes of the Getty Oil board meeting (made by Ralph Copley, General Counsel, and Secretary of the Board of Getty Oil) reflect that at the board meeting on January 3, all but one of Getty's directors voted to accept "the Pennzoil proposal," provided that the price being paid per share was $110 plus a minimum $5 stub. The testimony is sharply conflicting on exactly what the "Pennzoil proposal" was that the board approved, as are the inferences that could be drawn from the record of that board meeting.

      81

      Texaco's witnesses testified that the Getty board approved only a price proposal by Pennzoil, a basis upon which to negotiate further, and not the other terms originally presented to the board in the Memorandum of Agreement, which Texaco contends was rejected by the board and never considered again after that first vote. Pennzoil's evidence showed that the only "Pennzoil proposal" before the board was the terms contained in the Memorandum of Agreement, which among other things provided that Getty Oil was to buy the Museum's shares. The Memorandum of Agreement was signed by representatives of Pennzoil and of the Museum and the Trust, holders of a majority of Getty's shares, and was subject only to approval of the board of Getty Oil. The terms described in the press release issued by the Getty entities and then by Pennzoil the next day correspond to those contained in the Memorandum of Agreement except for the higher price term.

      82

      It was the jury's task to judge the credibility of the witnesses, to resolve conflicts in the factual evidence, and to decide which inferences to draw from the evidence presented. LeMaster v. Fort Worth Transit Co., 138 Tex. 512, 160 S.W.2d 224 [793] (1942). The reviewing court may not substitute its own opinion for that of the jury on these matters. We find that there was sufficient evidence to support the jury's finding that at the end of the Getty Oil board meeting on January 3, the parties had reached agreement on Getty's purchase of the Museum's shares.

      83

      There was evidence that the parties were made aware, on January 4, that Getty's purchase of the Museum's shares might trigger a tax penalty applicable to sales of stock between charitable trusts and related entities. It was agreed that this possibility had to be explored, and further discussions developed the alternative of having Pennzoil, rather than Getty Oil, buy the Museum's shares. The Museum's attorney drafted an escrow agreement to effect Pennzoil's purchase of those shares. There was testimony that Pennzoil also began making arrangements to have the necessary cash available in escrow.

      84

      There is sufficient evidence to refute Texaco's assertion that the question of who would buy the Museum's shares was a significant open issue that the parties had not agreed upon at the time Pennzoil contends, and the jury found, the parties intended to be bound. Nor does the conflicting evidence of events after January 3 compel the conclusion that the parties considered it a problem that Pennzoil, rather than Getty Oil, would be buying the Museum's shares.

      85

      There was evidence that the Museum's main concerns were price protection and that its shares would be purchased at once. The Museum's attorney suggested that any potential tax problem could be avoided by having Pennzoil buy its shares, and she drafted an escrow agreement for effecting this. Pennzoil's witnesses testified that Pennzoil did not object to this change of mechanics from the original agreement. Under the alleged agreement, Pennzoil was to purchase 24 million shares, and Pennzoil's CEO testified that it made no difference to Pennzoil which 24 million shares it bought. Although one of Getty's attorneys had expressed an objection to Pennzoil's buying the Museum shares, he also objected to Getty Oil itself buying those shares, as provided in the Memorandum of Agreement. There was concern, he said, that if Pennzoil and the Trust acquired control of Getty before buying all outstanding shares, the remaining public shares would not be bought at the same price. However, the Memorandum of Agreement and the press release both stated the same price to be paid to all selling shareholders. There was also testimony that the attorneys representing Getty Oil, the Museum, and the Trust agreed on January 5 that it was better to have Pennzoil rather than Getty buy the Museum's shares.

      86

      Texaco lists the extent of the Museum's "top up" price protection as another open issue showing the lack of the parties' intent to be bound.

      87

      The "top up" provision in the Memorandum of Agreement guaranteed that the Museum would receive a higher price per share than specified if anyone buying at least 10 percent of the stock paid a higher price for those shares. This provision effectuated the Museum's requirement of price protection for the sale of its Getty shares, should Pennzoil or the company pay another shareholder a higher price. Pennzoil's president acknowledged that Pennzoil was bound to the "top up" clause in the Memorandum of Agreement, which was signed by Pennzoil and the Museum, and which Pennzoil alleges became a binding contract upon its approval, with a higher price term, by the Getty board on January 3. Though no "top up" clause appeared in the first draft of the transaction agreement, such provisions were contained in subsequent drafts. The evidence as a whole does not support Texaco's contention that the parties did not reach agreement on price protection for the Museum, or that it remained a significant open issue.

      88

      Next, Texaco argues that the parties never resolved a number of questions relating to the payment of Getty's first quarter dividend and to the $5 stub that was to be part of the consideration for the Getty Oil shares. The stub represented the minimum payment shareholders were to receive [794] within 5 years from the excess proceeds from the sale of ERC.

      89

      Getty's outside counsel, Winokur, testified that open issues remained on who would control the sale, who would guarantee payment of the stub in the event of liquidation, how "net proceeds" would be defined, and what ERC's dividend policy would be under the new ownership. Pennzoil points out that the Copley notes of the board meeting do not show that the Getty Oil board expressed any concern over the mechanics of the ERC sale before it approved the Pennzoil proposal on January 3. Pennzoil's CEO testified that none of the parties ever brought up these matters at all before the agreement was made, and that Pennzoil was never told that resolution of such questions was essential to the agreement. There was evidence that the Getty entities' main concern was the price that shareholders would receive for their shares, and that questions over the exact mechanics of achieving that price were no obstacle to reaching agreement on the transaction.

      90

      Nor does the evidence show that Getty's first quarter dividend was an important unresolved issue. There was evidence that Pennzoil did not object to paying the dividend, and that there were customary ways of handling such questions in a merger situation. Pennzoil considered the amount involved insignificant in relation to the magnitude of the entire transaction. The jury was entitled to resolve the contradicting testimony on the significance of these matters and to decide the implications on the question of the parties' intent.

      91

      Texaco also asserts, again based on the testimony of its witness Winokur, that the parties never reached agreement on whether the definitive agreement would ensure that once Pennzoil and the Trust acquired control, they could not avoid the commitment to purchase the remaining outstanding public shares.

      92

      Pennzoil's witnesses testified that Pennzoil considered itself bound to the terms of the Memorandum of Agreement after the Getty board approved the transaction on January 3. The Memorandum of Agreement was signed by representatives of Pennzoil, the Trust, and the Museum before it was presented to the Getty board. The terms of the Memorandum of Agreement provided for the purchase of all outstanding shares at the same price.

      93

      As stated above, there was conflicting evidence on whether the board approved the transaction contemplated by the Memorandum of Agreement with a higher price term, or whether, as Texaco contends, it approved only a price proposal that was to form the basis for further negotiations. The press release issued the morning after the board meeting listed essentially the same terms as the Memorandum of Agreement, with the exception of price per share, in describing the transaction agreed upon in principle by the parties. All selling shareholders were to receive the same price. There was evidence that the board was concerned chiefly with the price per shares it could achieve for all the shareholders of Getty, and not with the mechanics of the transaction.

      94

      There was sufficient evidence for the jury to believe that the board approved more than just a price proposal, i.e., the Memorandum of Agreement terms modified by a higher price term. The jury could reasonably infer that, by those terms, Pennzoil and the Trust had agreed to pay the same price for all outstanding shares. There was very little evidence, other than Winokur's conjecture, that Pennzoil sought any "out" to its obligations under the agreement conflicting with the interests expressed by Getty.

      95

      Finally, Texaco contends that Pennzoil never agreed to honor Getty's employee benefit plans and provide adequate termination provisions.

      96

      There was testimony that Pennzoil did not anticipate terminating any employees, because Getty Oil was to continue in existence and would require all its employees under the new ownership of Pennzoil and the Trust. Given that scenario, there was no urgency in including provisions for employee termination benefits in the Memorandum of Agreement, press release, or [795] transaction agreement drafts, according to Pennzoil's evidence. Pennzoil's CEO testified that, given that there were no plans to fire anyone, there was no necessity to include termination benefits in the agreement, and that it was a "non-problem." Standard provisions on employee benefits were in fact drafted by one of the Getty attorneys and were sent over to Pennzoil's lawyers for incorporation into the transaction agreement.

      97

      There was sufficient evidence for the jury to conclude that the parties had reached agreement on all essential terms of the transaction with only the mechanics and details left to be supplied by the parties' attorneys. Although there may have been many specific items relating to the transaction agreement draft that had yet to be put in final form, there is sufficient evidence to support a conclusion by the jury that the parties did not consider any of Texaco's asserted "open items" significant obstacles precluding an intent to be bound.

      98

      The fourth factor that Texaco discusses as showing that the parties did not intend to be bound before executing a formal contract is the magnitude and complexity of the transaction. There is little question that the transaction by which Getty Oil was to be taken private by the Trust and Pennzoil involved an extremely large amount of money. It is unlikely that parties to such a transaction would not have expected a detailed written document, specifically setting out the parties' obligations and the exact mechanics of the transaction, whether it was to be executed before the parties intended to be bound or only to memorialize an agreement already reached.

      99

      We agree with Texaco that this factor tends to support its position that the transaction was such that a signed contract would ordinarily be expected before the parties would consider themselves bound. However, we cannot say, as a matter of law, that this factor alone is determinative of the question of the parties' intent.

      100

      The trial of this case lasted many weeks, with witnesses for both sides testifying extensively about the events of those first days of January 1984. Eyewitnesses and expert witnesses interpreted and explained various aspects of the negotiations and the alleged agreement, and the jury was repeatedly made aware of the value of Getty Oil's assets and how much money would be involved in the company's sale. There was testimony on how the sale of the company could be structured and on the considerations involved in buying and restructuring, or later liquidating, the company. But there was also testimony that there were companies that in the past had bound themselves to short two-page acquisition agreements involving a lot of money, and Getty's involvement banker testified that the Texaco transaction included "one page back-of-the-envelope kinds of agreements" that were formalized. The Memorandum of Agreement containing the essential terms of the Pennzoil/Getty agreement was only four pages long.

      101

      Although the magnitude of the transaction here was such that normally a signed writing would be expected, there was sufficient evidence to support an inference by the jury that that expectation was satisfied here initially by the Memorandum of Agreement, signed by a majority of shareholders of Getty Oil and approved by the board with a higher price, and by the transaction agreement in progress that had been intended to memorialize the agreement previously reached.

      102

      The record as a whole demonstrates that there was legally and factually sufficient evidence to support the jury's finding in Special Issue No. 1 that the Trust, the Museum, and the Company intended to bind themselves to an agreement with Pennzoil at the end of the Getty Oil board meeting on January 3, 1984. Point of Error 46 is overruled.

      103

      Texaco next claims that even if the parties intended to bind themselves before a definitive document was signed, no binding contract could result because the terms that they intended to include in their agreement were too vague and incomplete to be enforceable as a matter of law. Texaco attacks the terms, found by the jury, of the alleged agreement as being so uncertain as [796] to render the alleged contract fatally indefinite.

      104

      Where a question of the parties' intent is determinable by written agreement, the question is one of law for the court. Marinas of the Future, Inc. v. City of New York, 87 A.D.2d 270, 450 N.Y.S.2d 839, 844 (App.Div.1982). As discussed above, however, the parties' intent here is not conclusively discernible from their writings alone; therefore, extrinsic evidence of relevant events is properly considered on the question of that intent. St. Regis Paper Co. v. Hubbs & Hastings Paper Co., 235 N.Y. 30, 138 N.E. 495 (1923). Further, the case at bar is distinguishable from those cited by Texaco that involved writings stating specifically that certain essential terms were "to be agreed upon" in the future. See, e.g., Joseph Martin, Jr., Delicatessen, Inc. v. Schumacher, 52 N.Y.2d 105, 436 N.Y. S.2d 247, 417 N.E.2d 541 (1981); Willmott v. Giarraputo, 5 N.Y.2d 250, 184 N.Y.S.2d 97, 157 N.E.2d 282 (1959).

      105

      For a contract to be enforceable, the terms of the agreement must be ascertainable to a reasonable degree of certainty. Candid Productions, Inc. v. International Skating Union, 530 F.Supp. 1330, 1333 (S.D.N.Y.1982). The question of whether the agreement is sufficiently definite to be enforceable is a difficult one. The facts of the individual case are decisively important. Mason v. Rose, 85 F.Supp. 300, 311 (S.D.N. Y.1948), aff'd, 176 F.2d 486 (2d Cir.1949). "The agreement need not be so definite that all the possibilities that might occur to a party in bad faith are explicitly provided for, but it must be sufficiently complete so that parties in good faith can find in the agreement words that will fairly define their respective duties and liabilities." Id. On review, the agreement must be sufficiently definite for the court to be able to recognize a breach and to fashion a remedy for that breach. Candid Productions, Inc., 530 F.Supp. at 1333-34.

      106

      Texaco does not assert that a specific essential term was completely omitted from the agreement, but rather alleges very briefly why the terms of the agreement found by the jury are fatally incomplete. Texaco cites to the lack of description of the mechanics of various aspects of the transaction, e.g., how and when the determined price would be paid to shareholders, how the agreed stock ownership ratio was to be achieved, how a potential tax penalty on Getty's purchasing the Museum shares would be resolved, and what limitations, if any, existed on the option granted to Pennzoil to buy 8 million shares of Getty Oil stock.

      107

      Texaco's attempts to create additional "essential" terms from the mechanics of implementing the agreement's existing provisions are unpersuasive. The terms of the agreement found by the jury are supported by the evidence, and the promises of the parties are clear enough for a court to recognize a breach and to determine the damages resulting from that breach. Point of Error 47 is overruled.

      108
      SPECIAL ISSUE NO. 2
      109

      Texaco's next points of error concern the jury's finding in Special Issue No. 2 that Texaco knowingly interfered with the agreement, if so found, between Pennzoil and the Getty entities. Texaco contends that the evidence is legally and factually insufficient to show that Texaco had actual knowledge of any agreement, that it actively induced breach of the alleged contract, and that the alleged contract was valid and capable of being interfered with.

      110

      First, Texaco asserts that Pennzoil failed to prove that Texaco had actual knowledge that a contract existed.

      111

      New York law requires knowledge by a defendant of the existence of contractual rights as an element of the tort of inducing a breach of that contract. Hornstein v. Podwitz, 254 N.Y. 443, 173 N.E. 674 (1930). However, the defendant need not have full knowledge of all the detailed terms of the contract. Guard-Life Corp. v. S. Parker Hardware Manufacturing Corp., 50 N.Y.2d 183, 428 N.Y.S.2d 628, 406 N.E.2d 445 (1980); Gold Medal Farms, Inc. v. Rutland County Co-operative Creamery, Inc., 10 A.D.2d 584, 9 A.D.2d 473, 195 N.Y.S.2d 179, 185 (App.Div.1959).

      112

      [797] There is even some indication that a defendant need not have an accurate understanding of the exact legal significance of the facts giving rise to a contractual duty, but rather may be liable if he knows those facts, but is mistaken about whether they constitute a contract. Restatement (Second) of Torts § 766, comment i (1977); see Entertainment Events, Inc. v. Metro-Goldwyn-Mayer Inc., No. 74 Civ. 2959, slip op. at 15 (S.D.N.Y., May 31, 1978).

      113

      For example, the commentary to the Restatement (Second) of Torts describes the knowledge requirement as follows:

      114

      Actor's knowledge of other's contract. To be subject to liability ... the actor must have knowledge of the contract with which he is interfering.... [I]t is not necessary that the actor appreciate the legal significance of the facts giving rise to the contractual duty ... If he knows those facts, he is subject to liability even though he is mistaken as to their legal significance and believes that the agreement is not legally binding....

      115

      Sec. 766, comment i. New York's highest court has followed the principles and precepts embodied in the Restatement in this developing area of tort law. See, e.g., Guard-Life Corp., 50 N.Y.2d 183, 428 N.Y. S.2d 628, 406 N.E.2d 445.

      116

      The element of knowledge by the defendant is a question of fact, and proof may be predicated on circumstantial evidence. See American Cyanamid Co. v. Elizabeth Arden Sales Corp., 331 F.Supp. 597 (S.D.N.Y.1971). Since there was no direct evidence of Texaco's knowledge of a contract in this case, the question is whether there was legally and factually sufficient circumstantial evidence from which the trier of fact reasonably could have inferred knowledge.

      117

      Texaco argues that the writings known to Texaco and the verbal assurances it was given are matters of undisputed fact that do not add up to actual knowledge of a binding contract. It states that the only written evidence known to Texaco was the Memorandum of Agreement, the January 4 press release, and the January 2 "Dear Hugh" letter from Gordon Getty to Hugh Liedtke, Pennzoil's CEO. Texaco contends that these writings confirm the absence of a binding agreement.

      118

      First, it argues that the only reasonable conclusion that Texaco could draw from inconsistencies in the Memorandum of Agreement and the subsequent press release was that there was no binding agreement. Texaco points out that the Memorandum of Agreement provides for Pennzoil to amend its tender offer, but the press release states that Pennzoil was to withdraw the tender offer. The Memorandum of Agreement contains a price of $110 per share, whereas the press release states a price of $110 plus a $5 stub. Finally, Texaco argues that the failure of the press release to report who would buy the Museum shares was inconsistent with the Memorandum of Agreement's provision for Getty Oil's purchase of those shares.

      119

      Pennzoil responds that a comparison of the Memorandum of Agreement with the press release compels the conclusion that the Memorandum of Agreement was approved by the Getty Oil board with a price increment. We disagree that either of the parties' interpretations is the only possible interpretation of these two writings. Where different inferences may reasonably be drawn from the evidence, the question is one for the jury. LeMaster v. Fort Worth Transit Co., 138 Tex. 512, 160 S.W.2d 224.

      120

      Based on the other evidence at trial, different inferences could have been drawn from the fact that the press release did not state exactly the same information contained in the Memorandum of Agreement. One of Getty's lawyers testified that the Memorandum was phrased in such a way as to be "the last word," binding on Getty Oil. Before it was ever presented to the board, the Memorandum of Agreement had been signed by Pennzoil and representatives of the Trust and the Museum, who together owned a majority of the stock of Getty. The Memorandum of Agreement, which was written to become binding upon Getty Oil board approval, was presented to the board, and on the morning after the board meeting, the Getty press release announced that the Getty entities had reached [798] an agreement in principle with Pennzoil on essentially the same terms as the Memorandum of Agreement, but listed a higher price to be paid per share. The press release appeared on the Dow Jones "broad tape" under the headline "Getty Oil Announces Merger."

      121

      Though defense witnesses testified that Texaco was told that the board had completely rejected the Memorandum of Agreement, the jury did not have to believe this testimony and could reasonably have decided that when Texaco compared the two writings, it saw that the Memorandum of Agreement had been approved by the board after a renegotiation of the price and a change in the structure of effectuating the purchase of Getty (amending versus withdrawing the tender offer). Nor is the press release's silence on who would buy the Museum's shares a fatal inconsistency. Silence generally implies consistency rather than contradiction.

      122

      Texaco also asserts that the fact that the Memorandum of Agreement was expressly subject to board approval, along with the fact that the document's signature line for Getty Oil was blank, were unmistakable signals to Texaco that the Memorandum of Agreement was not a final contract. We agree such an inference could arise.

      123

      However, we find that a contrary inference is also reasonable, given the other evidence in this case. The discussion above, pertaining to a comparison of the Memorandum of Agreement with the Getty press release, is also applicable to Texaco's contentions here. There was testimony that the Memorandum of Agreement was written in such a way as to become binding upon board approval. Getty's press release announcing the transaction between Pennzoil and the Getty entities, and outlining basically the Memorandum of Agreement terms, was issued the next morning after the board meeting. Since the price announced in the press release was higher, it was not surprising that Getty Oil, after presumably negotiating that higher price, did not sign the original Memorandum of Agreement, which would have given shareholders a lower price per share. But the jury could reasonably infer from the Getty announcement of the terms of the agreement in principle reached with Pennzoil, that the terms of the Memorandum of Agreement had been approved by the board with a higher price. It was for the jury to decide what weight to give to the evidence, and where conflicting inferences were possible from the evidence, it was the jury's task to choose between them. LeMaster, 138 Tex. 512, 160 S.W.2d 224.

      124

      Texaco's next contention is that the unambiguous wording of the press release, i.e., the "subject to" and agreement "in principle" language, demonstrated that there was no contract. We disagree that the press release is unambiguous, and our discussion above of the press release's use of the terms: agreement "in principle," and "subject to" a definitive agreement, applies equally here. That language did not in itself preclude the existence of a contract, nor a jury finding of Texaco's knowledge of one.

      125

      Next, Texaco acknowledges that it was given the "Dear Hugh" letter from Gordon Getty to Pennzoil's CEO along with other writings relevant to the dealings with Pennzoil. But Texaco claims that the Trust's advisors indicated that the letter did not restrict the Trust's freedom to go forward with Texaco. The "Dear Hugh" letter was dated January 2, 1984, and was signed by Gordon Getty as trustee. It stated:

      126

      Dear Hugh:

      127

      This is to confirm the understanding between us relating to the Plan dated January 2, 1984 that is being presented to the Board of Getty Oil Company today.

      128

      Subject only to my fiduciary obligations, I agree that I will support the Plan before the Board and will oppose any alternative proposals or other arrangements submitted to the Board that do not provide for your participation in Getty Oil Company on the same basis as outlined in the Plan.

      129

      Subject only to my fiduciary obligations, if the Board does not approve the Plan [799] today, I will execute a Consent to remove that board and to replace the directors with directors who will support the best interests of the shareholders, as reflected in the Plan.

      130

      Subject only to my fiduciary obligations, I will also use my best efforts to urge the J. Paul Getty Museum to execute a Consent to the same effect....

      131

      Texaco contends that because the letter contained the reservation that its promises were "subject only to [Gordon Getty's] fiduciary duties," it did not give Texaco notice of any binding contractual relations. There was testimony that the advisors of Gordon Getty and the Trust told Texaco that the Trust was free to deal and that the letter was not an obstacle, because it contained the restrictive "subject only to my fiduciary obligations."

      132

      At the very least, the letter reaffirms other evidence that indicated how important the decisions made at the January 2-3 Getty board meeting were to the question of whether there was a contract with Pennzoil, and implies what the likely outcome of the board vote was. The letter was signed by a shareholder who, as trustee, controlled over 40 percent of the company's voting stock. It confirmed an understanding between Pennzoil and the trustee that the latter would not only support the Memorandum of Agreement before the board of Getty Oil and oppose any other proposals that would not include Pennzoil, but that he would also execute a Consent to remove the board and replace the directors if the Pennzoil plan was not approved. Under Delaware law, the holders of a majority of a company's stock could agree in writing to take action binding on the board without formal board approval.

      133

      Given the Trust's large ownership percentage in Getty, the jury could reasonably decide that Texaco knew that the "Dear Hugh" letter's promises were not insignificant on whether the Pennzoil proposal had been approved. In late autumn of 1983, the well-publicized dissension between Gordon Getty and members of the Getty Oil board resulted in the Trust and Museum executing a previous Consent, which amended Getty Oil's bylaws to require that all significant board action, including agreements to merge or to sell Getty's assets, had to have the approval of 14 of 16 directors. There was testimony that the company had been a candidate for a takeover struggle even before the Consent, but that that further confirmed and publicized it. Since Gordon Getty had so recently executed a Consent to resolve his difficulties with the Getty board, and specifically his conflicts with Getty CEO Sidney Petersen, a reader of the "Dear Hugh" letter would know that the promise of a Consent was not an idle threat, but rather made Gordon Getty's undertaking to obtain board approval for the Pennzoil plan much more certain.

      134

      Texaco acknowledges that the writings it saw relating to a possible agreement with Pennzoil were the Memorandum of Agreement, the press release, and the "Dear Hugh" letter. Based on these documents, it is clear that Getty board approval was a critical element in determining whether the Getty entities had a binding agreement with Pennzoil. Texaco's evidence of its lack of knowledge about what decisions were made at the January 2-3 board meeting must be contrasted with the circumstantial evidence that could have persuaded the jury that Texaco was aware that the Pennzoil proposal had been approved.

      135

      Texaco contends that it received repeated verbal assurances, both by principals and representatives of the Getty entities, that there was no binding contract with Pennzoil and that the Getty entities were free to deal with Texaco.

      136

      On January 3, one of Getty Oil's investment advisors, Geoffrey Boisi, called Texaco to say that the Getty board would meet that day and to get an expression of interest in Getty's sale. Boisi stated that Getty was seeking bids from potential purchasers other than Pennzoil. Texaco expressed its interest in receiving more information, and Boisi agreed to keep Texaco informed.

      137

      Texaco called Boisi back early on the next morning, when the Getty press release was issued and appeared on the Dow [800] Jones broad tape under the headline "Getty Oil Announces Merger." Boisi had not yet arrived for work when Texaco called, so he returned the call later that morning "as a courtesy" to explain the appearance of the announcement concerning Pennzoil. There was testimony that Texaco expressed heightened interest in Getty's sale. Boisi testified that he told Texaco that the agreement in principle with Pennzoil was subject to execution of a definitive agreement, that no definitive agreement had been signed yet, that there was just a handshake on price with other issues still open, and that there was no binding deal with Pennzoil.

      138

      Texaco's chairman, John McKinley, testified that Texaco talked to two investment banking firms that day, First Boston and Morgan Stanley, who wanted to represent Texaco in making a bid for Getty, and that they all knew that the situation was open for bids. Getty's investment bankers called Texaco back on the afternoon of January 4 and told McKinley again that Getty wanted to receive bids and would be pleased to receive a proposal from Texaco.

      139

      There was testimony that on January 4 and 5, Getty's CEO, another Getty director, and the Museum's lawyer, all stated to Texaco that there was no deal yet with Pennzoil, that no definitive contract had been signed, that Getty was not bound yet, that open issues remained in the negotiations with Pennzoil, and that Getty and the Museum were free to hear an offer. There was testimony that when Texaco made its offer on the evening of January 5, Gordon Getty and his advisors stated that the Trust also had no binding agreement with Pennzoil. There was also testimony that Texaco was assured again during final negotiations on its definitive agreement, which contained indemnities against any liability to Pennzoil, that the Getty board had rejected the Memorandum of Agreement and that there was no binding contract with Pennzoil.

      140

      Texaco asserts that this evidence shows that it made repeated efforts, in the absence of any duty to do so, to determine whether an offer would interfere with any pre-existing contract. Texaco witnesses testified that Texaco was repeatedly told that there was no binding contract with Pennzoil, and it accepted those assurances.

      141

      Pennzoil responds that there was legally and factually sufficient evidence to support the jury's finding of knowledge, because the jury could reasonably infer that Texaco knew about the Pennzoil deal from the evidence of (1) how Texaco carefully mapped its strategy to defeat Pennzoil's deal by acting to "stop the train" or "stop the signing"; (2) the notice of a contract given by a January 5 Wall Street Journal article reporting on the Pennzoil agreement—an article that Texaco denied anyone at Texaco had seen; (3) the knowledge of an agreement that would arise from comparing the Memorandum of Agreement with the Getty press release; (4) the demands made by the Museum and the Trust for full indemnity from Texaco against any claims by Pennzoil arising out of the Memorandum of Agreement; and (5) the Museum's demand that, even if the Texaco deal fell through, the Museum would be guaranteed the price Pennzoil had agreed to pay for the Museum's shares. Pennzoil contends that these circumstances indicated Texaco's knowledge of Pennzoil's deal too strongly to be overcome by Texaco's "self-serving verbal protestations at trial" that Texaco was told and believed that there was no agreement.

      142

      First, Pennzoil argues that an inference of Texaco's knowledge of its agreement arises from Texaco's carefully mapped strategy to dismantle each component of the Pennzoil deal. Pennzoil speculates that if Texaco had believed that there was no binding contract, it would have simply announced a public tender offer for 100 percent of Getty's shares. But a tender offer would not bring in all of Getty's stock if Pennzoil already had a binding agreement (the signed Memorandum of Agreement, approved by the Getty board with a higher price term) with the Trust and the Museum, who together held a majority of Getty shares. This would mean that Texaco could acquire only the remaining public shares through a tender offer and would be left with a minority interest in Getty Oil. So instead, Pennzoil argues, Texaco developed [801] a strategy to approach first the Museum, then the Trust, and finally the Getty board, with a higher price than Pennzoil had agreed to pay to persuade them to avoid that deal.

      143

      There was evidence that the public announcement of Getty's agreement in principle with Pennzoil had attracted Texaco's attention and prompted it to move quickly. Top executives of Texaco cut short their vacations and returned to New York because of Texaco's interest in Getty, and Texaco assembled its in-house financial planning group on January 4. A series of meetings were held throughout the day to study the Getty situation and Pennzoil's part in it. There were indications that the structure of the Pennzoil plan was examined in detail, and Texaco notes showed calculations on such matters as the price per barrel of Getty oil that Pennzoil would be paying and on Pennzoil's financing of this purchase. Getty's press release was reviewed, and extensive notes were made on "who pays and who gets what" under the Pennzoil plan.

      144

      Other Texaco notes admitted into evidence implied that Texaco believed it had "24 hours" to "stop the train" and "take care of Liedtke [Pennzoil's CEO]." Texaco's chairman testified that "the train" probably meant Pennzoil, and that "stop" meant that prompt action was necessary. Texaco recognized that under the Pennzoil plan, if an agreement on restructuring couldn't be reached within one year, Getty's "assets [were] to be divided!" (emphasis in original Texaco note).

      145

      There was evidence that Texaco had strong motivation to acquire Getty's extensive oil reserves. Texaco's own proven reserves had been declining steadily, and its recent exploration and development costs had been the highest in the industry. Texaco witnesses explained that the high finding costs were attributable mainly to a recent increase in exploration investment and that over a longer period, its average finding costs were much lower. But there was also evidence that it would be much less expensive for Texaco to buy Getty's large proven reserves than to find such reserves on its own. The purchase of Getty Oil would and did double Texaco's worldwide oil reserves. Texaco knew that under the Pennzoil plan, Getty's valuable reserves were to be divided between the Trust and Pennzoil if that partnership did not work out within one year.

      146

      On January 4, Texaco decided that it wanted to pursue its interest in Getty, but also decided that it needed outside advice on strategy and tactics. It retained First Boston, an aggressive investment banking firm that already had contacts with the Museum's counsel, Martin Lipton. On the evening of January 4, a number of strategy meetings were held to discuss how Texaco could best acquire Getty Oil.

      147

      There was evidence that Texaco considered Lipton to be a "key person" in its strategy, and that the Museum had to be approached first. Lipton had previously represented Texaco and knew McKinley and Texaco's lawyers and investment bankers. Once Texaco secured the Museum shares, it planned to "talk to Gordon."

      148

      Texaco notes indicate that it knew that there would be a "problem to get Gordon on base first." Texaco knew that under the Trust instrument, the trustee was authorized to sell its Getty Oil shares only to avoid a loss. Texaco also knew that Gordon Getty did not want the Trust's shares to be in a minority position at Getty Oil, and Texaco's notes read: "create concern that he [Gordon Getty] will take a loss"; "if there's a tender offer and Gordon doesn't tender, then he could wind up with [worthless] paper"; and finally, "pressure."

      149

      Texaco's last step was to get the Getty board's support. Texaco knew that many Getty board members were hostile to Gordon Getty, and Texaco had a report that Getty did not like Pennzoil's price. But Texaco also knew that the board could not take major corporate action, since the Consent, without the agreement of 14 of 16 directors, and some directors owed loyalty to Gordon Getty. It was therefore important to secure the agreement with the Trust and the Museum before Texaco's proposal went to the Getty board.

      150

      [802] We find that an inference could arise that Texaco had some knowledge of Pennzoil's agreement with the Getty entities, given the evidence of Texaco's detailed studies of the Pennzoil plan, its knowledge that some members of the Getty board were not happy with Pennzoil's price, and its subsequent formulation of strategy to "stop the [Pennzoil] train" and "take care of Liedtke."

      151

      Pennzoil contends that the jury could also draw an inference of Texaco's knowledge of its agreement from the evidence relating to a Wall Street Journal article dated January 5. That article reported on the terms of the Pennzoil/Getty merger and referred to an "agreement" 17 times.

      152

      In answer to an interrogatory, Texaco swore that no one working on matters related to Getty Oil or Pennzoil had seen the Wall Street journal article. Pennzoil argues that the jury could have disbelieved this representation that no one at Texaco had read the article, published in a major daily business newspaper, about the company that Texaco wanted to acquire.

      153

      This is an acceptable inference, given the evidence. Texaco's president, Alfred DeCrane, testified that he read the Wall Street Journal regularly, but he did not recall whether he read the article about the Getty/Pennzoil agreement on January 5. Getty's investment advisor, Boisi, testified that Texaco's chairman, McKinley, "may have" mentioned the article to him in their conversations. McKinley testified that several people at Texaco took the Wall Street Journal at the office, but that his own copy was delivered to his home. He testified that he did not see the article, and claimed that it was not mentioned at the Texaco board meeting that day, although the status of Pennzoil's negotiations with Getty was discussed by the board. Based on this testimony, the jury could reasonably have believed that the testimony of some of these witnesses was less than truthful, and that someone at Texaco connected with these events had seen the article, and that Texaco thus had further knowledge of the Pennzoil agreement.

      154

      Finally, Pennzoil points out that certain demands made by the Museum and the Trust also gave Texaco knowledge of their contractual obligations to Pennzoil.

      155

      The Museum demanded, as a condition of any sale of its shares to Texaco, full indemnity against any liability to Pennzoil arising from the Memorandum of Agreement. It also refused to give any written representation or warranty that selling its shares to Texaco would not result in a breach of the Memorandum of Agreement. Finally, the Museum insisted that, even if the Texaco purchase of Getty was not consummated, Texaco had to guarantee that the Museum would be paid a minimum price of $112.50 (the present value of Pennzoil's price of $110 plus a $5 stub to be paid within five years) for its shares. Texaco's witnesses testified that these demands were accompanied by assurances that the Museum had no binding contract with Pennzoil, but other evidence showed that the Museum refused to sell its shares unless these conditions were met.

      156

      Texaco's president, DeCrane, testified that when he saw the draft of Texaco's definitive agreement, he asked specifically about the indemnity and whether relevant documents had been reviewed. He said that his counsel told him that Texaco's only exposure would be litigation fees. When he asked about the warranty clause, he was told that the Museum's refusal to give a full warranty was consistent with what Texaco had been told about the Museum's position.

      157

      Texaco's chairman testified that it was a matter of concern to him that the Museum would not warrant its sale of stock against Pennzoil claims, but that Texaco accepted it that way. McKinley testified that it alerted him to check with his legal advisors, who reassured him. There is no evidence that Texaco received any statement in writing from any of the parties that they were free to deal with Texaco.

      158

      The jury could reasonably infer that Texaco was given knowledge of the Pennzoil agreement from this evidence. Though an indemnity does not necessarily imply liability, [803] Texaco was confronted here with the parties' specific demands for protection against claims by Pennzoil, with the refusal to warrant that the sale to Texaco would not breach the Memorandum of Agreement, and with the requirement that the Museum be guaranteed the Pennzoil price if Texaco's purchase was not consummated. The evidence showed that the Museum and the Trust considered these conditions essential, and that Texaco knew that they would not sell their shares without such protection.

      159

      Finally, Texaco cites American Cyanamid Co. v. Elizabeth Arden Sales Corp., 331 F.Supp. 597, as controlling authority to show that Pennzoil did not prove the required element of knowledge of a contract here. Though many of the facts of that case appear to be similar to the instant one, we find the case at bar to be distinguishable. Pennzoil correctly points out that the question of the defendant's knowledge is one of fact, and the holding in American Cyanamid was based on certain findings of fact. One defendant there was held to be not liable because the only information it was found to have possessed showed on its face that there was no binding contract. The plaintiff had contended that certain background negotiations between the parties made an incomplete writing a binding contract, but that defendant was found to have no knowledge of those circumstances.

      160

      Here, Texaco presented evidence that it was told repeatedly that Pennzoil had no binding agreement with the Getty interests. But there was other circumstantial evidence, as discussed above, from which the jury could conclude that Texaco did indeed have knowledge of the parties' obligations to Pennzoil.

      161

      The jury was not required to accept Texaco's version of events in this case, and this Court may not substitute its own interpretation of the evidence for the decision of the trier of fact. There was legally and factually sufficient evidence to support an inference by the jury that Texaco had the required knowledge of an agreement. Point of Error 49 is overruled.

      162

      The second major issue Texaco raises under Special Issue No. 2 is that the evidence was legally and factually insufficient to show that Texaco actively induced breach of the alleged Pennzoil/Getty contract.

      163

      A necessary element of the plaintiff's cause of action is a showing that the defendant took an active part in persuading a party to a contract to breach it. State Enterprises, Inc. v. Southridge Cooperative Section 1, Inc., 18 A.D.2d 226, 238 N.Y.S.2d 724 (App.Div.1963). Merely entering into a contract with a party with the knowledge of that party's contractual obligations to someone else is not the same as inducing a breach. P.P.X. Enterprises, Inc. v. Catala, 17 A.D.2d 808, 232 N.Y.S.2d 959 (App.Div.1962). It is necessary that there be some act of interference or of persuading a party to breach, for example by offering better terms or other incentives, for tort liability to arise. State Enterprises, Inc., 238 N.Y.S.2d at 726; Cosmopolitan Film Distributors, Inc. v. Feuchtwanger Corp., 226 N.Y.S.2d 584, 591 (Sup.Ct.1962). The issue of whether a defendant affirmatively took steps to induce the breach of an existing contract is a question of fact for the jury. See State Enterprises, Inc., 238 N.Y.S.2d at 726.

      164

      Texaco contends that it did not actively procure the alleged breach and that the required inducement did not occur. Texaco argues that it merely responded to a campaign of active solicitation by Getty Oil and the Museum, who were dissatisfied by the terms of Pennzoil's offer.

      165

      There was testimony that on January 2, Getty's investment advisor, Boisi, was instructed to seek a higher price for Getty's shares than Pennzoil had offered. Early on the morning of January 3, Boisi contacted Texaco's president, DeCrane, among others, to tell him that the Getty Oil board was meeting that day and to get a specific expression of interest in Getty's sale. DeCrane told Boisi that Texaco was interested in more information and to keep him informed.

      166

      That afternoon, Boisi told the Getty board of directors that he had been calling [804] other potential bidders and that some of those contacts had expressed interest in Getty's sale. After the board recessed, Boisi talked with some of the board members in more detail about his conversations and told them he thought that Getty could get more than Pennzoil's $110 per share.

      167

      Later in the evening on January 3, despite Boisi's report of other interest in Getty, the board of Getty Oil voted 15 to 1 to accept "the Pennzoil proposal," provided that the price per share be increased to $110 plus a minimum $5 stub. Pennzoil accepted the higher price, and the board was told that Pennzoil had accepted its counter-proposal. Yet, one of Getty's directors testified, for the defendant, that the board's consensus at that time was to encourage the overall bidding process. Petersen, the chairman of Getty, told Boisi to continue to search for a better price.

      168

      On January 4 Texaco called Boisi early in the morning. Getty Oil issued its press release that morning, and it appeared on the Dow Jones broad tape under the headline "Getty Oil Announces Merger." Boisi was not in his office yet, but returned the call later that morning to explain the press release. Boisi testified that he told DeCrane that the Getty board had voted on a price with Pennzoil; that no definitive merger contract had been signed yet, so there was no binding agreement; and that open issues remained for negotiation. Boisi testified that Texaco expressed a heightened degree of interest in Getty, and Texaco's witnesses testified that Texaco's interest in Getty increased as Texaco got more information.

      169

      As discussed above, Texaco assembled its in-house financial planning group, which worked all day on January 4 to study Getty and the Pennzoil situation and then reported to management. The evidence of Texaco's strong motivation to acquire Getty's reserves, given Texaco's own declining reserves and high finding costs, is also relevant here. There was testimony that in the afternoon of January 4, Texaco decided to pursue its interest in Getty, and it hired First Boston investment bankers to advise it on the most effective strategy to purchase Getty. Meetings with Texaco executives and First Boston advisors continued through the evening.

      170

      There was testimony for Texaco that on January 4, other representatives of the Getty entities told Texaco that Getty Oil wanted to receive bids and would be pleased to hear a proposal from Texaco. These representatives included one of Getty's directors, another Getty advisor from its investment bankers Goldman Sachs, and Getty's chairman. There was testimony that Texaco and its advisors were told that there were other potential competitors for Getty and that Texaco should put its "best shot" forward.

      171

      The evidence discussed above on Texaco's calculated formulation and implementation of its ideal strategy to acquire Getty is also inconsistent with its contention that it was merely the passive target of Getty's aggressive solicitation campaign and did nothing more than to accept terms that Getty Oil and the Museum had proposed. The evidence showed that Texaco knew it had to act quickly, and that it had "24 hours" to "stop the train." Texaco's strategy was to approach the Museum first, through its "key person" Lipton, to obtain the Museum's shares, and then to "talk to Gordon." It knew that the Trust instrument permitted Gordon Getty to sell the Trust shares only to avoid a loss, and it knew of the trustee's fear of being left in a powerless minority ownership position at Getty Oil. Texaco notes indicated a deliberate strategy to "create concern that he will take a loss"; "if there's a tender offer and Gordon doesn't tender, then he could wind up with paper"; and "pressure." This evidence contradicts the contention that Texaco passively accepted a deal proposed by the other parties.

      172

      Texaco then implemented its plan by contacting the Museum's lawyer, Lipton, arranging for a meeting on the evening of January 5 to discuss an offer by Texaco for Getty Oil. Lipton ordered his associate, on her way to join the meeting of attorneys drafting Pennzoil's transaction agreement, to not attend that meeting, because he needed her assistance in the meeting with [805] Texaco. At the Texaco meeting, Lipton reviewed an outline of points that the Museum wanted covered in any sale of its Getty shares to Texaco; for example, it wanted price protection and an indemnity against any claim brought by Pennzoil. Texaco agreed to the Museum's demands, and the Museum agreed to sell. Lipton testified that though he asked repeatedly about price, the Texaco officers at that time would say only that Texaco's chairman, McKinley, wanted to do the talking about price.

      173

      Texaco then contacted the Trust to arrange for a meeting between Texaco's chairman, McKinley, and Gordon Getty, the trustee. There was evidence that the initial meeting did not go well, and Lipton was asked to go over to Gordon Getty's hotel suite to speak with the trustee. Lipton testified that he went over because all the parties wanted to act together, and it was his understanding from Texaco that it wanted the Museum, the Trust, and the company to each "desire" a proposal from Texaco and express that desire. After talking to Gordon Getty, Lipton joined the Texaco people in the lobby and told them that the trustee did want to receive a proposal. When McKinley went back to Gordon Getty's suite, the trustee accepted Texaco's offer before McKinley could even name the price. Texaco initially offered the Getty entities $125 per share, compared to Pennzoil's price of $110 plus a $5 stub (present value $112.50), and eventually paid $128 per share.

      174

      Texaco argues that its testimony shows that Getty Oil and the Museum were the real moving forces that eventually led to the Texaco contract. However, we find that there is legally and factually sufficient evidence in the record to support the jury's finding that Texaco actively induced the breach of the Getty entities' agreement with Pennzoil.

      175

      Texaco also contends that Getty's shopping for bids constituted a breach of an implied "no-shop" provision of Pennzoil's alleged contract before Texaco ever entered the picture. We reject this contention. It was no defense that Getty was not happy with the Pennzoil price, or might have been dissatisfied with the agreement. See Gold Medal Farms, Inc., 195 N.Y.S.2d at 185. We overrule Points of Error 48 and 50, contending that there was no evidence or factually insufficient evidence to support the jury's finding that Texaco knowingly induced the breach of Pennzoil's agreement.

      176
      VALIDITY OF THE CONTRACT
      177

      Texaco's last contention regarding the sufficiency of the evidence is that Pennzoil failed to prove that the alleged contract was valid and enforceable, so there could be no interference. Texaco argues that the alleged contract would have violated SEC Rule 10b-13; that it would have violated state law governing fiduciary duties of directors, controlling stockholders, and trustees; that it would have been unenforceable because of mutual mistake; and that it would have violated the statute of frauds.

      178

      Pennzoil responds that because it made a prima facie showing that it had a binding contract, it was Texaco's burden to affirmatively plead and prove any defense that challenged the validity of that contract. Tex.R.Civ.P. 94, 279; see, e.g., Mabry v. Priester, 161 Tex. 173, 338 S.W.2d 704 (1960) (illegality); Durham v. Uvalde Rock Asphalt Co., 599 S.W.2d 866, 869 (Tex.Civ. App.—San Antonio 1980, no writ) (mutual mistake); Mann v. Fender, 587 S.W.2d 188 (Tex.Civ.App.—Waco 1979, writ ref'd n.r. e.); (statute of frauds). Pennzoil argues that Texaco waived its defenses based on invalidity because it failed to plead some of them and failed to obtain jury findings to support the defenses it did plead.

      179

      Rule 94, Texas Rules of Civil Procedure, requires the defendant to plead and prove affirmative defenses such as fraud, estoppel, illegality, statute of frauds, and any other matter constituting an avoidance or affirmative defense. Unless the affirmative defense is established as a matter of law, the burden is also on the defendant to obtain jury findings to establish the necessary elements of its affirmative defense. See, e.g., Oilwell Division, United States [806] Steel Corp. v. Fryer, 493 S.W.2d 487, 490 (Tex.1973).

      180

      We find that Texaco has waived its claim of mutual mistake, Durham, 599 S.W.2d at 869, and insufficiency under the statute of frauds, Tex.R.Civ.P. 94, because these affirmative defenses were not properly alleged in Texaco's amended trial pleadings. In its appellate brief, Texaco alleges generally that a mutual mistake about the possible tax treatment of the Museum's shares would have made the agreement unenforceable. Texaco's amended pleading alleges only a mistake by Pennzoil and Gordon Getty, and not one mutually shared by all the parties. There was also no request for a jury issue on the question of mistake, nor was the statute of frauds asserted in Texaco's operative pleadings. These contentions are waived, and Points of Error 55 and 56 are overruled.

      181

      Illegality as an affirmative defense is not limited to contracts prohibited by law, but also includes contracts rendered unenforceable because of some failure to comply with the law. Mabry, 161 Tex. at 176., 338 S.W.2d at 706.

      182

      Texaco contends that the alleged contract would have been void as violating SEC Rule 10b-13, which provides that once a party has publicly announced a tender offer, the offeror may not buy stock of the target company, except through the tender offer, for as long as the tender offer remains open. 17 C.F.R. § 240.10b-13 (1985). Texaco alleges that any contract made in violation of the rule is void.

      183

      Texaco points out that even under Pennzoil's version of the facts, Pennzoil allegedly contracted to buy the Museum's shares immediately and the public shares later at $110 plus a $5 stub per share—a higher price than the $100 tender offer price—at a time when the tender offer was still open. Texaco claims that this constituted a per se violation of the rule, whether or not any shareholder received a special benefit from the purchase occurring outside the tender offer. But Texaco also argues that the Museum did receive a substantial benefit that the public shareholders did not, in that it was to have received payment for its shares "immediately," which could possibly have been months before the public shareholders would be paid. Texaco contends that this timing difference could have amounted to millions of dollars in interest, and it was exactly this kind of treatment favoring large shareholders that the SEC rule was designed to prevent.

      184

      Rule 10b-13 was promulgated to protect the interests of shareholders who have already tendered their shares pursuant to a publicly announced tender offer, by prohibiting the offeror from making purchases outside the tender offer on different terms. Wellman v. Dickinson, 475 F.Supp. 783, 833 (S.D.N.Y.1979), aff'd, 682 F.2d 355 (2d Cir.1982), cert. denied, 460 U.S. 1069, 103 S.Ct. 1522, 75 L.Ed.2d 946 (1983); Heine v. Signal Companies, Inc., [1976-77 Transfer Binder] Fed.Sec.L.Rep. (CCH) par. 95,898 (S.D.N.Y. March 4, 1977). In particular, the rule seeks to prevent outside purchases by the offeror at a different price than that stated in the tender offer. Wellman, 475 F.Supp. at 833.

      185

      The rule itself provides a mechanism by which an exemption from its coverage can be obtained. In subsection (d), it provides that the rule will not prohibit a transaction if the Commission, upon written request or on its own motion, exempts the transaction as not constituting a manipulative, fraudulent, or deceptive device, act, or practice as comprehended by the purpose of the section. 17 C.F.R. § 10b-13(d). The emphasis is thus on applying the rule to further its stated purposes.

      186

      Although Texaco is not a party whom the rule is intended to protect in any way, it complains that Pennzoil's transaction violated the rule, was automatically void for that reason, and therefore could not give rise to an action for tortious interference. The express exemption provision of the rule negates the suggestion that any infraction of the rule automatically makes the transaction void. If the transaction is only voidable, Texaco has no standing to assert the rule, and we may not speculate [807] on whether a proper party would have successfully asserted it.

      187

      We disagree with Texaco's contention that it was irrelevant that Pennzoil might have obtained an exemption from the prohibitions of the rule, because it did not. Pennzoil had no control over the timing of Texaco's interference with its agreement with Getty entities. If an exemption had been obtained, the rule would not have prevented the purchase of Getty shares outside the tender offer, and Texaco's argument about the invalidity of the agreement for this reason fails.

      188

      With the purpose of rule 10b-13 in mind, we note that the agreement called for the same price to be paid per share for all selling shareholders, and that these terms were announced to the public in the press release and appeared in newspaper articles two weeks before the date Pennzoil would have been able to begin buying any tendered shares under the original $100 tender offer. There was testimony that the Museum, and indeed all parties, insisted that all shareholders were to be treated equally in the Pennzoil transaction, and that the parties all proceeded on this assumption. Pennzoil points out that if the Museum had been paid for its shares before the public shareholders, any benefit that it might have received from having its shares purchased sooner would have been offset by payment of Getty's first quarter dividend to those remaining shareholders. There was testimony that there were customary ways of handling the payment of regular dividends in a merger situation.

      189

      In any event, Pennzoil amended its SEC tender offer statement on January 4 to incorporate the information about its agreement with the Getty entities contained in the press release and to state that the tender offer at $100 would be withdrawn upon the execution of the definitive merger contract. Texaco's contention in Point of Error 51 that the alleged contract would have been void under rule 10b-13 is overruled.

      190

      Next, Texaco claims that the alleged contract would have violated Delaware state law governing the fiduciary duties of various parties. Texaco contends that agreeing to a contract that provided for the sale of Getty at a "bargain basement" price would have been a breach by Gordon Getty of his fiduciary duty as a controlling shareholder, and also a breach by the Getty Oil directors of their fiduciary duty to Getty stockholders.

      191

      Gordon Getty, as trustee, owned approximately 40.2 percent of the shares of Getty Oil. In addition to the fact that this does not constitute legal "control" of the corporation, the record does not support Texaco's implication that Gordon Getty had de facto control of Getty Oil, in spite of the Trust's large ownership percentage. On the contrary, the record evinces Gordon Getty's continual conflicts with the Getty Oil board of directors and management, which acted independently of and sometimes without the knowledge of Gordon Getty.

      192

      The jury found, in response to a special issue, that the agreed price was a fair price for the Getty shares. There was evidence that at the January 2 Getty Oil board meeting, the Trust and Museum had both been willing to sell at $110 or above. The Trust and the Museum had received opinions from their investment bankers that $110 plus the minimum $5 stub was a fair price. Prior to that board meeting, there had been discussions of having the company itself propose a self-tender to its shareholders at $110 per share to respond to Pennzoil's $100 tender offer.

      193

      Though the Getty entities eventually sold to Texaco at a higher price per share than they had agreed to accept from Pennzoil, that fact alone does not prove that selling to Pennzoil would have been a breach of fiduciary duty to the minority shareholders. There was evidence that public minority stockholders, with no direct claim to a company's assets, are primarily interested in the return on their investment, i.e., in realizing a profit from the increase in market value of their shares. Pennzoil's price represented a significant premium over the previous trading price of Getty's shares.

      194

      [808] The test of fairness in a merger situation is that a minority shareholder receives the substantial equivalent in value of what he had before. Sterling v. Mayflower Hotel Corp., 33 Del.Ch. 293, 93 A.2d 107, 114 (1952). Thus, the fairness of the price that the public minority shareholders received is not to be judged by the pro rata value of Getty's assets, as Texaco implies, but rather by the value of the shares in the hands of those minority shareholders, who had no direct right to the company's assets. In the two years before the Pennzoil agreement, Getty stock had traded at $83 per share or less, and the jury found that $110 plus the $5 stub was a fair price. Agreeing to sell to Pennzoil at this price did not constitute a breach of fiduciary duty to the minority shareholders.

      195

      Finally, Texaco argues that the Getty directors had an obligation to exercise informed business judgment and to maximize Getty Oil's sale value, based on the information available to them. It claims that agreeing to any implied no-shop provision or good faith obligation to complete negotiations with Pennzoil would have breached its duty to get the highest price possible for the Getty Oil shares.

      196

      Under Delaware law, the directors of a corporation owe a fiduciary duty of care to the corporation and its shareholders in carrying out their managerial roles. Smith v. Van Gorkom, 488 A.2d 858, 872-73 (Del.1985). The business judgment rule is based on a presumption that in making a business decision, the directors acted on an informed basis, in good faith, and in the honest belief that the action taken was in the best interests of the company. Id. at 872. Whether the board's business judgment is an informed one depends on whether the directors informed themselves prior to making a business decision, of all material information reasonably available to them. Id. Additionally, if a board takes anti-takeover measures, there is always the suspicion that the board may be acting primarily in its own interests and not in those of the corporation and shareholders. Revlon v. MacAndrews & Forbes Holding Inc., 506 A.2d 173, 180 (Del., 1986). Absent an abuse of discretion, the judgment of directors in making a business decision will be respected by the courts. Aronson v. Lewis, 473 A.2d 805, 812 (Del.1984).

      197

      The evidence supports the jury finding that the agreed price between Pennzoil and the Getty entities was a fair one. There is also sufficient evidence that the directors were informed on the other aspects of the transaction and exercised their business judgment in approving the Pennzoil proposal. A majority of Getty's shareholders had approved the transaction before it was presented to the board. Getty's investment advisor informed the board that he had been calling other companies and had received some indications of interest, though he had no specifics at that time. In smaller meetings with some individual board members, Texaco's name was mentioned as a possible bidder. When the meeting resumed, the board decided to present a higher price to Pennzoil, which had agreed to go that high if the board came back "firm." The board approved Pennzoil's proposal, provided that the price be raised to $110 plus a $5 stub. The board also voted themselves indemnities and "golden parachutes." Pennzoil accepted and conveyed its acceptance to the board, which then adjourned. One of Pennzoil's lawyers testified that after the meeting, he shook hands with some of the Getty directors, who congratulated him on their deal. Investment advisors for the Trust and Museum gave fairness opinions on the Pennzoil price. Getty itself announced the terms of the transaction in a press release the next morning.

      198

      The evidence shows that the board made an informed decision to enter the agreement with Pennzoil. It had notice of other companies' interest, but there is some evidence that the board might have thought it more prudent to commit to a sure thing, rather than to speculate on whether other offers would eventually materialize. Getty's CEO was quoted in Fortune magazine some months later, "it was a bird-in-the-handish situation. We approved the deal but we didn't favor it." Once the agreement was made, Getty could [809] not evade it, citing fiduciary duty, just because a higher offer came along. See Smith, 488 A.2d at 888. Points of Error 52, 53, and 54 are overruled.

      199
      ALLEGED ERRORS IN THE COURT'S CHARGE
      200

      Texaco's first 45 points of error complain of the court's jury charge. These 45 points fall into three basic categories: (1) points asserting that the special issues assume a disputed fact; (2) points asserting that the instructions are improperly "personalized" to the parties and evidence; and (3) points asserting that the instructions prejudice Texaco.

      201

      Initially, Texaco claims that the trial court erred in improperly commenting on the case to the jury panel ("this is the largest civil case ever filed in Harris County"), in refusing its requested instruction to ameliorate the harm, and alternatively in refusing to grant Texaco's motion for mistrial.

      202

      During voir dire, the trial court made the following statements:

      203

      But this isn't your average civil case. This is the largest civil case ever filed in anyone's knowledge in Harris County.

      And you prospective jurors are here to be examined by the attorneys and by myself to see whether you will be the ones who will hear the largest case ever filed in Harris County.

      At this time, I am going to ask the attorneys—

      MR. KEETON: Your Honor, may we approach the bench?

      (Conference at the bench)

      MR. KEETON: Your Honor, on behalf of Texaco, we object to the continued reference of largest case. You will note that the agreed statement has struck that because that has a—

      THE COURT: I have not mentioned the amount.

      MR. KEETON: I understand, but you said it's the largest case, Your Honor, that's ever been filed in Harris County. That tends, in our view, to give credence to the claim, and we ask the Court to refrain from such statements, if your Honor please, and to adhere to what is stated in the agreed statement, please.

      MR. JAMAIL: I don't see that you are prohibited from saying what you want to say. This statement is something different than what you are talking about—

      MR. KEETON: We view, Your Honor, that as a comment by the Court that we think is not proper.

      THE COURT: I think that's a fair request. I will abide by that.

      MR. KEETON: Thank you, Your Honor.

      MR. MILLER: We would like also, Your Honor, for—in view of the Court's comments, for the Court to advise the jury that when he says this is the largest case, what he means is that this is a case in which the largest damages are being claimed, and it may or may not be the largest case when the case is over with.

      MR. JAMAIL: Your Honor, I object to that.

      THE COURT: Mr. Miller, I think that if I do that, it will just throw the spotlight on it. That will bring us right back to the largest case.

      MR. MILLER: The only thing we want to be sure is that the jury, the fact that a large number of jurors having been summoned is not because of the size of the case; is because of the length of the case, the length that it is likely to last, and it has nothing to do with the amount of damages.

      THE COURT: I am not going to tell them about the amount of damages.

      In other words, the amount of the punitive damages. I am merely going to tell them the rest of it which is the length of the case.

      MR. MILLER: That's fine. We want our objection but—

      MR. KEETON: Well, Your Honor, I want to make a formal motion for mistrial because of the comment that has been made up to now and let's get another panel.

      THE COURT: Your motion—your oral motion for mistrial is denied.

      204

      [810] A presiding judge is vested with broad discretion in the manner in which he controls the trial of the case. Thus, reversal should not be ordered absent a showing of impropriety, probable prejudice, and the rendition of an improper verdict. Texas Employers Insurance Association v. Draper, 658 S.W.2d 202, 209 (Tex.App.— Houston [1st Dist.] 1983, no writ).

      205

      In the instant case, the remarks were made prior to jury selection. Texaco has failed to show how such remarks prejudiced it in this trial. Consequently, we cannot say that the remarks amounted to such a denial of Texaco's rights as was reasonably calculated to cause and probably did cause rendition of an improper judgment. Tex.R.App.P. 81(b)(1); see Meat Producers, Inc. v. McFarland, 476 S.W.2d 406, 414 (Tex.Civ.App.—Dallas 1972, writ ref'd n.r.e.).

      206

      Further, Texaco's first point is not argued in any of its grouped briefing points, and Texaco cites no authority to support this point. Tex.R.Civ.P. 414(e) (now Tex.R.App.P. 74(f)) requires a party to include such discussion of the authorities as is deemed necessary to make the points complained of clear. Texaco's failure to cite to any authority constitutes a waiver of the point. O'Dowd v. Johnson, 666 S.W.2d 619, 620 (Tex.App.—Houston [1st Dist.] 1984, writ ref'd n.r.e.).

      207

      Texaco's first point of error is overruled.

      208

      In its second point of error, Texaco claims that Special Issue No. 3 (damages) improperly assumes that Texaco "knowingly interfer[ed]" with an agreement, thus suggesting an affirmative answer to Special Issue No. 2.

      209

      Special Issue No. 3 asked the jury the following:

      210

      What sum of money, if any, do you find from a preponderance of the evidence would compensate Pennzoil for its actual damages, if any, suffered as a direct and natural result of Texaco's knowingly interfering with the agreement between Pennzoil and the Getty entities, if any?

      Answer in dollars and cents.

      211

      Texaco objects to the omission of conditional language after the phrase "knowingly interfering." It contends that as worded, Special Issue No. 3 assumes a disputed fact, i.e., that Texaco "knowingly interfer[ed]" with the agreement between the Getty entities and Pennzoil; this disputed fact was the subject of Special Issue No. 2. At trial, Texaco objected to Special Issue No. 3, in part, on the following ground:

      212

      The issue should have the phrase "after interfering, if it did so" because the issue is submitted to the jury without predicate and is otherwise a comment on the weight of the evidence suggesting that Texaco had, in fact, knowingly interfered with the agreement.

      213

      Pennzoil responds that the omission of any words of condition, such as "Texaco's knowingly interfering, if you have so found," (as suggested by the court) was inadvertent. The trial judge expressed his desire to include such language; however, when typed, the issue failed to include the requested language, and no objection was apparently lodged until Texaco filed its written objections to the charge on November 14, 1985.

      214

      Nonetheless, Pennzoil responds that Special Issue No. 3 does not assume a fact because (1) the "if any" language contained at the end of the sentence modifies the entire phrase "Texaco's knowingly interfering with the agreement between Pennzoil and the Getty entities"; therefore, the entire phrase is made conditional; and (2) even if Special Issue No. 3 were construed grammatically as an assumption of the fact of Texaco's interference, the error, if any, was harmless.

      215

      It is arguable that the "if any" language used in the issue modifies the entire verbal (gerund) phrase: "Texaco's knowingly interfering with the agreement between Pennzoil and the Getty entities."

      216

      In the instant case, the phrase "Texaco's knowingly interfering with the agreement between Pennzoil and the Getty entities" is a gerund phrase. "[I]nterfering" is the gerund used as the object of the preposition "of," which precedes the possessive noun "Texaco's." The final "if any" is a [811] phrase modifying the entire gerund phrase, thereby making conditional the fact of Texaco's "knowingly interfering with the agreement...." We do not agree that Special Issue No. 3 assumes the disputed issue of fact as alleged by Texaco.

      217

      Additionally, Tex.R.Civ.P. 277 provides that the court in its charge shall not "comment directly on the weight of the evidence or advise the jury of the effect of their answers." Thus, special issues are to be framed so as to avoid assuming the truth of a material, controverted issue of fact. Alvarez v. Missouri-Kansas-Texas Railroad Co., 683 S.W.2d 375, 377 (Tex.1984). However, even if the wording of a special issue constitutes an implied comment, not every such comment is cause for reversal. Id.; Mason v. Yellow Cab & Baggage Co., 153 Tex. 344, 269 S.W.2d 329, 330 (1954); Texas Employers Insurance Association v. McKay, 146 Tex. 569, 210 S.W.2d 147, 149 (1948). To warrant reversal, the comment must be one that "was reasonably calculated to cause and probably did cause rendition of an improper judgment...." Tex.R.App.P. 81(b)(1); Alvarez, 683 S.W.2d at 377. To determine whether an alleged error in the charge is reversible, this Court must consider the pleadings, evidence, and the charge in its entirety. Island Recreational Development Corp. v. Republic of Texas Savings Association, 710 S.W.2d 551 (Tex.1986).

      218

      Reversal is not mandated where under the circumstances of the case, including the charge as a whole, the force of the comment may be so weak that it is either not a comment at all or may be said to be harmless. Mason, 269 S.W.2d at 330.

      219

      In Texas Employers Insurance Association v. McKay, 146 Tex. 569, 210 S.W.2d 147, the court was faced with a similar problem. In McKay, the alleged comment consisted of a reference to the plaintiff's "injury," without the qualifying phrase "if any" in a defensive issue. Appellant asserted that the use of "injury" without the conditional "if any" assumed the existence of a disputed fact. The court was "satisfied from the very terms of the charge itself, considered as a whole, that the error... was not one which ... was reasonably calculated to cause and probably did cause the rendition of an improper judgment.... Tex.R.Civ.P. 434 [(repealed) (now Tex.R. App.P. 81(b))]."

      220

      The reviewing court based its holding on the following: (1) the court gave an elaborate preliminary admonition to the jury to answer the issues upon the general instructions and the evidence; (2) the court gave full definitions to guide the jury in its determination of the issues; (3) the court gave separate special issues regarding injuries sustained; and (4) the use of the conditional language "if any" was present 14 separate times in 12 issues and prior to the offending issue. Finally, the court noted that the repetition of "injury, if any" obviously emphasized the undetermined status of the injury question. See also Alvarez, 683 S.W.2d at 377 (issue constituted a harmless comment, which was not a proper ground for reversal).

      221

      As previously noted, in viewing the charge as a whole, the final "if any" conditional language of Special Issue No. 3 reasonably appears to qualify the entire phrase "Texaco's knowingly interfering with the agreement between Pennzoil and the Getty entities." Consequently, the jury could not assume this fact. Additionally, the trial court here, as in McKay, gave preliminary instructions to the jury to "consider only the evidence introduced" in arriving at their answers. Also, before the jury ever reached the contested Special Issue No. 3, it was required to answer Special Issue No. 2. Special Issue No. 2, with accompanying instructions, inquired whether Texaco "knowingly interfered with the agreement between Pennzoil and the Getty entities ...?" Unless plaintiff obtained an affirmative answer to Special Issue No. 2, its answer to Special Issue No. 3 was meaningless. Finally, Special Issue No. 4, the charge's other reference to Texaco's conduct, conditioned "Texaco's actions" with the "if any" language. As in McKay, every other mention of Texaco's "interference," except for Special Issue No. 3, contained the conditional language, thereby indicating [812] that the court was not assuming that disputed issue of fact.

      222

      Special Issue No. 3 could have been better worded. However, as articulated by the Texas Supreme Court, "in an already complicated field like that of special issues, we cannot strain too hard for perfection without ultimate damage to the whole jury system in civil cases." Alvarez, 683 S.W.2d at 378 (quoting Mason, 269 S.W.2d at 331).

      223

      Point of Error No. 2 is overruled.

      224

      In Points of Error 3 through 6, Texaco contends that the trial court erred in submitting Special Issue No. 1.

      225

      Special Issue No. 1 asked:

      226

      Do you find from a preponderance of the evidence that at the end of the Getty Oil board meeting of January 3, 1984, Pennzoil and each of the Getty entities, to wit, the Getty Oil Company, the Sarah C. Getty Trust and the J. Paul Getty Museum, intended to bind themselves to an agreement that included the following terms:

      a. all Getty Oil shareholders except Pennzoil and the Sarah C. Getty Trust were to receive $110 per share, plus the right to receive a deferred cash consideration from the sale of ERC Corporation of at least $5 per share within five years;

      b. Pennzoil was to own 3/7ths of the stock of Getty Oil and the Sarah C. Getty Trust was to own the remaining 4/7ths of the stock of Getty Oil; and

      c. Pennzoil and the Sarah C. Getty Trust were to endeavor in good faith to agree upon a plan for restructuring Getty Oil on or before December 31, 1984, and if they were unable to reach such agreement then they would divide the assets of Getty Oil between them also on a 3/7ths-4/7ths basis.

      Answer: "We do" or "We do not."

      227

      The accompanying instructions to the Special Issues No. 1 state:

      228

      1. An agreement may be oral, it may be written or it may be partly written and partly oral. Where an agreement is fully or partially in writing, the law provides that persons may bind themselves to that agreement even though they do not sign it, where their assent is otherwise indicated.

      2. In answering Issue No. 1, you should look to the intent of Pennzoil and the Getty entities as outwardly or objectively demonstrated to each other by their words and deeds. The question is not determined by the parties' secret, inward, or subjective intentions.

      3. Persons may intend to be bound to an agreement even though they plan to sign a more formal and detailed document at a later time. On the other hand, parties may intend not to be bound until such a document is signed.

      4. There is no legal requirement that parties agree on all the matters incidental to their agreement before they can intend to be bound. Thus, even if certain matters were left for future negotiations, those matters may not have been regarded by Pennzoil and the Getty entities as essential to their agreement, if any, on January 3. On the other hand, you may find that the parties did not intend to be bound until each and every term of their transaction was resolved.

      5. Every binding agreement carries with it a duty of good faith performance. If Pennzoil and the Getty entities intended to be bound at the end of the Getty Oil board meeting of January 3, they were obliged to negotiate in good faith the terms of the definitive merger agreement and to carry out the transaction.

      6. Modification or discussions to modify an agreement may not defeat or nullify a prior intention to be bound. Parties may always, by mutual consent and understanding, add new provisions spelling out additional terms that were not included in their original agreement.

      229

      In Point of Error No. 3, Texaco contends that Special Issue No. 1 improperly assumes that the three listed terms (a-c) constitute the sole essential terms to the alleged "agreement," thereby commenting on the weight of the evidence. Texaco alleges that by its wording, Special Issue No. 1 allowed the jury to return an affirmative answer on the contract element (intent [813] to be bound) even if there were other terms essential to any of the parties and not yet agreed upon. Additionally, Texaco argues that Special Issue No. 1 should have asked whether the three listed elements were the only essential terms to the contract and if not, whether there were other essential terms.

      230

      Under New York law, parties are free to enter into a binding contract without "memorializing their agreement in a fully executed document." Winston v. Mediafare Entertainment Corp., 777 F.2d 78, 80 (2d Cir.1985). This right to contract orally remains although the parties contemplate a formal writing to evidence their agreement; consequently, the mere intention to commit the agreement to writing will not prevent contract formation prior to execution. Id.; R.G. Group, Inc. v. Horn & Hardart Co., 751 F.2d 69, 74 (2d Cir.1984). The intent of the parties determines the time of the contract formation. Winston, 777 F.2d at 80.

      231

      In determining whether the parties intended to enter a contractual agreement, New York law applies an objective test, looking "to the objective manifestations of the intent of the parties as gathered by their expressed words and deeds." Brown Brothers Electrical Contractors, Inc. v. Beam Construction Corp., 41 N.Y.2d 397, 393 N.Y.S.2d 350, 352, 361 N.E.2d 999, 1001 (1977). Several factors are relied upon when ascertaining intent:

      232

      (1) whether there has been an express reservation of the right not to be bound in the absence of a writing; (2) whether there has been partial performance of the contract; (3) whether all of the terms of the alleged contract have been agreed upon; and (4) whether the agreement at issue is the type of contract usually committed to writing.

      233

      Winston, 777 F.2d at 80.

      234

      In the instant case, the question of whether the parties had agreed to all the essential terms is one of the factors considered in determining the controlling issue, submitted by Special Issue No. 1, i.e., whether the parties intended to be bound to their agreement at the conclusion of the January 3, 1984 board meeting. Texaco's argument erroneously focuses on the three listed elements and dismisses the fact that as worded, Special Issue No. 1 presents a broad submission of that controlling issue of the case.

      235

      By its argument, Texaco ignores the fact that Tex.R.Civ.P. 277, as amended in 1973, authorizes the trial court, in its discretion, to submit controlling issues broadly. Island Recreational Development Corp., 710 S.W.2d at 554; Lemos v. Montez, 680 S.W.2d 798, 801 (Tex.1984). The trial court is not required to submit each fact question separately and distinctly. Alvarez, 683 S.W.2d at 377.

      236

      Issues that are merely evidentiary should not be submitted. Making the distinction between evidentiary and controlling issues rests within the discretion of the court and will not be disturbed on appeal, unless there is a showing of probable harm. Stalder v. Bowen, 373 S.W.2d 824, 828 (Tex.Civ.App.—Dallas 1963, writ ref'd n.r. e.).

      237

      Additionally, Tex.R.Civ.P. 277 states in pertinent part:

      238

      It shall be discretionary with the Court whether to submit separate questions with respect to each element of a case or to submit issues broadly. It shall not be objectionable that a question is general or includes a combination of elements or issues.

      239

      In Special Issue No. 1, the jury was asked a controlling question in the case—whether Pennzoil and the Getty entities had an intent to be bound. By its broad submission and accompanying explanatory instructions, Special Issue No. 1 required the jury to determine that all elements essential to the agreement had been resolved, including the three listed elements, before the jury could answer affirmatively.

      240

      The trial court did not err in submitting Special Issue No. 1 broadly, as is authorized by Tex.R.Civ.P. 277.

      241

      In Points of Error 4 through 6, Texaco argues that the assumption established in Special Issue No. 1, that the three listed elements constitute the sole elements to [814] the contract formation, is aggravated by the use of the word "agreement" in a manner that signals that an "agreement" is less than a "binding contract." Consequently, Texaco requested: (1) that the word "agreement" be defined as "a legally binding agreement consisting of a meeting of the minds of the agreeing parties to all essential terms and conditions and to which agreement the parties then intend to be bound," and (2) that the word "contract" be substituted for "agreement" and defined as "a legally binding agreement consisting of a meeting of the minds of the contracting parties to all essential terms and conditions and to which agreement the parties then intend to be bound." These requests were refused and objections to their omission were overruled.

      242

      Texaco's basic argument is that the court's refusal to substitute "contract" for "agreement" and its refusal to give a "proper legal definition" to "agreement" left the jury with no guidance as to what the words and phrases mean.

      243

      Definitions of terms used in a charge are proper when they would aid the jurors. Since jurors are presumed to have average intelligence, the court is not required to convert the charge into a dictionary. Texas Employers Insurance Association v. Hamor, 97 S.W.2d 1041, 1041 (Tex.Civ.App.— Amarillo 1936, no writ). Ordinary words used in their common meaning need not be defined. West Texas State Bank v. Tri-Service Drilling Co., 339 S.W.2d 249, 256 (Tex.Civ.App.—Eastland 1960, writ ref'd n.r.e.).

      244

      In the instant case, the accompanying instructions present the applicable New York law regarding contract formation. Additionally, the word "agreement" was before the jury as an ordinary word, used in its ordinary meaning, pursuant to the trial court's charge:

      245

      When words are used in this Charge in a sense which varies from the meaning commonly understood, you are given a proper legal definition which you are bound to accept in place of any other definition or meaning.

      246

      Consequently, no definition for the word "agreement" was necessary. Mann v. Fender, 587 S.W.2d 188, 199 (Tex.Civ.App. —Waco 1979, writ ref'd n.r.e.) ("oral agreement" was not used in any special issue in a particular legal sense); West Texas State Bank, 339 S.W.2d at 256 ("approve" and "agree" are words of common usage).

      247

      Additionally, Texaco's objection to the use of "agreement" on the grounds that it allowed the jury "to find such an agreement, without finding a binding agreement" was properly overruled, as was its requested definitions of "agreement" and alternatively, "contract," as "legally binding agreement[s]." Whether an agreement is legally enforceable or binding is a question of law; therefore, the jury may not be called upon to construe the legal effect of an instrument. Trinity University Insurance Co. v. Ponsford Brothers, 423 S.W.2d 571, 575 (Tex.1968); Wirtz v. Orr, 533 S.W.2d 468, 471 (Tex.Civ.App.— Eastland 1976, writ ref'd n.r.e.).

      248

      The trial court is afforded considerable discretion in determining what issues and instructions are proper in submitting its charge. Tex.R.Civ.P. 277; Members Mutual Insurance Co. v. Muckelroy, 523 S.W.2d 77, 83 (Tex.Civ.App.—Houston [1st Dist.] 1975, writ ref'd n.r.e.). Generally, the trial court should submit appropriate instructions, when requested. However, the failure to do so is not reversible error per se. Tex.R.Civ.P. 277; Island Recreational Development Corp., 710 S.W.2d at 555.

      249

      Special Issue No. 1 properly submitted the controlling issue of "intent to be bound." When the totality of the case is considered, we find no reversible error. See Island Recreational Development Corp., 710 S.W.2d at 555. Texaco's Points of Error 3 through 6 are overruled.

      250

      In its next four points of error (7 through 10) Texaco claims that Special Issue No. I (intent to be bound) and Instruction No. I improperly emphasize Pennzoil's "Contract" theory. The specific points read as follows:

      251

      Point of Error No. 7:

      252

      The trial court erred in refusing Texaco's Requested Special Issue No. 100 (intent [815] to be bound) and instead submitting Special Issue No. 1, since Texaco's requested special issue was the proper inquiry.

      253

      Point of Error No. 8:

      254

      The trial court erred in refusing Texaco's Requested Special Issue No. 101-D (intent to be bound and without approval of a definite merger agreement) and instead submitting Special Issue No. 1, since Texaco's requested special issue was the proper inquiry.

      255

      Point of Error No. 9:

      256

      The trial court erred in overruling Texaco's objection to Special Issue No. 1, and in denying Texaco's motions for judgment and judgment n.o.v., because Special Issue No. 1 fails to inquire as to the existence of a present intention to be bound.

      257

      Point of Error No. 10:

      258

      The trial court erred in submitting Instruction No. 1 to Special Issue No. 1 (agreement may be oral or written) over Texaco's timely objection that the instruction improperly suggests that the parties to the alleged agreement did not intend to insist upon a written contract before being bound, directly commenting on the weight of the evidence.

      259

      In points of error 7 and 8, Texaco contends that the trial court erred in refusing its Requested Special Issues Nos. 100 and 101-D, which it argues were the "proper" issues. Requested Special Issues No. 100 and 101-A asked:

      260

      Special Issue No. 100

      261

      Do you find from a preponderance of the evidence that the Getty Oil Company, the Museum, the Trust, and Pennzoil at the end of the Getty Oil Company Board of Director's meeting on January 3, 1984, each intended to be bound to a contract without all the parties executing a written definitive merger agreement?

      Answer "Yes" for each entity below which did intend to be bound without an executed definitive merger agreement. Otherwise, answer "No."

      Getty Oil Company: _____The Museum: _____The Trust: _____Pennzoil: _____

      262

      Special Issue No. 101-A

      263

      Do you find from a preponderance of the evidence that a written definitive Merger Agreement was submitted to the Getty Oil Company Board of Directors on or before January 3, 1984?

      Answer "Yes" or "No." _____

      264

      Pennzoil points out that Texaco has failed to brief these points of error. Texaco has filed a cross-reference with this Court in which it asserts that Points 7-8 are argued at pages 17-19, and 23-24 of its brief. However, our reading of these pages negates its contention.

      265

      Points of error that are not supported by argument and authorities are waived. Tex.R.App.P. 74(f); Trenholm v. Ratcliff, 646 S.W.2d 927, 934 (Tex.1983); O'Dowd v. Johnson, 666 S.W.2d 619, 620 (Tex.App.—Houston [1st Dist.] 1984, writ ref'd n.r.e.). Having failed to brief points 7-8, Texaco has waived any allegation of error, but in the interest of judicial economy we will consider its argument.

      266

      In determining whether alleged error in the jury charge is reversible, this Court must consider the pleadings, the evidence, and the charge in its entirety. Error is reversible only if, "when viewed in the light of the totality of these circumstances, it amounted to such a denial of the rights of the complaining party as was reasonably calculated and probably did cause the rendition of an improper judgment." Island Recreational Development Corp., 710 S.W.2d at 555; Tex.R.App.P. 81(b)(1).

      267

      In the instant case, the controlling issue of intent to be bound was broadly submitted in Special Issue No. 1. Instruction No. 3 states:

      268

      Persons may intend to be bound to an agreement even though they plan to sign a more formal and detailed document at a later time. On the other hand, parties may intend not to be bound until such a document is signed.

      269

      [816] Under Texas law, the trial court has considerable discretion in deciding which issues are proper. Tex.R.Civ.P. 277; Members Mutual Insurance Co., 523 S.W.2d at 83. Pursuant to rule 277, where the broad form of submission is adopted, as here, "the extent of the jury's consideration of the elements comprising the controlling issue becomes a matter of evidence and argument, subject to appropriate instruction of the court." Members Mutual Insurance Co., 523 S.W.2d at 82.

      270

      Texaco's requested issues consist of evidentiary elements that are subsumed within the controlling issue submitted, Special Issue No. 1, "intent to be bound." Whether the parties intended to be bound without executing a definitive agreement and whether a definitive agreement was submitted to be board on January 3 are factors to be considered in determining intent. See Winston, 777 F.2d at 80.

      271

      The court here elected to submit broadly the controlling issue of "intent to be bound." Consequently, all of the elements comprising "intent to be bound," including those requested above, were a matter of evidence and argument, subject to the appropriate instructions given here, e.g., Instruction No. 3. See Members Mutual Insurance Co., 523 S.W.2d at 82.

      272

      In light of the totality of the circumstances, the denial of the requested issues did not amount to a denial of Texaco's rights as was reasonably calculated to cause the rendition of an improper judgment. See Island Recreational Development Corp., 710 S.W.2d at 555. Points of Error 7 and 8 are overruled.

      273

      Texaco argues in Point of Error No. 9 that the phrase "intended to bind themselves to an agreement," contained in Special Issue No. 1, is ambiguous. Consequently, it allowed the jury to return an affirmative answer even if it found an "agreement to agree," which is unenforceable under New York law. Specifically, Texaco contends that Special Issue No. 1 fails to establish a definite time frame as to when the parties, Pennzoil and the Getty entities, would be bound.

      274

      Special Issue No. 1 asks, in pertinent part:

      275

      Do you find from a preponderance of the evidence that at the end of the Getty Oil board meeting of January 3, 1984, Pennzoil and each of the Getty entities, to wit, the Getty Oil Company, the Sarah C. Getty Trust and the J. Paul Getty Museum, intended to bind themselves to an agreement that included the following terms.... (Emphasis added.)

      276

      Texaco's argument is without merit because it fails to consider the fact that the phrase, "at the end of the Getty Oil Board meeting of January 3, 1984," clearly establishes the "time frame" of when the parties intended to bind themselves, i.e., the intent to be bound was established at the end of the board meeting on January 3, 1984.

      277

      Additionally, Instruction Nos. 3-5 focus the jury's attention on the time frame in question, the end of the January 3, 1984 meeting. These instructions read as follows:

      278

      3. Persons may intend to be bound to an agreement even though they plan to sign a more formal and detailed document at a later time. On the other hand, parties may intend not to be bound until such a document is signed.

      4. There is no legal requirement that parties agree on all the matters incidental to their agreement before they can intend to be bound. Thus, even if certain matters were left for future negotiations, those matters may not have been regarded by Pennzoil and the Getty entities as essential to their agreement, if any, on January 3. On the other hand, you may find that the parties did not intend to be bound until each and every term of their transaction was resolved.

      5. Every binding agreement carries with it a duty of good faith performance. If Pennzoil and the Getty entities intended to be bound at the end of the Getty Oil board meeting of January 3, they were obliged to negotiate in good faith the terms of the definite merger agreement and to carry out the transaction.

      279

      (Emphasis added.)

      280

      In its 10th point of error, Texaco contends that the defects in Special Issue No. [817] 1 are aggravated by the following Instruction No. 1:

      281

      Instruction No. 1

      282

      An agreement may be oral, it may be written or it may be partly written and partly oral. Where an agreement is fully or partially in writing, the law provides that persons may bind themselves to that agreement even though they do not sign it, where their assent is otherwise indicated.

      283

      Texaco argues that the instruction suggests that the parties did not intend to insist upon a written contract prior to being bound, and therefore, it is a direct comment on the weight of the evidence, i.e., that the parties intended to be bound on January 3, 1984, although they had no written agreement.

      284

      Tex.R.Civ.P. 277 provides in pertinent part:

      285

      In submitting the case, the court shall submit such explanatory instructions and definitions as shall be proper to enable the jury to render a verdict.

      * * * * * *

      ... [T]he court's charge shall not be objectionable on the ground that it incidentally constitutes a comment on the weight of the evidence or advises the jury of the effect of their answers where it is properly a part of an explanatory instruction or definition.

      286

      While the trial court may not comment on the weight of the evidence, "it may incidentally comment where the comment is necessary or proper as part of an explanatory instruction or definition." Mader v. Aetna Casualty & Surety Co., 683 S.W.2d 731, 733 (Tex.App.—Corpus Christi 1984, no writ). Trial courts have considerable discretion in deciding which instructions are necessary and proper. Johnson v. Whitehurst, 652 S.W.2d 441, 449 (Tex.App. —Houston [1st Dist.] 1983, writ ref'd n.r. e.). However, an improper comment on the weight of the evidence occurs in either an instruction or an issue when the trial court indicates an opinion about the accuracy of the facts in inquiry. Armes v. Campbell, 603 S.W.2d 249, 251 (Tex.Civ.App.—El Paso 1980, writ ref'd n.r.e.).

      287

      In the instant case, we find is nothing in the language of Instruction No. 1 that suggests the court's opinion on whether the parties did or did not intend to be bound at the end of the January 3, 1984 meeting. Instruction No. 1 instructs the jury about the applicable law. See Winston, 777 F.2d at 80. However, even if an incidental comment were implied, such comment was permissible pursuant to Tex.R. Civ.P. 277. When the totality of the case is considered, i.e., the pleadings, evidence, and the charge in its entirety (particularly the remaining instructions given in connection with Special Issue No. 1), there is no reversible error.

      288

      Texaco's 9th and 10th points of error are overruled.

      289

      In its 11th, 12th, and 13th points of error, Texaco claims that Instruction No. 2 to Special Issue No. 1 (intent to be bound) improperly instructs the jury that they "should" consider only Pennzoil's evidence.

      290

      The points of error follow:

      291

      Point of Error No. 11:

      292

      The trial court erred in submitting Instruction No. 2 to Special Issue No. 1 (parties' intent should be determined from their words and deeds manifested to each other) over Texaco's timely objection that the instruction improperly limits the jury's consideration to those items, directly commenting on the weight of the evidence.

      293

      Point of Error No. 12:

      294

      The trial court erred in refusing Texaco's request for, and overruling Texaco's objection to the omission of, Texaco's Requested Instruction D (factors relevant to intention to be bound) because the instruction correctly states the law and is proper.

      295

      Point of Error No. 13:

      296

      The trial court erred in overruling Texaco's objection to Instruction No. 2 to Special Issue No. 1 (intent to be bound) and denying Texaco's Requested Instruction A (determine intent from words, deeds, and circumstances).

      297

      [818] Texaco contends that Instruction No. 2 to Special Issue No. 1 is legally flawed because it mandates, through the use of the word "should" and the phrase "to each other," that the jury limit its consideration to evidence favorable to Pennzoil. Instruction No. 2 states:

      298

      In answering Issue No. 1, you should look to the intent of Pennzoil and the Getty entities as outwardly or objectively demonstrated to each other by their words and deeds. The question is not determined by the parties' secret, inward, or subjective intentions.

      299

      (Emphasis added.)

      300

      Webster's New Collegiate Dictionary defines "should" (as used in this instruction) as expressing an obligation, propriety, or expediency.

      301

      In the instant case, the term "should" instructs the jury that it is "obliged" or "compelled" to look to the intent of Pennzoil and the Getty entities as manifested by their words and deeds to each other. Texaco asserts that the court erroneously included words of limitations, "to each other," which mandate the jury's consideration of manifestations of intent between the parties only, and preclude the consideration of manifestations of intent to other parties such, as (1) a rule 14D-1 filing with the SEC, and (2) certain post-board meeting conversations between Getty and Texaco on January 4-6, 1984.

      302

      While the instruction limits the jury's consideration of evidence to manifestations of intent made "to each other," thereby excluding evidence of meetings between only Texaco and Getty, unknown to Pennzoil, the instruction does not preclude the jury from considering the evidence of intent, such as the press releases and the SEC filing, that was made public.

      303

      Under New York law, it is well established that the existence of a binding contract is not dependent upon the subjective intent of the parties. Brown Brothers Electrical Contractors, Inc., 41 N.Y.2d 397, 393 N.Y.S.2d 350, 361 N.E.2d 999. Rather, it is the objective manifestations of the intent of the parties, as expressed by words and deeds, that determine whether the parties have actually entered into a contract. Id., 393 N.Y.S.2d at 352, 361 N.E.2d at 1001; see also Winston, 777 F.2d at 80; R.G. Group, Inc., 751 F.2d at 74.

      304

      "[M]utual assent must be manifested by one party to the other...." Porter v. Commercial-Casualty Insurance Co., 292 N.Y. 176, 54 N.E.2d 353, 356 (1944) (emphasis added). The Restatement (Second) of Contracts, § 19(2) states: "The conduct of a party is not effective as a manifestation of his assent unless he intends to engage in the conduct and knows or has reason to know that the other party may infer from his conduct that he assents." (Emphasis added.)

      305

      The instruction allows the jury to consider all overt, objective manifestations while denying consideration of secret or subjective manifestations. The SEC filing and the press release were outward, objective manifestations; conversations between Texaco and Getty, to which Pennzoil was not a party, were subjective, secret manifestations that were properly precluded from consideration.

      306

      Texaco's argument is without merit.

      307

      Texaco next contends in Points of Error 12 and 13 that the trial court erred in refusing its request for and in overruling its objection to the omission of Requested Instructions A and D.

      308

      The requested instructions state:

      309

      Requested Instruction A

      In answering Issue No. 1 you may look to the intent of Pennzoil, the Trust, the Museum and the Getty Oil Company as manifested by their words and deeds and by the existing circumstances.

      Requested Instruction D

      You are instructed that, although an oral or unsigned written agreement may be a binding contract if the parties so intend, it is not binding if any party intends to be bound to a contract only if there is a complete written document containing all the terms which have been agreed to and which document has been signed by all the parties. In such instance, none of [819] the parties will be bound until the signing occurs, even when all the parties have otherwise agreed on all the essential terms of the proposed contract.

      310

      Various factors are relevent to the determination of whether or not any of the parties intended to be bound without or prior to execution of a written definitive agreement. No single factor is decisive, but each provides significant guidance. Among the factors you may consider as evidence of intent to be bound only after execution of a written agreement are: (1) whether a party reserved the right to be bound only when a written agreement is signed, either orally during negotiations or in drafts of documents that condition the making of a binding agreement upon execution of the document; (2) whether there were any open issues that remained to be negotiated or settled; (3) whether the contract concerns complex and substantial business matters; and, (4) whether the situation is such that signed written agreements are standard or customary.

      311

      Texaco argues that by not including instructions that the jury should consider "all surrounding circumstances," particularly the four listed in Requested Instruction D, the court limited the jury's consideration of all relevant evidence and focused the jury's attention upon evidence favorable to Pennzoil.

      312

      It is noted that at trial, Texaco propounded Requested Instruction D, which was refused, and then filed specific objections to the refusal. In both instances, the requested instruction listed the following as one of the four circumstances to be considered: "(3) whether the contract concerns complex and substantial business matters." However, on appeal, Texaco argues that these four factors should have been submitted, but omits the number (3) factor and substitutes the following: "(b) whether there was partial performance indicative of agreement...."

      313

      Objections made on appeal that do not conform to those made at trial are waived. Conner v. Bean, 630 S.W.2d 697, 701 (Tex.App.—Houston [1st Dist.] 1981, writ ref'd n.r.e.). As Texaco's argument regarding Requested Instruction D does not conform to its objection at trial, it is waived. However, for the reasons previously stated, we will discuss and consider Texaco's complaint.

      314

      Tex.R.Civ.P. 277 provides that the trial court "shall submit such explanatory instructions and definitions as shall be proper to enable the jury to render a verdict...." Explanatory instructions are the tools that aid the jury in rendering a just and proper verdict, and as such, should be submitted when in the sole discretion of the trial judge, they will help the jury to understand the meaning and effect of the law and the presumption thereby created. Southern Pacific Transportation Co. v. Garrett, 611 S.W.2d 670, 674 (Tex.Civ.App.—Corpus Christi 1980, no writ).

      315

      Under New York law, the intent of the parties is discerned by looking to the parties' words and deeds that constitute objective signs in a given set of circumstances. See Winston, 777 F.2d at 80. Restatement (Second) of Contracts § 27 comment C (1981) suggests eight factors that "may be helpful in determining whether a contract has been concluded....":

      316

      The extent to which express agreement has been reached on all the terms to be included, whether the contract is of a type usually put in writing, whether it needs a formal writing for its full expression, whether it has few or many details, whether the amount involved is large or small, whether it is a common or unusual contract, whether a standard form of contract is widely used in similar transactions, and whether either party takes any action in preparation for performance during the negotiations.

      317

      These may be shown by "oral testimony or by correspondence or other preliminary or partially complete writings." Id.

      318

      In our case, Texaco chose only four of the suggested eight factors to be submitted [820] to the jury. Additionally, the four listed in Texaco's requested instruction are not the four often suggested in the case law. (It omitted "partial performance.") Finally, Texaco's requested "by the existing circumstances" language had the potential of allowing the jury erroneously to consider secret, subjective intentions.

      319

      Given these considerations and the trial court's broad discretion in submitting instructions, there was no reversible error in the court's denial of Requested Instructions A and D.

      320

      Texaco's Points of Error 11, 12, and 13 are overruled.

      321

      In its 14th point of error, Texaco argues that Instruction No. 4 to Special Issue No. 1 is misleading, incomplete, and a direct comment on the weight of the evidence. Specifically, it contends that Instruction No. 4: (1) fails to inform the jury that before there can be a contract, the parties have to agree to all material matters; (2) fails to inform the jury that if any element considered by any party is left for future consideration, there is no contract; (3) fails to inform the jury that even if the parties intend to be bound before resolution of "each and every" item, they cannot be bound until there is a resolution of "each and every" material item of the agreement; and (4) personalizes the parties, which personalization "nudges" the jury to adopt Pennzoil's position.

      322

      Instruction No. 4 states:

      323

      There is no legal requirement that parties agree on all the matters incidental to their agreement before they can intend to be bound. Thus, even if certain matters were left for future negotiations, those matters may not have been regarded by Pennzoil and the Getty entities as essential to their agreement, if any, on January 3. On the other hand, you may find that the parties did not intend to be bound until each and every term of their transaction was resolved.

      324

      At trial, Texaco objected as follows:

      325

      Instruction No. 4 is a direct comment on the weight of the evidence and is therefore improper because it personalizes the instruction to the party's case and thereby unduly emphasizes evidence favorable to Pennzoil.

      326

      We first note that Texaco's argument on appeal is different from its trial objection. As noted previously, it is well-settled that a party is confined to the objection made at trial and that he will not be allowed to enlarge his complaint on appeal. Tex.R.Civ.P. 274; Perez v. Baker Packers, 694 S.W.2d 138, 141-42 (Tex.App.—Houston [14th Dist.] 1985, writ ref'd n.r.e.); Conner, 630 S.W.2d at 701. Consequently, Texaco has waived all allegations of error regarding Instruction No. 4, except for the complaint of "personalization."

      327

      Texaco contends that Special Issue No. 1 fails to inquire whether there was agreement on all material issues and that Instruction No. 4 fails to tell the jury that there must be agreement on all material terms and that the parties cannot be bound until resolution of each material item. New York law does not contemplate such a specific formalistic rule:

      328

      Under the Uniform Commercial Code [2-204(3)], if the parties have intended to contract, and if an appropriate remedy may be fashioned, a contract for sale does not fail for indefiniteness if terms, even important terms, are left open ... It is no longer true that dispute over material terms inevitably prevents formation of a binding contract. What is true ... is that when a dispute over material terms manifests a lack of intention to contract, no contract results.

      329

      J. Baranello & Sons v. Hausmann Industries, Inc., 571 F.Supp. 333, 340-41 (E.D.N. Y.1983) (emphasis added); see also Restatement (Second) of Contracts § 33 comment A ("[T]he actions of the parties may show conclusively that they intended to conclude a binding agreement even though one or more terms are missing or are left to be agreed upon."); Kleinschmidt Division of SCM Corp. v. Futuronics Corp., 41 N.Y.2d 972, 395 N.Y.S.2d 151, 152, 363 N.E.2d 701, [821] 702 (1977) ("A contract for sale does not fail for indefiniteness if terms, even important terms, are left open."); V'Soske v. Barwick, 404 F.2d 495, 500 (2d Cir.1968), cert. denied, 394 U.S. 921, 89 S.Ct. 1197, 22 L.Ed.2d 454 (1969), ("[A]ll terms contemplated... need not be fixed with complete... certainty for a contract to have legal efficacy."); Camrex Contractors v. Reliance Marine Applicators, Inc., 579 F.Supp. 1420, 1427 (E.D.N.Y.1984); Reprosystem, B.V., 522 F.Supp. at 1275 ("[W]hile there is no enforceable agreement if the parties have not agreed on the essential terms, ... in New York and across the country a binding contract can be formed despite `material open issues.'").

      330

      Texaco also argues that Instruction No. 4 should have informed the jury that if any matter left for future negotiations was considered essential by any party, there was no contract.

      331

      Instruction No. 4 advises the jury that a contract can exist even though the parties have left certain "incidental" matters for future negotiations. It goes on to say that even if certain matters left for future negotiations, those matters may not have been regarded by the parties as essential to their agreement, if any. (Emphasis added.) This implies that essential items could not be left open. The instruction is a correct statement of the law and of the facts that Pennzoil, as plaintiff, had to prove. There is no requirement that the court additionally instruct the jury specifically on the converse, i.e., that a contract does not exist if essential items are left for future negotiations. Group Life & Health Insurance Co. v. Turner, 620 S.W.2d 670, 674 (Tex. App.—Dallas 1981, no writ) (no requirement that an affirmative statement be stated negatively). Additionally, the final sentence ("[o]n the other hand, you may find that the parties did not intend to be bound until each and every term of their transaction was resolved") clearly supplies relief to Texaco's objection by advising the jury that the parties here may not have intended to be bound until all terms were resolved.

      332

      Finally, Texaco contends that Instruction No. 4 "personalizes" the parties, which personalization impermissibly "nudges" the jury to adopt Pennzoil's position that any terms to be negotiated after the January 3, 1984 board meeting were merely "incidental" to the contract. (Again, we note that this is the only argument properly preserved on appeal under this point of error). Texaco's complaint here is with the second sentence of Instruction No. 4: "Thus, even if certain matters were left for future negotiations, those matters may not have been regarded by Pennzoil and the Getty entities as essential to their agreement, if any, on January 3."

      333

      We note that Texaco cites no authority directly on point that would support its argument that the "personalization" here was improper.

      334

      Courts frequently "personalize" or "individualize" the charge so as to make the law contained in the charge applicable to the facts in the case and more easily understood by the jury. See Herrera v. Balmorhea Feeders, Inc., 539 S.W.2d 84, 88 (Tex. Civ.App.—El Paso 1976, writ ref'd n.r.e.). Problems arise when the instruction deviates from "enabl[ing] the jury to render a verdict," Tex.R.Civ.P. 277, to actually misstating the law or misguiding the jury. Jackson v. Fontaine's Clinics, Inc., 499 S.W.2d 87 (Tex.1973). The following cases, cited by Texaco, evidence such improper and impermissible deviations:

      335

      1. Lemos v. Montez, 680 S.W.2d 798. (The court held that in light of the fact that the supreme court had previously defined "unavoidable accident," an appended definition of the term impermissibly "tilted" or "nudged" the jury thereby commenting on the weight of the evidence.)

      336

      2. Gulf Coast State Bank v. Emenhiser, 562 S.W.2d 449, 453 (Tex.1978). (It is impermissible to marshal the facts or parties' contentions into an instruction and then to instruct the jury to find for one party if it believed certain facts to be true.)

      337

      [822] 3. Owen Development Co. v. Calvert, 157 Tex. 212, 302 S.W.2d 640, 643 (1957). (An issue, which tied the jury to a 31-day time period, singled out and gave prominence to the testimony of an interested witness.)

      338

      4. McLeroy v. Stocker, 505 S.W.2d 615, 618 (Tex.Civ.App.—Houston [1st Dist.] 1974, no writ). (An instruction on "unavoidable accident," which appeared on a page preceding the first special issue, was probably considered by the jury as a direction to first consider the question of unavoidable accident, thereby commenting on the weight of the evidence.)

      339

      Our case is distinguishable from these cases. Instruction No. 4 is a true statement of the law; it personalizes the law to the parties without misleading the jury. Consequently, we find no error that was reasonably calculated to prejudice Texaco.

      340

      Texaco's 14th point of error is overruled.

      341

      In its 15th and 31st points of error, Texaco claims that Instruction No. 5 to Special Issue No. 1 (intent to be bound) is a "surplus" instruction that improperly emphasizes Pennzoil's "duty to negotiate" theory.

      342

      Instruction No. 5 states:

      343

      Every binding agreement carries with it a duty of good faith performance. If Pennzoil and the Getty entities intended to be bound at the end of the Getty Oil board meeting of January 3, they were obliged to negotiate in good faith the terms of the definitive merger agreement and to carry out the transaction.

      344

      Texaco objected to Instruction No. 5 as follows:

      345

      Instruction No. 5 is an improper instruction because it does not assist the jury in its consideration of its answer to Special Issue No. 1. It is irrelevant to the inquiry posed in Special Issue No. 1 as to whether the parties intended to be bound. Instead, this is merely a judicial comment to negate Texaco's evidence indicating no intention to be bound by virtue of the ongoing negotiations. It assumes a finding of some prior intention to be bound since only in those circumstances does any obligation to negotiate in good faith arise. No such instruction need or should be given.

      346

      Texaco presents four basic arguments:

      347

      (1) the instruction misstates New York law; (2) it is unnecessary surplusage; (3) it comments on the weight of the evidence because it assumes the existence of a binding contract; and (4) it attempts to avoid New York law that allegedly holds that an agreement in principle, subject to the execution of definitive documents, is not an enforceable contract.

      348

      Texaco first argues that Instruction No. 5 is a misstatement of the law because it erroneously converts the post-contractual duty of "good-faith performance" into a pre-contractual duty of "good-faith negotiation." It urges that this instruction abrogates its defense (to the tort of interference with prospective contractual relations) by erasing the distinction between pre-contractual and post-contractual conduct.

      349

      Tex.R.Civ.P. 277 provides that the trial court may give such explanatory instructions and definitions as shall be proper to enable the jury to render a verdict. A "proper" instruction is one that assists the jury and is legally correct. First State Bank & Trust Co. v. George, 519 S.W.2d 198, 207 (Tex.Civ.App.—Corpus Christi 1974, writ ref'd n.r.e.). An instruction that misstates the law or misleads the jury would not meet this standard. Jackson, 499 S.W.2d at 90.

      350

      Under New York law, there exists a duty of good faith and fair dealing that is read into every contract and requires a party not to act in a manner that defeats the purpose of the agreement. Candid Productions, Inc., 530 F.Supp. at 1334-35. "Where the parties are under a duty to perform that is definite and certain the courts will enforce a duty of good faith, including good faith negotiation, in order that a party not escape from the obligation he has contracted to perform." Teachers Insurance & Annuity Association of America v. Butler, 626 F.Supp. 1229, [823] 1231-32 (S.D.N.Y.), stay granted, 803 F.2d 61 (2d Cir.1986).

      351

      In the instant case, the "duty of good faith performance" language contained in Instruction No. 5 is stated to arise from the parties' agreement. It is worded clearly, instructing the jury that a duty of good faith performance on the part of the Getty entities and Pennzoil arose post-contractually, i.e., only if the jury found an intent to be bound on January 3. Thus, Instruction No. 5 is not a misstatement of the law.

      352

      Texaco next argues that Instruction No. 5 is mere surplusage because nothing in Special Issue No. 1 (intent to be bound) relates to a "good faith duty to negotiate," and consequently, this is the precise type of instruction that has been condemned by the Texas Supreme Court.

      353

      While trial courts are authorized to submit instructions that will enable the jury to reach a verdict, they should refuse to submit unnecessary instructions even if they are correct statements. Samsel v. Diaz, 659 S.W.2d 143, 144 (Tex.App.—Corpus Christi 1983, no writ); First State Bank & Trust Co., 519 S.W.2d at 207. The submission of unnecessary instructions may be so prejudicial that it requires reversal. Boaz v. White's Auto Store, 141 Tex. 366, 172 S.W.2d 481 (1943); Samsel, 659 S.W.2d at 145.

      354

      Instruction No. 5 is a correct statement of the law. It was submitted to aid the jury in answering Special Issue No. 1, which asks whether Getty and Pennzoil intended to be bound to an agreement at the end of the January 3, 1984 meeting. Texaco asserts that because a good faith obligation to perform does not arise unless there is a binding contract, this instruction was unnecessary surplusage.

      355

      The cases cited by Texaco are inapposite. In each instance, the court condemned the requested instruction because it deviated from or elaborated upon (1) court-promulgated instructions or (2) standard instructions.

      356

      In Fleishman v. Guadiano, 651 S.W.2d 730, 731 (Tex.1983), cited by Texaco, the court endorsed its previous instruction, promulgated in Turner v. General Motors Corp., 584 S.W.2d 844 (Tex.1979), and held that a requested additional instruction on "sole cause" would deflect the jury's attention to contributory negligence when it was considering whether a ladder in question was defectively designed.

      357

      In Acord v. General Motors Corp., 669 S.W.2d 111, 116 (Tex.1984), the Texas Supreme Court held that although the contested instruction given was a correct statement of the law, it constituted harmful error because it was a direct comment on the weight of the evidence. The Acord court indicated that the singling out of the law in such a way as to favor one side constitutes a comment on the weight of the evidence and is harmful error.

      358

      In Lemos, 680 S.W.2d at 801, the court found that an appended instruction to a previously-approved definition of "unavoidable accident" was wrong. The court indicated that its reversal and remand was based upon (1) the incorrectness of the instruction, and (2) the fact that it impermissibly titled or nudged the jury "one way or the other."

      359

      In First International Bank v. Roper Corp., 686 S.W.2d 602, 604 (Tex.1985), a products liability case cited by Texaco, the trial court embellished the standard definition of "producing cause" by adding a definition of "sole cause." The Texas Supreme Court held that the additional instruction, although correct as to the definition of "sole cause," was improper surplusage in this type of case, because it placed undue emphasis on the parents' negligence when the jury was considering the existence of a defect and its relationship to the injurious event.

      360

      In our case, Instruction No. 5 to Special Issue No. 1 advises the jury of a post-contractual duty; Special Issue No. 1 inquires into the existence of a contract. Thus, it seems that Instruction No. 5 was unnecessary to enable the jury to determine this [824] contract element. However, even though the instruction was unnecessary, we find that its inclusion was not so prejudicial as to require reversal. Tex.R.App.P. 81(b)(1).

      361

      The "character" of the negotiations between Pennzoil and Getty after the January 3 board meeting is hotly contested by both sides. Pennzoil asserts that the negotiations after January 3 were merely to formalize the implementing details of the contract already reached. Texaco contends that the fact that the parties continued to negotiate after January 3 on allegedly essential issues showed that no binding agreement had been reached.

      362

      Instruction No. 4 to Special Issue No. 1 advised the jury that the parties may not have intended to be bound until all negotiations were resolved. On the other hand, Instruction No. 5 advised the jury that the subsequent negotiations may have been exemplary of the parties' post-contractual duty of good faith effort to complete the details of what had been agreed to before. Consequently, the combined effect of Instructions 4 and 5 was to focus the jury upon the controlling issue, whether the parties had an intent to be bound.

      363

      Texaco further complains that the instruction was a comment on the weight of the evidence, because it assumes the existence of a binding contract and negates Texaco's evidence that the on-going negotiations indicate that there no intention to be bound. By its use of the conditional language, "If Pennzoil and the Getty entities intended to be bound ...," Instruction No. 5 does not assume the existence of any agreement; thus, it is not an improper judicial comment aimed at negating Texaco's evidence.

      364

      Finally, Texaco contends that Instruction No. 5 was offered for the purpose of neutralizing the January 4, 1984 Getty press release. This contention was not raised at trial. A party may not enlarge on appeal the objections made at trial. Conner, 630 S.W.2d at 701.

      365

      However, even if this argument had been preserved, it is without merit. Specifically, Texaco contends that by using the identical "definitive merger agreement" language, in Instruction No. 5, the court neutralized the language, allegedly favorable to Texaco's position, of the press release ("the agreement in principle is subject to execution of a definitive merger agreement").

      366

      Throughout the trial, the phrases "definitive merger agreement," "formal agreement," and "definitive agreement" were used repeatedly to refer to the document that would be the final written agreement between the parties. There was some evidence that "definitive merger agreement" could also refer to a formal boilerplate merger document required under Delaware law in all mergers. In its discretion, the court chose to use the phrase "definitive merger agreement" rather than one of the other terms used. We do not find that the use of this term was so prejudicial as to require reversal.

      367

      Texaco's Points of Error 15 and 31 are overruled.

      368

      In its 16th and 17th points of error, Texaco urges that Instruction No. 6 to Special Issue No. 1 (intent to be bound) improperly assumes the existence of an "agreement" and an "original agreement."

      369

      Instruction No. 6 states:

      370

      Modifications or discussions to modify an agreement may not defeat or nullify a prior intention to be bound. Parties may always, by mutual consent and understanding, add new provisions spelling out additional terms that were not included in their original agreement.

      371

      Texaco objected to Instruction No. 6 at trial as follows:

      372

      Instruction No. 6 is a direct comment on the weight of the evidence because it uses the term "do," rather than "may" and it fails to include a balancing instruction to the effect that modifications or discussions to modify may show an intention not to be bound. In this regard the Instruction unduly and unfairly comments on the weight of the evidence and favors Pennzoil's evidence. There is no [825] need to submit any such issue to aid the jury in their answer to Special No. 1.

      373

      If Instruction No. 6 is to be given in some form, Texaco requests that the following be added as the last sentence to the instruction: "On the other hand, such modifications or discussions to modify an agreement may show an intent not to be bound."

      374

      Texaco first contends that Instruction No. 6 was "surplus" and assumes the existence of an "agreement," thereby directly commenting on the weight of the evidence. It asserts that the trial court should have changed the instruction to include alternative directions that modifications could indicate an intent not to be bound. Specifically, Texaco contends that this instruction signaled the jury that it could find an intent to be bound even though there was on-going discussion regarding the purchase of the Museum shares.

      375

      Tex.R.Civ.P. 277 authorizes the court to submit explanatory instructions that are "proper" to enable the jury to reach a verdict. An instruction is "proper" if there is support for it in the evidence or the inferences to be drawn therefrom and if the instruction might aid the jury in answering the issues. Mejia v. Liberty Mutual Insurance Co., 544 S.W.2d 690, 691 (Tex.Civ.App.—Houston [14th Dist.] 1976, no writ).

      376

      In the instant case, evidence was presented that indicated that following the January 3 meeting, the parties discussed modifying details of the agreement, for example that Pennzoil rather than Getty Oil should would purchase the Museum shares. Consequently, this instruction aided the jury in answering Special Issue No. 1 by explaining the possible significance of the post-January 3 negotiations.

      377

      Additionally, even if Instruction No. 6 were surplus or unnecessary, its submission was not so prejudicial as to require reversal. To be an improper comment, the court must indicate an opinion as to the verity or accuracy of the facts. Samsel v. Diaz, 659 S.W.2d at 147. Instruction No. 6 refers to no facts; therefore, it is not a comment on the weight of the evidence. Id.

      378

      Texaco additionally argues in Point of Error 16 that Instruction No. 6 directly comments on the weight of the evidence by assuming the existence of an "agreement." Pennzoil correctly points out that this objection is not the same lodged at trial. As such, it is waived. Tex.R.Civ.P. 274.

      379

      Even if Texaco's objection had been properly preserved, its alleged error is without merit. Instruction No. 6 was submitted to aid the jury in determining whether the evidence proved an intent to be bound. The instruction correctly states the significance of post-agreement modifications on the question of the parties' prior intent to be bound, which prior intent was the subject of Special Issue No. 1. Additionally, throughout the remainder of the charge, the term "agreement" was modified with the conditional language "if any" or "if you have so found" numerous times. Consequently, it is unlikely that a juror would believe that the trial court assumed the existence of an agreement in Instruction No. 6. See Texas Employers Insurance Association v. McKay, 210 S.W.2d at 148-49.

      380

      Additionally, we note that Texaco's requested addition to Instruction No. 6 uses "agreement" in the same manner as now complained of, and that contrary to Texaco's contention, Instruction 6 uses "may" rather than "do."

      381

      Texaco also argues that because the trial court charged the jury that modifications may not defeat the agreement, it should have charged the jury that "a realization by the parties that modifications have to be made to material terms will defeat the formation of an `agreement,'" and that "a realization by the parties that new material terms have to be added to which the parties have not agreed, can defeat the formation of such an `agreement.'"

      382

      [826] This argument is waived for two reasons: (1) Texaco made no objection at trial on this ground ("[the instruction] fails to include a balancing instruction to the effect that modifications or discussion to modify may show an intent not to be bound"), Tex.R. Civ.P. 274; and (2) Texaco failed to request such explanatory instruction, Tex.R.Civ.P. 279.

      383

      Finally, Texaco argues that the trial court erred in denying its requested additional language to Instruction No. 6: "On the other hand, such modifications or discussions to modify an agreement may show an intention not to be bound."

      384

      In issuing explanatory instructions, the trial court is given wide discretion to determine the sufficiency of the explanations. K-Mart Corp. Store No. 7441 v. Trotti, 677 S.W.2d 632, 636 (Tex.App.—Houston [1st Dist.] 1984, writ ref'd n.r.e.). In deciding whether there has been an abuse of discretion, this Court may not substitute its judgment for that of the trial court but must decide only whether the court's action was arbitrary or unreasonable. Id.

      385

      Texaco's requested addition to Instruction No. 6 was not correct. Under New York law, negotiations on new provisions of an agreement do not defeat the agreement. Rose v. Spa Realty Associates, 42 N.Y.2d 338, 397 N.Y.S.2d 922, 928, 366 N.E.2d 1279 (1977). Parties may vary the terms of the agreement or add new ones by mutual agreement. "[T]his has no effect upon the validity of any contract, formal or informal." Corbin on Contracts, § 30 at 111-12 (1963) (emphasis added). Texaco's requested addition to Instruction No. 6 was properly denied.

      386

      Points of Error 16 and 17 are overruled.

      387

      Texaco next alleges that Instruction No. 1 to Special Issue No. 2 (knowing interference) improperly marshals Pennzoil's evidence on inducement and signals the jury that an "agreement" existed.

      388

      Special Issue No. 2 asks:

      389

      Do you find from a preponderance of the evidence that Texaco knowingly interfered with the agreement between Pennzoil and the Getty entities, if you have so found?

      Answer: "We do" or "We do not."

      390

      The accompanying Instruction No. 1 states:

      391

      Knowledge of a fact can be shown either by direct evidence of what it knew or what it was told, or by indirect or circumstantial evidence. A fact may be established by indirect or circumstantial evidence when the fact is fairly and reasonably inferred from other facts proven in the case.

      In order to find that Texaco interfered with the agreement, if any, inquired about above, it must be shown by a preponderance of the evidence that Texaco wanted to cause the breach, or to prevent the performance of this agreement, or that Texaco knew that a breach or failure to perform would occur as a result of its actions. (Emphasis added.)

      392

      Texaco complains of the underlined portion of the instruction. Texaco asserts that the use of the demonstrative adjective "this" before "agreement" aggravated the harmful effect of this allegedly improper instruction, because it instructed the jury that the court believed that an enforceable agreement did exist. Texaco's argument regarding the implications of the court's use of "this" is (1) waived (because there was no such objection made at trial, Tex.R. Civ.P. 274), and (2) erroneous, both conceptually and grammatically. In this context, the use of "this" did not instruct the jury that the court believed an enforceable contract did exist. As used, "this" is a demonstrative adjective modifying the noun "agreement." The function of a demonstrative adjective is to "designate" or "point out" something close at hand, near in thought, or something that has just been mentioned.

      393

      Texaco next argues that Instruction No. 1 constituted a direct comment on the weight of the evidence in that it marshaled [827] the evidence for the jury and individualized the instruction to Texaco's conduct. In support of this argument, Texaco relies exclusively upon Gulf Coast State Bank v. Emenhiser, 562 S.W.2d 449 (Tex. 1978), but that case does not support Texaco's contention.

      394

      Gulf Coast involved an action to recover funds that proved to be uncollectible. The trial court submitted four special instructions in which it recited the duties of a collecting bank, stated the legal effect of certain facts, directed the jury to find for the defendants if it believed certain facts, and asked the jury whether it "found for defendants." The reviewing court stated that it was "not permissible for the trial court to marshal the facts or parties' contentions in an instruction, and then instruct the jury to find for one party if they believed certain facts to be true." Id. at 453 (emphasis added). Reversal was required, because the court repeatedly instructed the jury that if it found certain facts, then it should find for the defendants. Individualization of the parties was never discussed in that case.

      395

      In the instant case, Instruction No. 1 advised the jury of the law and the burden of proof in assessing Special Issue No. 2 (knowledge). Actually, this instruction favored Texaco by informing the jury of Pennzoil's burden of proof, i.e., Pennzoil had to prove, by a preponderance of the evidence, that Texaco's interference was intentional. "The Court, in its charge to the jury, must so present its charge as to make the law contained in the charge applicable to the facts in the case." Herrera v. Balmorhea Feeders, Inc., 539 S.W.2d 84, 88 (Tex.Civ.App.—El Paso 1976, writ ref'd n.r.e.). This is what the trial court did.

      396

      Texaco's 18th point of error is overruled.

      397

      In Texaco's 19th point of error, it complains that Instruction No. 2 to Special Issue No. 2 (knowing interference) improperly emphasizes Pennzoil's evidence on knowledge of a contract.

      398

      Instruction No. 2 to Special Issue No. 2 states:

      399

      In order to find that Texaco had knowledge of the agreement, if any, it is not necessary that Texaco had an accurate understanding of the legal significance of the facts which produced the agreement. If Texaco knew the facts that gave rise to the agreement, then it knew of the agreement, even if it did not believe that those facts gave rise to an agreement, and even if it believed that any agreement that did exist violated the law. You may also find that Texaco knew of the agreement, if any, if you find that Texaco intentionally or willfully refused to ascertain the facts or if it exercised bad faith. Texaco is also charged with all the knowledge, if any, of its agents and representatives, whether communicated to each other or not.

      400

      At trial, Texaco objected to Instruction No. 2 in pertinent part, as follows:

      401

      The first two sentences of Instruction 2 are an incorrect statement of the law. Texaco requests that the following instruction be included in the charge to the jury in lieu of these sentences:

      402

      In order to find that Texaco knowingly interfered with the contract between the Getty Oil Company, the Trust, the Museum and Pennzoil, if any, it is necessary that Texaco had actual knowledge of the existence of such a contract. In order to have "actual knowledge" of a contract, a party must know that a contract exists. If a party should have known that a contract exists, he does not have "actual knowledge" of that contract.

      403

      The first two sentences of Instruction No. 2 are a direct comment on the weight of the evidence in that they imply that Texaco did not have an accurate understanding of the legal significance of the facts in its possession and that Texaco did know of the existence of the agreement.

      404

      Texaco contends that a portion of the second sentence in Instruction No. 2 ("[i]f Texaco knew the facts that gave rise to the agreement, then it knew of the agreement....") is incomplete, misleading, [828] and a direct comment on the weight of the evidence. It contends that the court should have given a "balanced" instruction "that if there were facts required for a binding contract that were not known to Texaco then Texaco did not have actual knowledge of the contract."

      405

      Under New York law, to recover on its claim of tortious interference with contract, Pennzoil had to establish that Texaco had knowledge of the agreement between the Getty entities and Pennzoil. But it was not necessary that Texaco have full knowledge of the detailed terms of the contract, Gold Medal Farms, Inc., 10 A.D.2d 584, 9 A.D.2d 473, 195 N.Y.S.2d 179. The instruction reflects the description of the knowledge requirement articulated in the Restatement (Second) of Torts § 766. The tort of inducing a breach of contract is a developing area of tort law, and New York courts have looked to the Restatement (Second) for guidance in this area. Section 766, comment i, focuses on the knowledge requirement, providing that although the defendant must know the facts giving rise to the contractual duty, it need not necessarily have an accurate understanding of the legal significance of those facts.

      406

      In the instant case, the first and second sentences of Instruction No. 2 instructed the jury that in order for Texaco to be liable, Texaco must have had "knowledge" of the facts giving rise to the contract and not necessarily of the legal ramifications of those facts. We find this to be an acceptable instruction on the element of knowledge.

      407

      Texaco's argument, that the instruction should have been balanced, is without merit. This argument is made for the first time on appeal and is therefore waived. Tex.R.App.P. 274. Even if this argument could be inferred from Texaco's trial objections, it is without merit, because there is no requirement that a negative instruction be given in addition to the affirmative one the trial court gave. Tex.R. Civ.P. 277; Saint Paul Mercury Indemnity Co. v. Tarver, 272 S.W.2d 795, 799 (Tex. Civ.App.—Eastland 1954, writ ref'd n.r.e.).

      408

      Texaco also asserts, for the first time on appeal, that the instruction's use of the article "the" in the phrase "the agreement" in the first two sentences of Instruction No. 2 is a signal to the jury that the court believed there was an agreement.

      409

      In the contested first two sentences of Instruction No. 2, the phrase "the agreement" is used four times. The first time it is used, it is conditioned by the phrase "if any." The latter part of the second sentence uses the indefinite phrases "an agreement" and "any agreement." The entire charge states the conditional "the agreement, if any" numerous times. It is unlikely that the jury rendered an improper verdict because the court here failed to qualify "the agreement."

      410

      Finally, Texaco contends that Instruction No. 2 "nudges" the jury toward favoring Pennzoil by emphasizing the significance of the evidence concerning Texaco's investigation of the contract. Texaco presents no argument on this point. Additionally, as noted by Pennzoil, at trial this "nudges" objection was made to the third sentence of Instruction 2; the substance of the argument presented in point 19 refers to the second sentence of the instruction. In its reply brief, Texaco counters Pennzoil by alleging that this "nudges" trial objection was aimed at the whole instruction. However, the trial objection states: "The third sentence in Instruction No. 2 `nudges'...." Texaco's argument presents nothing for review. Point of Error 19 is overruled.

      411

      In its 20th and 21st points of error, Texaco claims that Instruction No. 3 to Special Issue No. 2 (knowing interference) improperly emphasizes Pennzoil's evidence on inducement and virtually directs an affirmative answer to Special Issue No. 2.

      412

      Instruction No. 3 to Special Issue No. 2 states:

      413

      A party may interfere with an agreement by persuasion [sic] alone, by offering better terms, by giving an indemnity against damage claims to the party or parties [829] induced to breach, or by any act interfering with the performance of a legal duty arising from the agreement, such as the duty of good faith performance.

      414

      Texaco argues that the court erred in submitting Instruction No. 3, because (1) as written in the disjunctive, the court made it possible for the jury to answer Special Issue No. 2 negatively only if it found that Texaco committed none of the actions, and (2) it is "tailored to dovetail" with Pennzoil's evidence supporting inducement by Texaco. Texaco points out that it offered better terms and gave an indemnity; consequently, this instruction is in effect a direction by the court to the jury to return an affirmative answer.

      415

      What is missing in Texaco's argument is any allegation that the instruction, listing possible ways of interfering with an agreement, is a misstatement of the law. Indeed, each of the four acts has been identified as constituting tortious interference under New York law: (1) persuasion (Guard-Life Corp. v. S. Parker Hardware Manufacturing Corp., 50 N.Y.2d 183, 428 N.Y.S.2d 628, 406 N.E.2d 445; Restatement (Second) of Torts, § 768, Comment "e" (1979)); (2) offering better terms (Gold Medal Farms, 195 N.Y.S.2d at 185); (3) indemnity (American Law Book Co. v. Edward Thompson Co., 41 Misc. 396, 84 N.Y.S. 225, 226 (Sup.Ct.1903)); (4) interference with performance of a legal duty arising from the agreement (Morris v. Blume, 55 N.Y.S.2d 196, 199 (Sup.Ct.), aff'd, 269 A.D. 832, 56 N.Y.S.2d 414 (App.Div.1945)).

      416

      Texaco has failed to cite any authority to suggest the court erred in listing four possible specific acts of tortious interference. The only case cited, Lemos, 680 S.W.2d 798, is not supportive. The court there found reversible error in the use of an instruction defining "unavoidable accident," because (1) the instruction was incorrect, and (2) it was appended to an already correct definition as set forth in a prior decision and the Texas Pattern Jury Charges. In the instant case, the instruction is a correct statement of the law.

      417

      Points of Error 20 and 21 are overruled.

      418

      In Points of Error 22, 23, 24, and 25, Texaco claims that Instruction Nos. 4 and 5 to Special Issue No. 2 (knowing interference) improperly emphasize Pennzoil's evidence in response to Texaco defenses, are unnecessary to the issue presented and constitute direct comments on the weight of the evidence.

      419

      Instruction No. 4 to Special Issue No. 2 states:

      420

      A competitor has no privilege and is not permitted to interfere with the agreements of those with whom it is in competition. Also, a party is not justified in interfering with the agreement of another simply because it is advancing its own business interests.

      421

      Texaco objected to Instruction No. 4 on the following grounds:

      422

      Instruction No. 4 is an incorrect statement of the law, since a party is fully justified in interfering with an agreement with another party that is voidable or is terminable at will.

      Instruction No. 4 is a direct comment on the weight of the evidence in that it unduly emphasizes evidence which may be relevant to Texaco's intent and does so in a negative manner.

      423

      Texaco first contends that this instruction seeks "to collapse the pre-contractual and post-contractual New York torts" by forcing the jury to find liability for the post-contractual tort based on proof of a pre-contractual tort, thus depriving Texaco of the defenses it could have asserted to the pre-contractual tort. It also urges that this instruction was obviously unhelpful in answering Special Issue No. 2.

      424

      Pennzoil responds that this instruction was essential to "undo any confusion" presented by Texaco's evidence of business competition because "competition" is only a defense to interference with prospective contractual relations.

      425

      Instruction No. 4 is a correct statement of the law. A party's status as a competitor [830] does not protect him from the consequences of interference with an existing contract. Guard-Life Corp., 428 N.Y.S.2d at 631, 406 N.E.2d at 448; see also Restatement (Second) of Contracts § 768(2):

      426

      The fact that one is a competitor of another for the business of a third person does not prevent his causing a breach of an existing contract with the other from being an improper interference if the contract is not terminable at will.

      427

      Additionally, because the evidence raised the issue of the ramifications of business competition, it was proper to instruct the jury regarding the law in this area. Tex.R.Civ.P. 277. Finally, there were no pleadings seeking relief for interference with a prospective contract, or alleging that the contract was terminable at will; thus the omission of these two exceptions to the general rule was correct.

      428

      Instruction No. 5 to Special Issue No. 2 states:

      429

      You may find that Texaco knowingly interfered with the Pennzoil agreement, if any, even though the Getty Oil directors, the Museum's President, and Gordon P. Getty, Trustee, were fiduciaries. If those fiduciaries intended to be bound to an agreement with Pennzoil on January 3, they could not avoid that agreement by later seeking or accepting a higher price or a more beneficial arrangement with a third party.

      430

      Texaco contends that this instruction is incomplete, misleading, and constitutes a direct comment on the weight of the evidence. Specifically, it contends that the instruction erroneously uses the language "even though," which serves as a direct comment by the court that it did not approve Texaco's argument that the alleged agreement between Pennzoil and Getty violated all fiduciary obligations of the parties and was therefore unenforceable.

      431

      Where a breach of fiduciary obligation occurs, the contract entered is valid and enforceable where the bona fide purchaser takes without notice of fraud or misuse by the directors. See Cross Properties, Inc. v. Brook Realty Co., 37 A.D.2d 193, 322 N.Y.S.2d 773, 781 (App.Div.1971), aff'd 31 N.Y.2d 938, 340 N.Y.S.2d 928, 293 N.E.2d 95 (1972); see also Restatement (Second) of Trusts § 284 (1959):

      432

      (1) If the trustee in breach of trust transfers trust property to, or creates a legal interest in the subject matter of the trust in, a person who takes for value and without notice of the breach of trust and who is not knowingly taking part in an illegal transaction, the latter holds the interest so transferred or created free of the trust and is under no liability to the beneficiary.

      433

      In its reply brief, Texaco asserts that any agreement entered into by a board to foreclose bidding is unenforceable, citing Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173 (Del.1986). However, the facts in Revlon are distinguishable. The Revlon board, having before it two bids, rejected the latest offer of one entity and authorized negotiations with the other parties interested in acquiring Revlon. One bidder was privy to certain financial data. The court determined that the board breached its primary duty when it entered into a lock-up agreement on the basis of impermissible considerations at the expense of the shareholders. Consequently, the lock-up agreement could not be sustained.

      434

      In our case, the negotiations and alleged agreement with Pennzoil occurred prior to Texaco's offer, so the Revlon case does not control. A reasonable construction of Instruction No. 5 would be that the court sought to advise the jury that the parties' fiduciary obligations were not relevant to the "interference" issue.

      435

      Additionally, Texaco's argument, that the use of the "even though" language was an impermissible comment, is without merit. While the use of "even though" language was held to be an impermissible comment in Gulf Insurance Co. v. [831] Vela, 361 S.W.2d 904, 906-907 (Tex.Civ. App.—Austin 1962, writ ref'd n.r.e.), the error was mitigated with the 1973 amendment to Rule 277 that liberalized the practice of giving explanatory instructions. The court in Forney v. Memorial Hospital, 543 S.W.2d 705, 708 (Tex.Civ.App.—Beaumont 1976, writ ref'd n.r.e.), in allowing such "even though" language, articulated that "the test by which an instruction is measured is ... whether it is a misstatement as to the law applicable to the facts." Id.

      436

      In the instant case, Instruction No. 5 is a correct statement of the law applicable to the facts of the case, i.e., fiduciaries cannot breach a binding contract for a better offer.

      437

      Points of Error 22, 23, 24, and 25 are overruled.

      438

      In Point of Error No. 26, Texaco claims that Instruction No. 2 to Special Issue No. 3 improperly directs the jury to consider Pennzoil's evidence on damages.

      439

      Instruction No. 2 to Special Issue No. 3 states:

      440

      Pennzoil must prove its damages, if any, with a reasonable degree of certainty. This does not, however, require proof as to an absolute mathematical certainty if a wrong has been done from which monetary loss results, you may make a just and reasonable estimate of damages based on relevant data, including opinion evidence, even if the extent of injury cannot be proven precisely. Damages cannot be remote or contingent. (Emphasis added.)

      441

      Texaco asserts that the instruction constitutes a direct comment on the weight of the evidence by directing the jury to consider "opinion evidence," that was presented by Pennzoil only.

      442

      The charge to the jury must be sufficient to enable the jury to make an assessment of damages on the proper grounds and legal principles. Jackson v. Fontaine's Clinics, Inc., 499 S.W.2d 87, 90 (Tex.1973); Osoba v. Bassichis, 679 S.W.2d 119, 121-22 (Tex.App.—Houston [14th Dist.] 1984, writ ref'd n.r.e.). Instruction No. 2 is a correct statement of the applicable principles, i.e., the fact that damages in a tort action cannot be ascertained with absolute mathematical certainty does not bar recovery if they can be approximately fixed. See Steitz v. Gifford, 280 N.Y. 15, 19 N.E.2d 661 (1939). Additionally, in the highly specialized field of oil and gas, expert testimony that is free of conjecture and speculation is proper and necessary to determine and estimate damages. Amoco Production Co. v. Alexander, 594 S.W.2d 467, 477, 622 (Tex.Civ.App.—Houston [1st Dist.] 1979), modified on other grounds, 622 S.W.2d 563 (Tex.1981).

      443

      The instruction here does not mandate that the jury accept the expert opinion testimony. Rather, by its use of "may" (meaning "have permission to"), the instruction allows the jury to consider all of the evidence, opinion or otherwise.

      444

      Point of Error No. 26 is overruled.

      445

      Texaco's remaining points of error pertaining to the charge argue that the charge contains numerous errors of substantive law. Its first grouping of points of error complains of the failure to submit special issues on essential elements.

      446

      Specifically, Texaco urges that Pennzoil failed to submit a special issue that would support a finding of a valid, binding contract (Points of Error Nos. 27-28); and that Pennzoil failed to submit a special issue on actual knowledge of the alleged contract (Point of Error Nos. 29-30, 35).

      447

      Texaco contends that Special Issue No. 2 failed to submit the element of "knowledge" to the jury. Special Issue No. 2 asked:

      448

      Do you find from a preponderance of the evidence that Texaco knowingly interfered with the agreement between Pennzoil, and the Getty entities, if you have so found?

      449

      Texaco contends that this issue collapses the second and third elements of Pennzoil's [832] cause of action—knowledge and inducement.

      450

      Texaco again presents a grammar argument, insisting that as framed ("knowingly" modifies "interfered"), the "knowledge" element is converted into knowledge of the acts of interference, rather than knowledge of the contract with Pennzoil. This argument is without merit. As used in this issue, "knowingly" is an adverb modifying the verb "interfered," and answering the question "how?" [did Pennzoil interfere with the agreement?]. A reasonable reading is that the issue asks about interference, with knowledge of the agreement.

      451

      Texaco also argues that, even if properly worded, Instruction No. 2 to Special Issue No. 2 erroneously tells the jury that it can answer affirmatively, without a finding of "knowledge" as defined by New York law. Instruction No. 2 states:

      452

      In order to find that Texaco had knowledge of the agreement, if any, it is not necessary that Texaco had an accurate understanding of the legal significance of the facts which produced the agreement. If Texaco knew the facts that gave rise to the agreement, then it knew of the agreement, even if it did not believe that those facts gave rise to an agreement and even if it believed that any agreement that did exist violated the law. You may also find that Texaco knew of the agreement, if any, if you find that Texaco intentionally or willfully refused to ascertain the facts or if it exercised bad faith. Texaco is also charged with all the knowledge, if any, of its agents and representatives, whether communicated to each other or not.

      453

      Texaco contends that this instruction presents a "should have known" standard that is insufficient under New York law. Roulette Records, Inc. v. Princess Production Corp., 15 A.D.2d 335, 338, 224 N.Y. S.2d 204, 207 (App.Div.), aff'd, 12 N.Y.2d 815, 236 N.Y.S.2d 65, 187 N.E.2d 132 (1962). Because of such argument, Texaco requested the following Special Issue No. 105 and Instruction F, which were denied:

      454

      Special Issue No. 105

      Do you find from a preponderance of the evidence that at the time of the execution of the Texaco Museum Stock Purchase Agreement, Texaco had actual knowledge of a contract among the Getty Oil Company, the Museum, the Trust, and Pennzoil?

      Answer "Texaco had actual knowledge" or "Texaco did not have actual knowledge."

      Texaco Instruction: F

      In order to find that Texaco knowingly interfered with the contract between the Getty Oil Company, the Trust, the Museum, and Pennzoil, if any, it is necessary that Texaco had actual knowledge of the existence of such a contract. In order to have "actual knowledge" of a contract, a party must know that a contract exists. If a party should have known that a contract exists, he does not have "actual knowledge" of that contract.

      455

      The requested issue and instruction were properly denied because Instruction No. 2 to Special Issue No. 2 adequately describes the knowledge requirement of the tort of inducing a breach of contract. See Gold Medal Farms, Inc., 195 N.Y.S.2d at 185; Restatement (Second) of Torts § 766, comment i. Points of Error 27 through 30, and 35 are overruled.

      456

      In Points of Error 32, 33, and 34, Texaco argues that Special Issue No. 2 and the accompanying instructions conflict with applicable New York law. It contends that the third sentence of Instruction No. 2 creates a "duty to investigate" that is contrary to New York law. Appellant requested an instruction that would have told the jury that a party had no duty to investigate concerning the existence of a contract beyond the information in its possession and any representations by parties to the contract.

      457

      In Kelly v. Central Hanover Bank, 11 F.Supp. 497 (S.D.N.Y.1935), rev'd on other [833] grounds, 85 F.2d 61 (2d Cir.1936), the court held that a negligent failure to investigate further would not lead to liability for interference with a contract, but did imply that a willful refusal to ascertain the facts would be more culpable.

      458

      I need not now determine whether knowledge that there were outstanding debentures would have led an ordinarily prudent man of [the defendant's] financial experience, ... to inquire whether they contained any, and if so what, restrictive covenants. Even if an ordinarily prudent man would have made such inquiry, [the defendants'] failure so to do cannot be attributed and is not charged to be due to any intentional or willful refusal to ascertain the facts.

      459

      At the best, there would be a negligent interference with contractual rights which, unlike an intentional invasion thereof, does not evidence bad faith and therefore does not call for an extension of equity jurisdiction beyond that heretofore established. In all of the cases cited in which specific performance of a contract was decreed against a third person, full knowledge on the part of the defendant of the plaintiff's contractual rights was proved. In granting such relief, the courts ordinarily stress the defendant's lack of good faith.

      460

      Kelly, 11 F.Supp. at 513 (emphasis added); see also Entertainment Events v. MGM, No. 74 Civ. 2959.

      461

      In this case, the court did not submit a charge on "negligent interference." Rather, it submitted an "intentional or willful refusal to ascertain the facts" or "lack of good faith" factor, as implied in Kelly. As such, the charge is an acceptable description of New York law.

      462

      Finally, Texaco contends that the third sentence comments on the weight of the evidence, because there is no evidence to support its submission. This argument is waived because there was no corresponding trial objection. Points of Error 32 through 34 are overruled.

      463

      In Points of Error 36 through 39, Texaco claims that Instruction No. 2 to Special Issue No. 2 conflicts with applicable law, which would not attribute to Texaco knowledge possessed by the Getty entities or Getty agents. It attacks the fourth sentence of Instruction No. 2 to Special Issue No. 2: "Texaco is also charged with all the knowledge, if any, of its agents and representatives, whether communicated to each other or not." Texaco fails to argue or cite to any supporting authority as to why the fourth sentence allegedly misstates the law. Consequently, that contention is waived. Tex.R.App.P. 74(f); Richardson v. Office Buildings, 704 S.W.2d 373, 375-76 (Tex.App.—Houston [14th Dist.] 1985, no writ).

      464

      Texaco next argues that because the words "agents" and "representatives" are not defined or qualified in Instruction No. 2, confusion is created as to "whose" knowledge can be attributed to appellant, i.e., alleging that knowledge of the Getty entities can also be attributed to Texaco. It urges that the harm in this was manifested when, on November 18, during jury deliberations, the jury asked whether "Texaco [was] liable for the actions of Lipton [the Museum's attorney], Winokur [Getty Oil's attorney], and Boisi [Getty Oil's investment banker]."

      465

      In response to this inquiry, the court instructed the jury as follows:

      466

      The court is unable in any way to specifically answer your question other than to advise you that you are to follow the Instruction of the Court, the Special Issues as encompassed in the Court's charge and the evidence as received in your court.

      467

      Texaco initially agreed to this instruction, ("This is fine with us Your Honor"), but the following day, requested the following instruction, which was denied:

      468

      The Court now instructs you that a party is only responsible for the actions of its own employees, agents or representatives acting within the scope of their employment.

      469

      Tex.R.Civ.P. 285 concerns the jury's communication with the court. Tex.R.Civ.P. [834] 286 provides that the jury may receive further instructions, "but no instruction shall be given except in conformity with the rules relating to the charge." Tex.R.Civ.P. 274 is such a rule "relating to the charge."

      470

      Tex.R.Civ.P. 274 provides that a party objecting to the charge must point out the objection or it is waived. In the instant case, Texaco failed to object to the instruction given until one day later. Consequently, such failure to object constitutes a waiver. See George Pharis Chevrolet, Inc. v. Polk, 661 S.W.2d 314, 317-18 (Tex.App.— Houston [1st Dist.] 1983, no writ).

      471

      Finally, Texaco argues that the harm of Instruction No. 2 is magnified by Pennzoil's statements during voir dire and closing argument, that Texaco could be held liable for the knowledge and conduct of the Getty entities or agents. The complained of statements during voir dire are:

      472

      You may be curious as to why Texaco is the only party here.... It's because they have indemnified Getty. They own Getty. They are the only necessary party to this action.

      Whatever would befall Getty under the indemnity, it's Texaco's responsibility.

      473

      The complained of statements in closing argument are:

      474

      [Y]ou are to consider not just Texaco but also the circumstances and I suggest to you, these Getty people. And there was only one way that Texaco acquired Getty Oil Company. Indemnities. They were essential.

      They [Texaco] bought and paid for this lawsuit when they gave the indemnities.

      And they ask, you know, you don't see Getty in here, you don't see the Museum in here, you don't see the Trust in here. For what purpose?

      For what purpose, Jury?

      After they've guaranteed them and protected them from this very contingency, Pennzoil's lawsuit.

      Well, why would there by any question in having them here, or for what reason?

      475

      Except for the voir dire shown above, Texaco failed to object to the argument. Where no objection is made, the general rule is that any impropriety is waived. Standard Fire Insurance v. Reese, 584 S.W.2d 835 (Tex.1979).

      476

      Furthermore, Texaco did not object to the voir dire argument until almost one week later. In both instances, however, reversal must come from an evaluation of the entire case, Luna v. North Star Dodge Sales, Inc., 667 S.W.2d 115, 120 (Tex.1984), and reversal is mandated only when the argument was so prejudicial that an instruction to disregard would not have removed the prejudice produced. Southern Pacific Co. v. Hubbard, 297 S.W.2d 120, 125 (Tex.1957).

      477

      The Texas Supreme Court set out the test for evaluating jury argument in Standard Fire Insurance Co. v. Reese, 584 S.W.2d at 839. The complainant must prove:

      478

      (1) an error (2) that was not invited or provoked, (3) that was preserved by the proper trial predicate, such as an objection, a motion to instruct, or a motion for mistrial, and (4) was not curable by an instruction, a prompt withdrawal of the statement, or a reprimand by the judge. 3 McDonald, Texas Civil Practice sec. 13.17.2 (1970). There are only rare instances of incurable harm from improper argument. The complainant has the further burden to prove (5) that the argument by its nature, degree and extent constituted reversibly harmful error. How long the argument continued, whether it was repeated or abandoned and whether there was cumulative error are proper inquiries. All of the evidence must be closely examined to determine (6) the argument's probable effect on a material finding. (7) Importantly, a reversal must come from an evaluation of the whole case, which begins with the voir dire and ends with the closing argument. The record may show that the cause is weak, strong, or very close. From all of these factors, the complainant must show that the probability that the improper argument caused harm is [835] greater than the probability that the verdict was grounded on the proper proceedings and evidence. Aultman v. Dallas Ry. & Term. Co., 152 Tex. 509, 260 S.W.2d 596 (1953). Rules 434, 503, Tex. R.Civ.P.

      479

      Texaco has failed to show how it was harmed by the complained-of argument. In all practicality, these few statements, buried within 4 ½ months of testimony, had little or no effect on the jury's verdict. We also disagree that the reference to charging Texaco with the knowledge of its agents confused the jury to such an extent that reversal is required.

      480

      Points of Error 36, 37, 38, and 39 are overruled.

      481

      In Points of Error 40-41, Texaco contends that Special Issue No. 3 and the accompanying instructions do not present the proper measure of damages. It contends that the proper measure was the stock price differential.

      482

      Special Issue No. 3 asks:

      483

      What sume of money, if any, do you find from a preponderance of the evidence would compensate Pennzoil for its actual damages, if any, suffered as a direct and natural result of Texaco's knowingly interfering with the agreement between Pennzoil and the Getty entities, if any?

      484

      Instruction No. 1 to Special Issue No. 3 states:

      485

      1. The measure of damages in this case is the amount necessary to put Pennzoil in as good a position as it would have had if its agreement with the Getty entities, if any, had been performed.

      486

      The instruction as given is a correct statement of the benefit of the bargain measure of damages for breach of contract under New York law. Dillon v. Magner, 29 A.D.2d 759, 760, 287 N.Y.S.2d 519, 521 (App.Div.1968); Hutchins v. Bethel Methodist Home, 370 F.Supp. 954, 964 (S.D.N.Y. 1974). Additionally, Texaco requested practically the same language in Requested Instruction J: "The measure of damages in this case is the amount necessary to put Pennzoil in as good a position as it would have had if its agreement, if any, with the Getty Oil Company, the Museum, and the Trust had been performed." Consequently, Texaco may not complain on appeal, when the instruction given is substantially the same as that requested. Dailey v. Wheat, 681 S.W.2d 747, 757 (Tex.App.— Houston [14th Dist.] 1984, writ ref'd n.r.e.). Nor may Texaco invite error by encouraging the court to submit an instruction and then complain on appeal. New Trends, Inc. v. Stafford-Lowdon Co., 537 S.W.2d 778, 783 (Tex.Civ.App.—Fort Worth 1976, writ ref'd n.r.e.).

      487

      Texaco next complains of the denial of the following Requested Instruction K:

      488

      The measure of damages in this case is the difference, if any, between the fair market value of 3/7 of the stock of Getty Oil Company, less $112.50 per share. Fair market value is the price a willing buyer would pay a willing seller.

      489

      An instruction is proper if it finds support in any evidence or inferences therefrom and if it would aid the jury in answering the special issues. Atlantic Mutual Insurance Co. v. Middleman, 661 S.W.2d 182, 187 (Tex.Civ.App.—San Antonio 1983, writ ref'd n.r.e.); Mejia v. Liberty Mutual Insurance Co., 544 S.W.2d 690, 691 (Tex.Civ.App.—Houston [14th Dist.] 1976, no writ). Texaco's requested instruction K contains the measure of damages for breach of contract to purchase stock, but it is an incorrect measure of damage in a tortious interference case.

      490

      Points of Error 40 and 41 are overruled.

      491

      In Points of Error 42-45, Texaco claims that Special Issue No. 4 and instructions to Special Issue Nos. 4 and 5 conflict with the standards for punitive damages under applicable law.

      492

      Special Issue Nos. 4 & 5, relating to punitive damages, ask:

      493

      No. 4

      Do you find from a preponderance of the evidence that Texaco's actions, if any, [836] were intentional, willful and in wanton disregard of the rights of Pennzoil, if any?

      If and only if you have answered Special Issue No. 4 "We do", then you are to answer Special issue No. 5.

      No. 5

      What sum of money, if any, is Pennzoil entitled to receive from Texaco as punitive damages?

      494

      The accompanying instruction states:

      495

      Punitive damages means an amount that you may in your discretion award as an example to others and as a penalty or by way of punishment, in addition to any amount you may have found as actual damages.

      496

      It is not necessary to show that Texaco was motivated by ill will or hatred of Pennzoil.

      497

      In assessing punitive damages, if any, you may take into account not merely the act or acts of Texaco itself. You may also take into account all the circumstances, including Texaco's motives and the extent of damages, if any, suffered by Pennzoil.

      498

      Pursuant to a jury request, the following definition of "wanton disregard" was given:

      499

      Wanton is used in its ordinary sense and synonymous with reckless or heedless disregard of the rights of others.

      500

      Texaco objected to Special Issue Nos. 4 and 5 and the accompanying instructions and requested the following:

      501

      You are instructed that you should find no punitive damages if you believe that Texaco acted on advice of counsel.

      You are instructed that a party acts "maliciously" if its conduct was morally culpable, was motivated by evil and reprehensible motives, or was outrageous.

      502

      Texaco contends that Special Issue No. 4 is an incorrect statement of New York law, because under said law, before there can be an award of punitive damages, there must be a finding of actual malice or ill will, and moral culpability or reprehensible motives. For support of this assertion, Texaco relies upon Guard-Life Corp., 67 A.D.2d at 659, 412 N.Y.S.2d at 625. Pertinent here is the following language from the Appellate Division's decision in Guard-Life:

      503

      There is no evidence here of "actual malice or ill will" (Anthony v. George T. Bye, Inc., 243 App.Div. 390, 391, 217 N.Y.S. 222, 223), a wrong "morally culpable" or "actuated by evil and reprehensible motives" (Walker v. Sheldon, 10 NY2d 401, 404, 223 N.Y.S.2d 488, 490, 179 N.E.2d 497, 498) or a wrongful act "done willfully, wantonly or maliciously" (Huschle v. Battelle, 33 A.D.2d 1017, 308 N.Y.S.2d 235). To the contrary, the record shows that defendant's motive was to secure an advantageous business relationship for itself.

      504

      Texaco contends that in addition to finding a willful, wanton act, the jury must also find (1) actual malice or ill will and (2) a wrong, morally culpable or actuated by evil and reprehensible motives.

      505

      Texaco's interpretation of the Appellate Division's opinion in Guard-Life is erroneous. Guard-Life does not mandate a finding of each of the above. In Universal City Studios, Inc. v. Nintendo Co., 615 F.Supp. 838, 863 (D.C.N.Y.1985), the court upheld an award of punitive damages pursuant to a finding of tortious interference with a contract. The court wrote:

      506

      In New York:

      exemplary damages are recoverable in all actions ex delicto based upon tortious acts which involve ingredients of malice, fraud, oppression, insult, wanton or reckless disregard of the plaintiff's rights, or other circumstances of aggravation, as a punishment of the defendant and admonition to others.

      507

      36 N.Y.Jur.2d sec. 176 (1984); Giblin v. Murphy, 97 A.D.2d 668, 469 N.Y.S.2d 211, (3d Dept.1983). See also Le Mistral, Inc. v. Columbia Broadcasting System, 61 A.D.2d 491, 402 N.Y.S.2d 815 [837] (1st Dept.1978). Punitive damages are awarded "not for the unintended result of an intentional act, but for the conscious disregard of the rights of others ..." Hartford Acc. v. Village of Hempstead, 48 N.Y.2d 218, 422 N.Y.S.2d 47, 53, 397 N.E.2d 737, 743 (Ct.App.1979).

      508

      The court later referred to the defendant's "reckless disregard" of plaintiff's rights and the "wantonness of the conduct involved." See also Hornstein v. Podwitz, 254 N.Y. 443, 173 N.E. 674.

      509

      It appears that there is no requisite "laundry list" of adjectives defining a defendant's behavior in a tortious interference action, but a jury finding that the defendant's conduct was intentional, willful, and in wanton disregard of appellee's rights is sufficient to support a punitive damages award.

      510

      Texaco next argues that the jury should have been instructed that no punitive damages are recoverable where a defendant acted on the advice of counsel. Under New York law, acting on the advice of counsel is only one factor to be considered "in the context of the totality of the circumstances." Universal City Studios, Inc., 615 F.Supp. at 862 (citing Central Soya Co. v. George A. Hormel & Co., 723 F.2d 1573, 1577 (Fed.Cir.1983)). Pennzoil asserts that Texaco failed to present evidence of its advice of counsel and punitive damages and that the court thus did not err in refusing the requested instruction. See Atlantic Mutual Insurance Co. v. Middleman, 661 S.W.2d 182. There was other evidence of Texaco's reliance on advice of counsel, but, in any event, the instruction was not required because it incorrectly stated New York law.

      511

      Points of Error 42 through 45 are overruled.

      512
      ALLEGED ERRORS IN THE COURT'S EVIDENTIARY RULINGS
      513

      Texaco's Points of Error 70 through 79 complain of the trial court's wrongful admission of evidence and of its wrongful exclusion of admissible evidence. To obtain reversal of a judgment based on error in the admission or exclusion of evidence, an appellant must show error that was calculated to cause and probably did cause rendition of an improper judgment. Tex.R. App.P. 81(b)(1). Reversible error does not usually occur in connection with rulings on questions of evidence unless the whole case turns on the particular evidence admitted or excluded. Atlantic Mutual Insurance Co. v. Middleman, 661 S.W.2d 182, 185 (Tex.App.—San Antonio 1983, writ ref'd n.r.e.).

      514

      Texaco's 70th point of error complains that Pennzoil's witness, Dr. Thomas D. Barrow, was allowed to give improper legal opinions. It specifically alleges that Dr. Barrow was allowed to testify that a binding agreement had been reached between the Getty entities and Pennzoil, as follows:

      515

      Based on the evidence that I have seen and only as an experienced executive who served on boards, I would come to the conclusion that the Getty board had reached an agreement with Pennzoil.

      * * * * * *

      It would appear to me that the intent of the parties was clearly evidenced by their agreement and that I've seen nothing in what I have read that would indicate anything to the contrary.

      516

      Before either of the above statements were made, Dr. Barrow testified that he had read the "Copley notes," the Memorandum of Agreement between Getty Oil, the Museum, the Trust, and Pennzoil, and the press release issued by Getty Oil on January 4. Dr. Barrow qualified his testimony by stating that "his opinions were given only as an experienced executive who served on boards," based on what he had read in the aforementioned documents.

      517

      Rule 702, Texas Rules of Evidence, concerning testimony by experts, provides:

      518

      Testimony by Experts

      If scientific, technical, or other specialized knowledge will assist the trier of [838] fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise.

      519

      Under the rule, given the limitations the witness placed on his testimony, we find no reversible error.

      520

      Texaco's Point of Error 71 contends that Pennzoil's CEO, Liedtke, was allowed to testify, in a purely conclusory manner, that Pennzoil had reached a binding contract with Getty Oil, even though the bulk of his testimony was not based on personal knowledge.

      521

      Texaco argues that Liedtke's following testimony about the Copley notes was inadmissible: (1) that the words "accept the Pennzoil proposal provided that the amount being paid relating to ERC be $5 per share" meant acceptance of everything in the Memorandum of Agreement except the price term, and (2) provisions in the notes relating to executive compensation "means Getty Oil thought they had a deal with us."

      522

      Contrary to Texaco's contention, Liedtke did not testify that Getty Oil and Pennzoil had a binding contract, nor did he testify about events of which he had no knowledge. He testified to what certain parts of the Copley notes, which he had read, meant to him. In fact, many witnesses, both for Texaco and Pennzoil, gave their opinion of whether there was a binding agreement based on their interpretation of statements or events.

      523

      We find that the testimony complained of was admissible under rule 701, Tex.R. Evid.[1]

      524

      In its 72nd point of error, Texaco complains of the exclusion of testimony relating to a January 5 conference between Getty Oil and Pennzoil lawyers. In its bill of exceptions, Getty's lawyer Winokur testified that at the meeting, Getty's lawyers told Pennzoil lawyers that Pennzoil "can't buy the Museum shares because of Rule 10b-13."[2]

      525

      When Pennzoil's lawyer Cialone asked if rule 10b-13 applied, Winokur said that one of Getty Oil's lawyers responded:

      526

      Yes, because it applies not only to transactions which actually take place while there is a tender but to purchases that are arranged while a tender is in progress. And if you were to arrange now to buy the Museum shares that arrangement would have been made during the time the tender offer was outstanding.

      527

      Cialone asked if that was correct, and Pennzoil lawyer Hertz responded, "Yes, I think he's right. I think he's right as to what the rule says." He then asked Getty Oil attorney Katz what he would do; Katz answered that he would call his partner (a former SEC lawyer) to see what could be done. Cialone then asked him to call his partner.

      528

      Texaco also offered deposition testimony relating to this same discussion from Pennzoil attorney Hertz and Getty Oil attorney Katz.

      529

      Pennzoil attorney Hertz's testimony concerning the January 5 lawyers' meeting essentially consisted of the following questioning by Texaco lawyers:

      530

      Question: Did you volunteer information to any other representative of Pennzoil concerning the matter of Pennzoil offering to purchase shares of a stockholder during the existence of the tender offer but outside the tender offer?

      [839] Answer: I did not volunteer it.

      Question: Did you discuss that with any representatives of Pennzoil?

      Answer: Yes.

      Question: With whom?

      Answer: I think it was Mr. Cialone.

      531

      Getty attorney Katz's testimony was somewhat more detailed. He related his memory of the January 5 conversation with Cialone as follows:

      532

      Answer: In addition to having substantive business objections to an acquisition of the Museum's shares by Pennzoil, I raised the question with Joe (Cialone) as to how Pennzoil could agree to acquire— Pennzoil or the Company acting basically at the request of Pennzoil—could agree to acquire the Museum shares as part of the overall transaction, which was what had been suggested by both Pennzoil, as well as the Museum and the Trust.

      In view of the pending tender offer, I told Joe that in my view it was a clear violation of Rule 10(b)13 for Pennzoil or for the company acting at the behest of Pennzoil to agree to acquire the Museum shares during the pendency of this tender offer.

      Question: What was Mr. Cialone's response?

      Answer: At first, it didn't seem to worry him and we raised this concern, but he didn't seem troubled.

      Later he came back and he asked me, `Are you really concerned about this?' And I said, `Literally, it would be doing exactly what the rule on its face prohibits,' and he said to me, `Well, what would you do?'

      And I said, `I would call Harvey Pitt, who is my partner in the Washington office who is general counsel to the SEC and who is very familiar with this type of regulation, and I would get his advice, but I would not go ahead without consulting with more people in my firm and do a transaction which, to me, violated the rule.'

      I said to Joe, `Do you want me to call Harvey? I will call him if you want me to,' and he said, `Fine.'

      * * * * * *

      Question: Did you say anything about going ahead with the transaction without some analysis of this problem?

      Answer: I had previously communicated to Joe that, putting aside 10(b)13 concerns, that we did not believe that the board would authorize a transaction where the Museum would be treated differently than the other shareholders of the company, and that meant not only in terms of the consideration the Museum would receive, but when they would receive it.

      533

      Texaco contends that this evidence was offered to negate Pennzoil's intent to be bound, and was improperly excluded. It argues that the testimony was offered to prove that Pennzoil believed it had not yet entered and could not enter a binding agreement until its pending tender offer was withdrawn. The agreement and intent to be bound, if there was such an intent, had been formed two days previously.

      534

      The testimony does not support a conclusion that the Pennzoil lawyers by reason of the above after-the-fact conversations, did not consider Pennzoil to be bound by the agreement. The testimony only shows only that Pennzoil lawyers were alerted by Getty Oil lawyers to the possibility that while the tender offer was in effect, the purchase of the Museum stock by Pennzoil might violate an SEC rule. Rule 403, Tex. R.Evid., authorizes exclusion of testimony that is not, on balance, sufficiently probative to justify admissibility. The trial judge properly excluded the proffered evidence.

      535

      In Point of Error 73, Texaco complains of the exclusion of the complaint Pennzoil filed in the Delaware Chancery Court in which Pennzoil sought equitable relief. Texaco argues that paragraph 16 of the complaint explicitly recognizes that a Getty Oil board meeting would have had to be held on Friday, January 6, before a definitive merger agreement could have been executed.

      536

      Paragraph 16 of the complaint provides:

      537

      During the evening of January 3 and through the day of January 4, lawyers [840] for Pennzoil and the Trustee prepared a draft of an implementing agreement. Discussions concerning the draft implementing agreement were held between representatives of all parties throughout the day. On the evening of January 4, Pennzoil and the Trustee submitted their draft implementing agreement to the Museum and Getty. During the late afternoon and evening of January 5, lawyers for the Trustee, Getty and Pennzoil met and revised the draft implementing agreement. These efforts were concluded at 1:00 a.m. Friday, January 6. At no time did any of the lawyers or any of the parties suggest any modification of any of the substantive terms regarding the number of shares to be purchased, the price or the form of consideration agreed to by the Getty board on Tuesday, January 3. Thus, by 1:00 A.M., Friday, January 6, the implementing agreement was substantially complete, except for certain technical matters that Pennzoil's and Getty's representatives agreed could be resolved in time for board meetings and execution before the end of the day Friday.

      538

      Texaco's specific complaint concerns the last sentence in the paragraph. It contends that this sentence confirms Texaco's position that additional action by the Getty directors was necessary before the parties would be bound.

      539

      Pleadings in other actions that contain statements inconsistent with the party's present position are receivable as admissions. St. Paul Fire & Marine Insurance Co. v. Murphree, 357 S.W.2d 744, 747 (Tex. 1962). Rule 801(e)(2), Tex.R.Evid., provides that admissions by a party-opponent are not hearsay statements and thus are admissible.

      540

      The Pennzoil complaint filed in Delaware is not inconsistent with Pennzoil's position that a binding agreement was effected on January 3. A reasonable reading of the sentence suggests that work was being done on an "implementing agreement" and that the only matters left to be resolved prior to board meetings were "certain technical matters." Additionally, earlier in the paragraph, there is an express qualification: "At no time did any of the lawyers or any of the parties suggest any modifications of any of the substantive terms regarding the number of shares to be purchased, the price or the form or consideration agreed to by the Getty board on Tuesday, January 3." This is consistent with Pennzoil's position. Thus it is not an admission. The trial judge properly excluded the complaint.

      541

      Additionally, error, if any, would be harmless under rule 81(b)(1), Tex.R. App.P., because the same evidence contained in the petition, i.e., that the parties were doing additional work on an implementing contract with a view toward formally executing it on January 6, was presented to the jury throughout the trial.

      542

      In Texaco's 74th through 78th points of error, it claims that Pennzoil was allowed to introduce inadmissible hearsay to prove the existence of a contract.

      543

      First, it claims that the trial court improperly admitted affidavits of Martin Siegel, the Trust's investment banker, and Charles Cohler, a Trust lawyer, and the transcribed oral argument of Cohler, all from a California temporary injunction suit. We find no merit to this claim because both Cohler and Siegel testified at the trial of this case, and their trial testimony did not conflict with that previously given during the California hearing. Texaco correctly contends that the documents came within no exception to the hearsay rule and were thus inadmissible. But rather than prejudice Texaco, it appears to have reinforced its contention that there were other matters to attend to before the contract between Pennzoil and the Getty entities would become binding. There is no harmful error. Tex.R.App.P. 81(b)(1).

      544

      Texaco next claims that notes made by Getty Oil general counsel Ralph Copley of the January 3 Getty Oil board of [841] directors meeting were improperly admitted.

      545

      Pennzoil initially offered only that part of the notes pertaining to the 15-1 vote of the board on the Pennzoil proposal. Texaco properly objected to the notes being admitted into evidence, but after its objection was overruled, it offered the remaining portion of the notes into evidence. Thereafter, Texaco read the unoffered part of the notes to the jury, and had several of its officers testify about their impressions of the notes.

      546

      During voir dire, Texaco's counsel told the jury panel of the notes' existence, explained the significance of the notes, and promised the jury that they would be informed of the notes' contents. Finally, in his closing argument, Texaco's counsel vouched for the veracity and reliability of the notes.

      547

      A party to an appeal may not complain of improper evidence offered by the other side when it introduced the same or similar evidence. McInnes v. Yamaha Motor Corp. U.S.A., 673 S.W.2d 185, 188 (Tex.1984), cert. denied, 469 U.S. 1107, 105 S.Ct. 782, 83 L.Ed.2d 777 (1985). There is no error.

      548

      Texaco next complains of the admission into evidence of a handwritten note regarding the January 3 Getty board meeting made by C. Stedman Garber, Getty Oil treasurer. The note was allegedly made by Garber during or after a phone conversation with Copley or Bland (Getty vice-president). The note contains the Pennzoil proposal as approved by the Getty Board on January 3. This evidence is in the record from many different witnesses, and is particularly cumulative of part of the Copley notes. The Garber note does not say or indicate that the agreement was complete or binding, but merely that the board, with the exception of Chauncy Medberry, agreed that the "deal should be done." Any error was harmless. Id. at 188.

      549

      Texaco urges that the trial court erred in allowing Sidney Petersen, Getty Oil CEO, to testify that a Saudi Arabian businessman told him that "Gordon Getty told him (the Saudi) that it was a `done deal,'" implying that Pennzoil and the Getty entities had a binding agreement. Though Texaco claims that it lodged an objection that was overruled, we can find neither an objection nor a court ruling. In absence of an objection, the complaint is waived. Wilfin, Inc. v. Williams, 615 S.W.2d 242, 244 (Tex.Civ.App.—Dallas 1981, writ ref'd n.r.e.).

      550

      Texaco next urges that a Fortune magazine article written by reporter Peter Nulty was hearsay and that its admission into evidence was error. In the article, Nulty quotes Getty CEO Petersen as saying "[w]e thought there was a better deal out there, but it was a bird-in-the-handish situation. We approved the deal but we didn't favor it."

      551

      We agree with Texaco's contention that the magazine article was hearsay. However, such articles may become admissible if properly verified. In Sherrill v. Estate of Plumley, 514 S.W.2d 286 (Tex. Civ.App.—Houston [1st Dist.] 1974, writ ref'd n.r.e.), an authority relied on by Texaco, this Court held an obituary appearing in a newspaper to be hearsay and inadmissible under the business records act, Tex. Rev.Civ.Stat.Ann. art. 3737e (Vernon 1964), because it was not shown at trial that the author had personal knowledge of the matters contained in the article.

      552

      By contrast, in this case, the article's author testified that he interviewed Petersen and that even though he could not swear that the quote contained the exact words of Petersen, it was essentially correct. Petersen admitted that he may have said, "yes, we have an agreement in principle with Pennzoil but we thought there were better things around."

      553

      In Southern Savings & Loan Association v. Lewis, 536 S.W.2d 677 (Tex.Civ.App. —Waco 1976, writ ref'd n.r.e.), the court held that exhibits that were otherwise inadmissible as hearsay were properly admitted [842] after a witness who was familiar with the data contained in them had testified about the correctness of the information in the documents.

      554

      Rule 803(5), Tex.R.Evid., adopted September 1, 1983, changed the existing rule regarding past recollection recorded, by providing that a memorandum or record may be read into evidence, but may not be received as an exhibit unless offered by the adverse party. Apparently the rules committee felt that there was a danger that the jury would give undue weight or credence to the written document if it were admitted as an exhibit.

      555

      We are of the opinion that oral evidence of the Petersen statement was admissible to impeach Petersen and as a past recollection recorded, but that the court erroneously admitted the article itself into evidence. However, we perceive no error because the same evidence as the Petersen quote was admitted and used extensively in questioning other witnesses, without objection by Texaco. An objection to evidence is waived by permitting other witnesses to testify without objection to the same complained of evidence. City of Houston v. Riggins, 568 S.W.2d 188, 190 (Tex.Civ.App.—Tyler 1978, writ ref'd n.r. e.).

      556

      Texaco's final complaint of the evidentiary rulings claims that the court erred in excluding testimony of William Weitzel, Texaco's general counsel, that he and Morris Kramer, outside counsel to Texaco, advised the Texaco board and management before Texaco contracted with Getty Oil that there was no binding agreement between Pennzoil and the Getty entities. The record is replete with testimony of Texaco management (DeCrane, president; McKinley, CEO; Kinnear, vice-chairman of the board) that each, as well as the board of directors as a body, was advised, before they entered into the Getty merger, that Pennzoil had no binding contract with the Getty entities.

      557

      The exclusion of evidence is harmless where the evidence is merely cumulative of other evidence in the record. Reina v. General Accident Fire & Life Assurance Corp., 611 S.W.2d 415, 417 (Tex.1981).

      558

      If there was any error, it was harmless. Tex.R.App.P. 81(b)(1).

      559

      Texaco's Points of Error 70 through 79 are overruled.

      560
      ALLEGED DENIAL OF A FAIR TRIAL
      561

      In Points of Error 80 through 85, Texaco claims that it was denied due process and was denied a fair trial because of the posture or actions of the trial judges.

      562

      In its Point of Error 80, Texaco contends that:

      563

      The trial court and Judge Jordan erred in denying Texaco's motion to recuse or disqualify Judge Farris, letting stand an impermissible appearance of bias and depriving Texaco of its right to a fair trial.

      564

      On March 7, 1984, after the filing of the lawsuit, Pennzoil's lead counsel, Joseph Jamail, contributed $10,000 to presiding Judge Farris' campaign fund. On or about October 1, 1984, Texaco filed its motion for recusal or disqualification, asserting that such campaign contribution coupled with Jamail's services on Judge Farris' steering committee created an "appearance of impropriety." Judge Farris declined to recuse himself, and pursuant to rule 18a, Tex.R.Civ.P., the matter was assigned to Judge E.E. Jordan to determine whether Judge Farris should preside over the case. After conducting a hearing, Judge Jordan refused to recuse or disqualify Judge Farris. Texaco first argues that the failure to recuse Judge Farris was error under Texas law.

      565

      Under Texas law, the basis for the disqualification of a judge is contained in Article V, Section 11 of the Texas Constitution, which prohibits a judge from sitting in a case where he may be interested, or where he is related to a party by affinity or consanguinity in a degree prescribed by law, or where he was counsel in the case. In [843] the instant case, neither Texaco's trial motion nor its argument on appeal contains any of these constitutional grounds. Rather, it argues that the grounds for recusal rest in Canon 3C of the Code of Judicial Conduct (reprinted in Tex.Rev.Civ.Stat. Ann. Appendix B to Title 14 [Vernon Supp. 1987]), which provides:

      566

      (1) A judge should disqualify himself in a proceeding in which his impartiality might reasonably be questioned, including, but not limited to, instances where:

      (a) he has a personal bias or prejudice concerning a party....

      567

      In support of this argument, Texaco relies upon McLeod v. Harris, 582 S.W.2d 772 (Tex.1979). This reliance is misplaced because McLeod dealt exclusively with the procedural method to be followed when a motion to recuse has been filed. The court held that in all instances where a motion to recuse has been filed in a suit, it is mandatory that the judge in whose court the motion is filed must request the administrative judge to assign another judge to hear the motion for recusal.

      568

      Texaco argues that, on McLeod's authority, at least two courts have held that Canon 3C provides the grounds for judicial disqualification: Robb v. Robb, 605 S.W.2d 390 (Tex.Civ.App.—El Paso 1980, no writ), and Manges v. Garcia, 616 S.W.2d 380 (Tex.Civ.App.—San Antonio 1981, no writ). Neither case supports Texaco's argument.

      569

      In Robb, the court was presented with a situation in which a trial judge refused to appoint another judge to hear a motion for recusal. The motion was based upon allegations of bias and prejudice due to campaign contributions by attorneys representing appellee. Without addressing the merits of the motion, the appellate court concluded that based upon McLeod, the trial judge erred procedurally in failing to obtain another judge to rule on the motion.

      570

      In Manges, the trial court judge had recused himself from all matters involving relator Manges. Manges asserted that the judge was under a duty to act in the case unless he was precluded from so doing because of one of the impediments enumerated in Article V, Section 11 of the Texas Constitution. The appellate court held that Canon 3C contemplates that a judge's refusal to sit may be based upon a reason not included in the constitution. To force a litigant before a judge who maintained a personal bias against the litigant would raise significant due process question.

      571

      However, the exact question presented here, whether campaign contributions constitute the "appearance of impropriety" such that recusal is warranted under Canon 3C, has been considered by the San Antonio Court of Appeals and the Texas Supreme Court.

      572

      In River Road Neighborhood Association v. South Texas Sports, Inc., 673 S.W.2d 952 (Tex.App.—San Antonio 1984, no writ), and Rocha v. Ahmad, 662 S.W.2d 77 (Tex.App.—San Antonio 1983, no writ), motions to recuse were filed against appellate justices because they had accepted campaign contributions from one of the litigant's attorneys. In River Road, the contributions amounted to 21.7% and 17.1% of the total campaign contributions received by the justices. Speaking from an en banc court in Rocha, Chief Justice Cadena stated:

      573

      It is not surprising that attorneys are the principal source of contributions in a judicial election. We judicially know that voter apathy is a continuing problem, especially in judicial races and particularly in contests for a seat on an appellate bench. A candidate for the bench who relies solely on contributions from nonlawyers must reconcile himself to staging a campaign on something less than a shoestring. If a judge cannot sit on a case in which a contributing lawyer is involved as counsel, judges who have been elected would have to recuse themselves in perhaps a majority of the cases filed in their courts. Perhaps the next step would be to require a judge to recuse himself in any case in which one of the lawyers had refused to contribute or, [844] worse still, had contributed to that judge's opponent.

      574

      Rocha, 662 S.W.2d at 78.

      575

      Additionally, both parties before this Court cite Manges v. Guerra, 673 S.W.2d 180 (Tex.1984), a case in which the appellee filed motions to recuse against three Texas Supreme Court justices. The opinion does not specify that the basis on which the recusal was sought was the receipt of political contributions. See Kilgarlin & Bruch, Disqualification and Recusal of Judges, 17 St. Mary's L.J. 599, 638 (1986); Calvert, Disqualification of Judges, 47 Tex.B.J. 1330, 1337-38 (1984). In denying the motions, the supreme court noted that the challenged justices were qualified under Article V, Section 11 of the Texas Constitution. Manges v. Guerra, 673 S.W.2d at 185. In interpreting the Manges opinion, former Chief Justice Calvert articulated at page 1337:

      576

      The opinion seems to the writer to leave not the slightest doubt that the only grounds for disqualification of a judge are those listed in art. 5, sec. 11, of the Constitution, and the grounds set out in Canon 3C(1) should not be considered in the future as grounds for disqualification.

      577

      Texaco's Canon 3C argument is overruled.

      578

      Texaco next argues that the failure to recuse Judge Farris was error under the Due Process Clause of the United States Constitution.

      579

      The United States Supreme Court has recognized that most matters relating to judicial disqualification do not rise to a constitutional level, and that only in extreme cases would disqualification on the basis of bias and prejudice be constitutionally required. Aetna Life Insurance Co. v. Lavoie, 475 U.S. 813, 106 S.Ct. 1580, 1585, 89 L.Ed.2d 823 (1986). Yet, Texaco argues that disallowing recusal of Judge Farris, because Article V, Section 11 of the Texas Constitution provides the sole basis for judicial disqualification in Texas, violated Texaco's due process rights.

      580

      The due process clause entitles a person to neutrality in adjudicative proceedings in both civil and criminal cases. Marshall v. Jerrico, Inc., 446 U.S. 238, 242, 100 S.Ct. 1610, 1613, 64 L.Ed.2d 182 (1980). This neutrality helps to guarantee "that life, liberty, or property will not be taken on the basis of an erroneous or distorted conception of the facts or the law" while preserving "both the appearance and reality of fairness." Id.

      581

      Fairness requires an absence of actual bias, and our legal system has always endeavored to prevent even the probability of unfairness. In re Murchison, 349 U.S. 133, 136, 75 S.Ct. 623, 625, 99 L.Ed. 942 (1955). As articulated by the Murchison court:

      582

      To this end no man can be a judge in his own case and no man is permitted to try cases where he has an interest in the outcome. That interest cannot be defined with precision. Circumstances and relationships must be considered. This Court has said, however, that "Every procedure which would offer a possible temptation to the average man as a judge ... not to hold the balance nice, clear, and true between the State and the accused denies the latter due process of law." Tumey v. State of Ohio, 273 U.S. 510, 532, 47 S.Ct. 437, 444, 71 L.Ed. 749. Such a stringent rule may sometimes bar trial by judges who have no actual bias and who would do their very best to weight the scales of justice equally between contending parties. But to perform its high function in the best way "justice must satisfy the appearance of justice." Offutt v. United States, 348 U.S. 11, 14, 75 S.Ct., 11, 13 [99 L.Ed. 11].

      583

      Id.

      584

      In the instant case, Texaco argues that Jamail's $10,000 campaign contribution presented the appearance of bias and prejudice; therefore, the refusal to recuse Judge Farris was a violation of Texaco's constitutional rights. In support of this argument, Texaco relies heavily upon Commonwealth Coatings Corp. v. Continental Casualty Co., 393 U.S. 145, 150, 89 S.Ct. 337, 340, 21 L.Ed.2d 301 (1968), asserting that the "refusal [845] to disqualify Judge Farris is in direct conflict with that Supreme Court authority." However, Commonwealth is distinguishable from the present case.

      585

      Commonwealth was an appeal from an arbitration award rendered by a three-member panel. One of the arbitrators had a "sporadic" business relationship with the prime contractor, which relationship went so far as to include the rendering of services on the very projects involved in the lawsuit. These facts were never revealed to the petitioner until after the award was made. 393 U.S. at 146, 89 S.Ct. at 338.

      586

      In holding that the award should be set aside, the Commonwealth court based its decision upon Tumey v. Ohio, 273 U.S. 510, 47 S.Ct. 437, 71 L.Ed. 749 (1927), a case also cited by Texaco. In Tumey, the court reversed convictions rendered by a mayor of a town because a small part of the mayor's income consisted of court fees and costs collected by him acting in a judicial capacity. The Tumey court held that the due process clause would not permit any "procedure which would offer a possible temptation to the average man as a judge to forget the burden of proof required to convict the defendant, or which might lead him not to hold the balance nice, clear and true between the state and the accused." Tumey, 273 U.S. at 532, 47 S.Ct. at 444. The Tumey court also noted that a decision should be set aside where there is "the slightest pecuniary interest" on the part of the judge. 273 U.S. at 524, 47 S.Ct. at 441.

      587

      Finally, the Commonwealth court noted:

      588

      It is true that arbitrators cannot sever all their ties with the business world, since they are not expected to get all their income from their work deciding cases, but we should, if anything, be ever more scrupulous to safeguard the impartiality of arbitrators than judges, since the former have completely free rein to decide the law as well as the facts and are not subject to appellate review.

      589

      393 U.S. at 148-149, 89 S.Ct. at 339.

      590

      The facts of the instant case do not parallel Commonwealth. Judge Farris neither participated with Pennzoil in the case' being tried nor enjoyed even "the slightest pecuniary interest" in the outcome of the trial as did the arbitrator in Commonwealth.

      591

      The instant case presents mere allegations of bias and prejudice. As in Aetna, these allegations "are insufficient to establish any constitutional violation." 106 S.Ct. at 1586. There is no evidence in the record that Judge Farris was either biased or prejudiced in any manner or that he was acting as judge in his own case or enjoyed any pecuniary interest in the outcome of the case. Texaco's Point of Error 80 is overruled.

      592

      In its Point of Error 81, Texaco alleges that:

      593

      [t]he trial court abused its discretion in denying Texaco's Motion for Mistrial and in allowing Texaco's Motion for New Trial to be overruled by operation of law because the substitution of Solomon Casseb, Jr., for Judge Farris denied Texaco its due process right to a fair trial.

      594

      Texaco first argues that the trial disruption caused by Judge Farris' ill health violated Texaco's right to a due and orderly trial under Article I, Section 15 of the Texas Constitution. This argument is not presented in a point of error; consequently, it is waived. Kirkman v. City of Amarillo, 508 S.W.2d 933 (Tex.Civ.App.—Amarillo 1974, writ ref'd n.r.e.).

      595

      Judge Farris presided over the trial from July 9 to October 22, 1985, at which time he was forced to step down because of ill health. Judge Casseb presided over the remainder of the trial proceedings. This included the preparation of the charge, attention to Texaco's motions for judgment and judgment n.o.v., and to its motion for new trial.

      596

      Texaco first argues that Judge Casseb's late substitution and his denial of Texaco's motion for mistrial constitute error under Texas law. It argues that because Judge Casseb was unfamiliar with the previous testimony given in the preceding three [846] months' worth of testimony, i.e., all of Pennzoil's evidence and a portion of Texaco's, his unfamiliarity with the evidence prejudiced the preparation of the charge and the post-trial motions.

      597

      Tex.R.Civ.P. 18 provides for the substitution of judges:

      598

      If the judge dies, resigns, or becomes unable to hold court during the session of court duly convened for the term, and the time provided by law for the holding of said court has not expired, such death, resignation, or inability on the part of the judge shall not operate to adjourn said court for the term, but such court shall be deemed to continue in session. If a successor to such judge shall qualify and assume office during the term, or if a judge be transferred to said district from some other judicial district, he may continue to hold said court for the terms provided, and all motions undisposed of shall be heard and determined by him, and statements of facts and bills of exception shall be approved by him. If the time for holding such court expires before a successor shall qualify, and before a judge can be transferred to said district from some other judicial district, then all motions pending, including those for new trial, shall stand as continued in force until such successor has qualified and assumed office, or a judge has been transferred to said district who can hold said court, and thereupon such judge shall have power to act thereon at the succeeding term, or on an earlier day in vacation, on notice to all parties to the motion, and such orders shall have the same effect as if rendered in term time. The time for allowing statement of facts and bills of exception from such orders shall date from the time the motion was decided.

      599

      Appellate courts in Texas have repeatedly approved the substitution of judges. In Bickham v. Herrin Transportation Co., 344 S.W.2d 953 (Tex.Civ.App.—Houston 1961, no writ), this Court approved a substitution and the resulting actions by the court's denial of appellant's motion for new trial. The first judge heard most of the evidence, and the second judge, over objection of the appellant, heard the balance of the evidence and presided over the preparation of the charge and argument of counsel. Then the first judge returned and accepted the verdict from the jury and ruled on the motion for new trial. This Court noted that the record failed to indicate (1) that appellant requested the first judge to read the testimony that he had not heard; (2) that he was presented with a transcript thereof; or (3) that he heard the testimony. This Court held that in the absence of such showing, "it will be presumed that he became sufficiently familiar with the testimony of witnesses whom he did not hear...." Furthermore, the appellant failed to show any abuse of discretion or harm because the court of appeals "is required to pass upon the same and has the same power as the trial judge to do so. Rule 434, T.R.C.P." Id. at 959.

      600

      In Weiser v. Hampton, 445 S.W.2d 224, 229 (Tex.Civ.App.—Houston [1st Dist.] 1969, writ ref'd n.r.e.), the appellant urged that it was error for the presiding judge, who did not sit at trial, to overrule appellant's motion to disregard jury findings. The court held "while it is obvious that the judge who heard the evidence would be in a better position to pass on the motion, it would not be unreasonable to suppose that another judge would be able to do so after hearing the arguments of counsel." Id.

      601

      Although appellate courts have repeatedly approved of the substitution of judges, Texaco argues that the case of Rutherford v. Rutherford, 554 S.W.2d 829 (Tex.Civ. App.—Amarillo, no writ), is supportive of its contention that a substitution here was error. Rutherford involved a bench trial in which the first judge heard part of the evidence and made known the judgment he would render. The second judge, as finder of fact, heard part of the evidence and rendered judgment based thereon. The court held that it was reversible error to render a final judgment "without a consideration [847] of all of the evidence adduced on the matter." Id. at 832.

      602

      In the instant case, the jury was the finder of facts, not Judge Casseb. Judge Casseb heard much of Texaco's evidence, and although he admitted at the charge conference that he "did not read the full parts of this evidence," he did have available to him a transcription of all the evidence adduced prior to his appointment to which he could refer for confirmation of relevant and material matters upon which the parties disagreed. Judge Casseb heard extensive preliminary argument by both parties of the evidence taken prior to his assignment. He presided over the preparation of the charge, and the charge does properly present the applicable law and is supported in the evidence.

      603

      Texaco has failed to show any abuse of discretion or harm caused by Judge Casseb's substitution. Texaco's argument, that the substitution and denial of the mistrial were error under Texas law, is without merit.

      604

      Texaco next argues that if the Texas Rules of Civil Procedure allow for this substitution, then the rules are unconstitutional under the due process clause.

      605

      For support, Texaco relies upon Mathews v. Eldridge, 424 U.S. 319, 96 S.Ct. 893, 47 L.Ed.2d 18 (1976), in which the Supreme Court identified three factors that must be weighed in determining whether a state procedural rule, in this case rule 18, comports with the requirement of due process:

      606

      First, the private interest that will be affected by the official action; second, the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and finally, the Government's interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail.

      607

      424 U.S. at 335, 96 S.Ct. at 903.

      608

      Texaco argues (1) that its private property interest at stake here is its very right to exist; (2) that Judge Casseb's substitution created a risk of deprivation because of his unfamiliarity with large portions of the testimony, and (3) that a new trial in this case is the only "additional procedural safeguard" that would eliminate the risk of deprivation created by the late substitution.

      609

      Texaco's due process argument centers on the court's denial of its new trial motion, asserted in its Points of Error 82-84. Such a motion is addressed to the sound discretion of the court, and the court's action thereon will not be disturbed absent a showing of abuse. Alkas v. United Savings Association, 672 S.W.2d 852 (Tex. App.—Corpus Christi 1984, no writ); Neunhoffer v. State, 440 S.W.2d 395 (Tex.Civ. App.—San Antonio 1969, writ ref'd n.r.e.).

      610

      In Bickham, this Court held that appellant failed to show harm as a result of a substituted judge's passing on the sufficiency of the evidence because this Court "is required to pass upon the same and has the same power as the trial judge...." 344 S.W.2d at 959. In the instant case, there is no harm because Texaco's allegations of error in its new trial motion are now under review by this Court. We find no denial of due process. Texaco's Point of Error 81 is overruled.

      611

      In its next three points of error, Texaco asserts that:

      612

      The trial court erred in refusing to hear Texaco's motion for new trial unless Texaco waived its rights to a qualified judge because that condition violates the Due Process Clause of the United States Constitution, amend. V (applicable to Texas through Amend. XIV, § 1), and the Texas Constitution, Art. I, § 19.

      The trial court erred in allowing Texaco's motion for new trial to be overruled by operation of law because that action violated the Due Process and Equal Protection Clauses of the United States Constitution.

      The trial court erred in denying Texaco a hearing on the motion for new trial with regard to Texaco's complaints of newly discovered evidence and jury misconduct.

      613

      [848] On January 9, 1986, Texaco filed its motion for new trial alleging, in part, that Judge Casseb's qualifications as a retired judge were in question. On February 13, Texaco applied for a hearing on the motion for new trial, and additionally alleged jury misconduct. The hearing was set for February 20, at which time the following occurred:

      614

      THE BAILIFF: All rise. The 151st District Court is now in session, the Honorable Solomon Casseb, Jr., presiding.

      THE COURT: Good morning, ladies and gentlemen.

      ALL COUNSEL: Good morning, Your Honor.

      THE COURT: You may be seated.

      In Cause No. 85-05905, Pennzoil Company versus Texaco, Inc. in the 151st Judicial District Court of Harris County, Texas, this Court would like to ascertain at this time and would like a reply from each of the respective firms of record representing Texaco, Incorporated if they still at this time question and challenge the right and authority of Solomon Casseb, Jr. to preside over—as a Judge to preside over any hearings at this time in this cause.

      MR. McMAINS: Your Honor, I'm Russell McMains with the firm of Edwards, McMains, Constant and Terry.

      We have not intended by setting or requesting the setting of this motion for hearing or by any of the other papers that we filed with the Court to waive our challenge on the disqualification issue which, in point and in fact, is part of the Newly Discovered Evidence Complaint that is contained in our Motion for New Trial and supported by the affidavits for which we requested an evidentiary hearing today.

      THE COURT: And you're taking the position—

      MR. McMAINS: The answer to your question is yes.

      THE COURT: All right. Any other firms?

      MR. BOIES: Your Honor, David Boies from Cravath, Swaine and Moore. We likewise continue our challenge.

      MR. SALES: Jim Sales of Fulbright and Jaworski. We do continue the challenge.

      THE COURT: Any others?

      MR. PETERSEN: Your Honor, Michael Petersen for Miller-Keeton. Mr. Miller and Mr. Keeton are on their way and should be here shortly. We join in the motion of our co-counsel and continue the challenge.

      MR. JAMAIL: We have no challenge to the qualifications of this Judge.

      THE COURT: As I understand, you still challenge the qualifications of Solomon Casseb as a Judge or otherwise to preside over this cause and to hear all motions on file in this cause at this time?

      MR. McMAINS: That is our position, but we have been repudiated at this point.

      THE COURT: I understand that.

      That still being your position, this Court then is going to let the law take its course and y'all are excused.

      615

      On February 24, four days later, Texaco's motion for new trial was overruled by operation of law.

      616

      Texaco argues that Judge Casseb's refusal to conduct a hearing on the new trial motion contravened Texas case law and the due process and equal protection clauses of the U.S. Constitution. Texaco therefore requests that this Court remand for a hearing on the motion for new trial.

      617

      In its Point of Error 84, Texaco first argues that the trial court erred in not conducting an evidentiary hearing and in denying its new trial motion when juror misconduct was alleged and supported by affidavit. Specifically, Texaco urges that the following statements by juror Shannon shows that juror Shannon conducted an independent investigation into issues not in evidence and that the trial court considered an annual report that was not in evidence:

      618

      Well, in point of fact, Texaco never made this argument [that the damages was claim [849] was exorbitant] until the very end of the trial in final arguments because it could be easily rebutted by their own annual report. Texaco's worth, when you subtract liabilities from assets, is still in excess of twenty-three billion dollars. This figure they're getting that the verdict is more than the company's worth is when you take the number of shares of stock and multiply it times the current stock price and that is somewhat less than ten billion but they have assets over liabilities [of] twenty-three billion dollars. Their own annual reports give these figures and if that would have been brought into court it could have been easily proven. (Emphasis added.)

      619

      The sole accompanying affidavit of Richard E. Miller, counsel for Texaco, states in pertinent part:

      620

      Neither Texaco's annual report nor Shannon's net worth calculation, as expressed by him in this interview, was in evidence. Shannon has stated to me that he did not consult any source outside the evidence.

      10. During the deliberations on the afternoon of November 18, 1985, the jury asked the following question: "Was the Texaco annual report put into evidence, and if so, can we have a copy?" The parties then agreed that the annual report was not in evidence. This question, coupled with Shannon's statement quoted in Paragraph 9 above, indicates that the jury considered the annual report or information from the annual report even though it was not in evidence.

      11. I have attempted to interview the jury members with regard to whether the Texaco annual report or information from that report was considered by the jury in its deliberations. I have not been able to reach all jurors; several have refused to speak to me or my partners about anything relating to the trial; those to whom I have spoken deny that information from the annual report was discussed during the deliberation of the jury.

      621

      It is within the discretion of the trial court to conduct a hearing on a new trial motion when the motion presents solely questions of law. Moore v. Mauldin, 428 S.W.2d 808 (Tex.1968); University of Texas v. Morris, 163 Tex. 130, 352 S.W.2d 947 (1962), cert. denied, 371 U.S. 953, 83 S.Ct. 511, 9 L.Ed.2d 503 (1963). However, Texaco asserts that the following are questions of fact requiring an evidentiary hearing: (1) Judge Casseb was not qualified as a retired judge, and (2) there was jury misconduct during voir dire and in deliberation.

      622

      The argument regarding Judge Casseb's qualifications is addressed under Point of Error 85.

      623
      JURY MISCONDUCT
      624

      Texaco's allegations do not constitute jury misconduct as a matter of law, pursuant to the 1983 amendment to Tex.R.Civ.P. 327 and Tex.R.Evid. 606(b). Prior to the adoption of the new rules of evidence in Texas and specifically amended rule 327(b), a party complaining of jury misconduct had to show (1) that the misconduct occurred; (2) that it was material; and, (3) that based on the record as a whole, the misconduct probably resulted in harm to the complaining party. See Redinger v. Living, Inc., 689 S.W.2d 415, 419 (Tex.1985). Only overt acts of the jury were considered, and any testimony concerning the jury's mental processes was disregarded. Strange v. Treasure City, 608 S.W.2d 604, 606 (Tex.1980). However, the new rule 327(b), and Tex.R. Evid. 606(b), prohibit jurors from testifying as to matters or statements that occurred during jury deliberations.

      625

      Tex.R.Evid. 606(b) states:

      626

      Upon an inquiry into the validity of a verdict or indictment, a juror may not testify as to any matters or statement occurring during the course of the jury's deliberations or to the effect of anything upon his or any other juror's mind or emotions as influencing him to assent to or dissent from the verdict or indictment or concerning his mental processes in connection therewith, except that a juror [850] may testify whether any outside influence was improperly brought to bear upon any juror. Nor may his affidavit or evidence of any statement by him concerning a matter about which he would be precluded from testifying be received for these purposes. (Emphasis added.)

      627

      Likewise, Tex.R.Civ.P. 327(b) provides:

      628

      A juror may not testify as to any matter or statement occurring during the course of the jury's deliberations or to the effect of anything upon his or any other juror's mind or emotions as influencing him to assent to or dissent from the verdict concerning his mental processes in connection therewith, except that a juror may testify whether any outside influence was improperly brought to bear upon any juror. Nor may his affidavit or evidence of any statement by him concerning a matter about which he would be precluded from testifying be received for these purposes.

      629

      (Emphasis added.)

      630

      Under both rules, all testimony is now excluded when juror misconduct is alleged, unless it can be shown that an "outside influence" was brought to bear. Robinson Electric Supply v. Cadillac Cable Corp., 706 S.W.2d 130 (Tex.App.—Houston [14th Dist.] 1986, writ ref'd n.r.e.).

      631

      The "outside influence" requirement is so new that there is very little Texas case law interpreting it. In Robinson, the Texas Fourteenth Court of Appeals declined to hold the jury's consideration of matters not in evidence, the calculation of prejudgment interest during deliberations, to be "outside influence." In Clancy v. Zale Corp., 705 S.W.2d 820, 828 (Tex.App.—Dallas 1986, no writ), the court declined to hold certain statements made by jurors during deliberations to be "outside influence." The Clancy court noted several instances in which "outside influence" had been found pursuant to rule 606(b), Fed.R.Evid.; for example, tampering with evidence, conversation between the judge and a juror, and a threat to a juror. Id. at 829. The Clancy court held that by its wording, Tex.R.Evid. 606(b) mandates that an "outside influence" "must emanate from outside the jury and its deliberations." See Clancy, 705 S.W.2d at 829.

      632

      In the instant case, Texaco fails to allege such "outside influence" in its new trial motion or on appeal. Rather, Texaco relies upon the 1979 Texas Supreme Court case of Hensley v. Salinas, 583 S.W.2d 617 (Tex.1979), in which the court held that it was error for the trial court to deny a hearing where questions of fact were alleged in a motion for new trial, which questions, if true, would entitle the movant to a new trial. The question of fact alleged in Hensley was not juror misconduct but whether the new trial movant had actually "completely rejected" an agreed judgment. Hensley is not on point.

      633

      The new trial motion here fails as a matter of law to demonstrate any "outside influence." The sole supporting affidavit of Texaco's trial counsel concedes that the jurors that were contacted denied that the annual report was ever considered during deliberations. This presents no evidence of juror misconduct during deliberations. Consequently, the trial court was under no duty to conduct a hearing. See Caterpillar Tractor Co. v. Boyett, 674 S.W.2d 782, 793 (Tex.App.—Corpus Christi 1984, no writ).

      634

      Furthermore, the affidavit in support of Texaco's allegation of juror misconduct during deliberation is insufficient as a matter of law. Tex.R.Civ.P. 327(a) provides:

      635

      When the ground of a motion for new trial, supported by affidavit, is misconduct of the jury or of the officer in charge of them, or because of any communication made to the jury, or that a juror gave an erroneous or incorrect answer on voir dire examination, the court shall hear evidence thereof from the jury or others in open court, and may grant a new trial if such misconduct proved, or [851] the communication made, or the erroneous or incorrect answer on voir dire examination, be material, and if it reasonably appears from the evidence both on the hearing of the motion and the trial of the case and from the record as a whole that injury probably resulted to the complaining party.

      636

      Rule 327(a) mandates that the court hear evidence of juror misconduct if it is properly presented. In the instant case, the sole affidavit in support of juror misconduct during deliberations was provided by Texaco's counsel. This affidavit was insufficient under rule 327(a). "An affidavit by a non-juror is insufficient to establish material jury misconduct because the affidavit is based upon hearsay." Clancy, 705 S.W.2d at 828.

      637

      Likewise, Texaco's allegation of juror misconduct during voir dire is without merit. Texaco first asserts juror misconduct in juror Shannon's failure to respond to Texaco's question "If you have any reason to believe, whether its [sic] philosophical or whether its [sic] political, whether it's religious, for whatever reason whether I've asked the question or not, any reason to believe that you could not sit in this important case and sit as a fair juror ... then you need to let us know." Juror Shannon failed to inform the court that his wife had lost her job as a result of a corporate takeover; Texaco asserts this is juror misconduct.

      638

      For erroneous or false answers given on voir dire to entitle a party to a new trial, there must be a concealment by the juror. Dunn v. Sears Roebuck & Co., 371 S.W.2d 731, 735 (Tex.Civ.App.— Houston 1963, writ ref'd n.r.e.). Before there can be concealment, the questions asked must call for disclosure; the questions asked must be direct and specific. Id.; Roy L. Jones Truck Line v. Johnson, 225 S.W.2d 888, 896 (Tex.Civ.App.—Galveston 1949, writ ref'd n.r.e.). A catch-all question asking "was there anything in" the juror's experience "that would cause [them] to lean one way or the other in this type of case" does not meet the requirement of specificity. 4 R. McDonald, Texas Civil Practice in District & County Courts § 11.10.3 (1983); see also Roy L. Jones Truck Line, 225 S.W.2d at 896.

      639

      In the instant case, the question asked was not so direct or specific as to require juror Shannon to reveal the fact that his wife had lost her job in a corporate takeover. Although harm is suggested, no harm has been shown. In addition, as a matter of law, the question was insufficient to elicit the information Texaco complains it should have received. Id.

      640

      Texaco next alleges juror misconduct in juror Lawler's failure to answer the following questions: "Is anybody here on the panel that's left or any member of your family that's ever had any business dealings with Texaco? ... Any business relationship with Texaco? You or your employers or members of your family?" Texaco asserts that juror misconduct occurred because juror Lawler failed to inform the court that his father-in-law was a Texaco employee.

      641

      The affidavit in support of Texaco's new trial motion states:

      642

      6. After the jury's verdict was returned, Texaco learned for the first time that the jury's presiding juror, Richard Lawler, was related by marriage to a long-time Texaco employee, Jimmie R. Paull. I interviewed Mr. Paull on December 9, 1985, and learned for the first time that he is the father of Cheryl Paull, Mr. Lawler's wife, that he and his daughter are estranged, and that he has not seen his daughter since 1977, when Mr. Lawler and his daughter were married. He has neither seen nor spoken to his son-in-law during this period and he has never seen or spoken to his two grandchildren. Attached hereto in support of these points is the affidavit of Jimmie R. Paull.

      7. Juror Lawler should have divulged this information in the voir dire examination of the jury panel in response to the following question from Mr. Jamail:

      [852] Is anybody here on the panel that's left or any member of your family that's ever had any business dealings with Texaco?... any business relationship with Texaco? You or your employers or members of your family?

      8. Lawler responded but only that his employer had a "lot of business with Texaco." He did not mention his father-in-law's long-time employment. When I interviewed Mr. Lawler after the verdict and asked him about his father-in-law, he told me he did not learn his father-in-law was a Texaco employee until two months into the trial or later, and that this was the reason he did not disclose his relationship with Texaco. This relationship between Lawler and his father-in-law was relevant to Texaco's consideration of whether Juror Lawler was qualified to serve on the jury. Had Texaco been aware of this information, which would have a tendency to bias Lawler against Texaco, it would have moved to excuse Lawler for cause. Had that motion not been granted, Texaco would have used one of its preemptory [sic] challenges to excuse Lawler.

      643

      The affidavit fails as a matter of law to establish concealment. By its own wording, the affidavit establishes that juror Lawler did not know the work relationship between his father-in-law and Texaco until the trial was two months old. Failure to disclose information about which a juror had no knowledge or had forgotten at the time of voir dire does not constitute concealment. McDonough Brothers v. Lewis, 464 S.W.2d 457, 466 (Tex.Civ.App.— San Antonio 1971, writ ref'd n.r.e.).; see also Childers v. Texas Employers Insurance Association, 154 Tex. 88, 273 S.W.2d 587, 588 (1954).

      644

      Texaco's Point of Error 84 is overruled.

      645

      In its Points of Error 82 and 83, Texaco argues that Judge Casseb violated Texaco's constitutional rights of due process and equal protection in failing to hold a hearing on its new trial motion and by announcing his intention to allow Texaco's motion to be overruled by operation of law.

      646

      The United States Supreme Court has consistently held that the fundamental requirement of due process is the opportunity to be heard "at a meaningful time and in a meaningful manner." Mathews v. Eldridge, 424 U.S. 319, 333, 96 S.Ct. 893, 902, 47 L.Ed.2d 18 (1976). However, due process is flexible and calls for procedural protections as a particular situation demands. Id. at 334, 96 S.Ct. at 902.

      647

      Tex.R.Civ.P. 329b(c) provides:

      648

      In the event an original or amended motion for new trial or a motion to modify, correct or reform a judgment is not determined by written order signed within seventy-five days after the judgment was signed, it shall be considered overruled by operation of law on expiration of that period.

      649

      Pursuant to this rule, Texaco's right to be heard at "a meaningful time and in a meaningful manner" is not obviated. Rather, by its time constraints, rule 329(b) in fact "expedites" Texaco's right to be heard on appeal by automatically overruling a new trial motion on which there has been no ruling made. By this procedural method, Texaco's rights have been preserved and transferred to this Court for consideration. See James v. Appel, 192 U.S. 129, 24 S.Ct. 222, 48 L.Ed. 377 (1904). Texaco's Points of Error 82 and 83 are overruled.

      650

      In its Point of Error 85, Texaco asserts that:

      651

      The presiding judge erred in denying Texaco an evidentiary hearing on its motion to disqualify Solomon Casseb Jr., denying Texaco its constitutional and statutory rights to a qualified judge.

      652

      Texaco contends that in derogation of rule 18a, it was not afforded a hearing on its motion to disqualify Judge Casseb, which motion alleged that Judge Casseb was not properly qualified to preside as judge in this action and that he had not taken the oath of office. To understand [853] Texaco's contention, we briefly review the procedural history of this area of the case.

      653

      When Judge Farris became ill, Judge Stovall, Presiding Judge of the Second Administrative Judicial District, assigned Judge Casseb to preside over the remainder of the trial, which ended with a judgment on December 10, 1985. On January 9, 1986, Texaco filed its motion to disqualify based upon a New York Times article quoting Judge Casseb's son, who allegedly stated that Judge Casseb had not met the judicial service time requirement to be eligible for retirement in Texas before he was assigned this case.

      654

      When the motion to recuse was filed, Judge Casseb refused to voluntarily recuse himself, but forwarded the motion to Judge Stovall, as mandated by rule 18a of the Texas Rules of Procedure. Texaco requested Judge Stovall to hear the motion himself or assign another judge and to authorize discovery of documents relevant to the motion. On January 21, 1986, the matter was presented to Judge Stovall at a status conference, at which time copies of Chief Justice Hill's certification of Judge Casseb were presented. This documentation established that Judge Casseb had completed the necessary 12 years of credited service and was entitled to retire and receive pension. This certificate was dated May 20, 1985, several months before Judge Casseb's assignment to the case.

      655

      Texaco proceeded to seek discovery of the supporting documentation leading up to Judge Casseb's certification. Pennzoil opposed the discovery, contending that it exceeded the bounds of rule 18a. Pennzoil asserted then and asserts on appeal that the attack on Judge Casseb's qualifications to serve on this case on the grounds that he had not met the certification requirements (12 years of service) could only be brought in a quo warranto proceeding in which the State would be a party.

      656

      On January 27, Judge Stovall denied the recusal motion, noting that Judge Casseb was assigned as a "retired judge on October 22, 1985. The grounds for disqualification asserted only the question of his qualification as a retired judge. Because the date of his certification as a retired judge was May 1985, no further hearing is necessary or appropriate." Texaco then sought leave to file a writ of mandamus with the Texas Fourteenth Court of Appeals and the Texas Supreme Court, requesting the courts to require Judge Stovall to hold another hearing on the recusal motion. Both courts denied Texaco's motions.

      657

      Under Texas law, because Judge Casseb was not holding judicial office at the time of his retirement in May 1985, he could qualify as a retired judge only if he had accrued 12 years service time. Tex.Rev. Civ.Stat.Ann. Title 110B § 44.101(a)(2) (Vernon 1987). This service credit could come from two sources: (1) "membership service"; and (2) "military service." §§ 41.001(6) and 43.001.

      658

      Judge Casseb served as judge of the 57th District Court for eight years and three months in the 1960's; he served in the military during World War II. Texaco asserts that based upon his son's comments in the New York Times, the addition of these two "credits" will not equal 12 years, despite the certification by Chief Justice Hill.

      659

      Texaco argues that this is a situation authorizing a collateral attack on Judge Casseb because: (1) quo warranto is not an exclusive remedy; (2) rule 18a provides for recusal based upon "any disability"; and (3) the de facto officer doctrine, related to Pennzoil's quo warranto assertion, is not applicable because Judge Casseb was not holding "an office."

      660

      Tex.Government Code §§ 74.031 and 74.032 (Vernon 1987) (formerly Tex.Rev.Civ. Stat.Ann. art. 200a, §§ 5 and 5a) provide for the assignment of a retired judge to fill a district court:

      661

      § 74.031. Assignment of Judges

      Judges may be assigned in the manner provided by this Chapter to hold district court when:

      [854] (1) the regular judge of the district court is absent or is disabled or disqualified for any cause;

      (2) the regular judge of the district court is present or is trying cases as authorized by the constitution and laws of this State, or

      (3) the office of district judge is vacant.

      § 74.032. Judges Subject to Assignment

      The following judges may be assigned as provided by this chapter by the presiding judge of the administrative district in which the assigned judge resides:

      (1) a regular district judge in this state;

      (2) a district judge who is a retiree under Subtitle E, Title 110B, Revised Statutes, and who has consented to be subject to assignment; and

      (3) a former district judge who:

      (A) is not more than 70 years of age;

      (B) was elected at a general election or appointed by the governor, and has not been defeated for reelection or removed from office by impeachment, the supreme court, the governor on address of the legislature, the State Commission on Judicial Conduct, or the abolishment of the judge's court by the legislature; and

      (C) certifies to the presiding judge a willingness to serve and to comply with the prohibitions relating to the practice of law imposed on a retired judge by Section 44.005, Title 110B, Revised Statutes.

      662

      Furthermore, Tex.Rev.Civ.Stat.Ann. Title 110B § 41.001(4) (Vernon Supp.1987) defines a "retiree" as "one who receives an annuity based on service that was credited to the persons."

      663

      Texaco first argues that a quo warranto proceeding would not be a proper vehicle here because pursuant to Tex.R.Civ.P. 782, quo warranto is not exclusive and is to be cumulative of any existing remedy, i.e., a rule 18a recusal proceeding. However, Texaco cites no authority allowing for such a collateral attack where the qualifications of the judge to function as a judge, i.e., a retired judge, are challenged in a rule 18a proceeding.

      664

      In Texas, it has been held consistently that a collateral attack upon the qualifications of a district judge cannot be sustained. When a judge is holding office under color of title by appointment and discharging the duties of the office, his "acts are conclusive as to all persons interested and cannot be attacked in a collateral proceeding, even though the person acting as judge lacks the necessary qualifications and is incapable of legally holding the office." Tart v. State, 642 S.W.2d 244, 246 (Tex.App.—Houston [14th Dist.] 1982, no pet.) (citing Ex parte Lefors, 171 Tex.Crim. 229, 347 S.W.2d 254 (1961). "If the appellant desires to challenge such authority, he must bring a direct action through a quo warranto proceeding." Id., 642 S.W.2d at 246; see also Keen v. State, 626 S.W.2d 309 (Tex.Crim.App.1981); Archer v. State, 607 S.W.2d 539 (Tex.Crim.App.1980), cert. denied, 452 U.S. 908, 101 S.Ct. 3037, 69 L.Ed.2d 410 (1981). The State is an indispensable party in a quo warranto proceeding, which must be brought in the State's name. Lewis v. Drake, 641 S.W.2d 392 (Tex.App.—Dallas 1982, no writ). The basis for this rule of law is a matter of public policy.

      665

      Public officers should be free to perform their duties without their authority questioned incidentally in litigation between other parties. They should not be called on to defend their authority unless a proper legal officer of the State has determined that the question raised is serious and deserves judicial consideration....

      666

      Id., at 395.

      667

      In the instant case, the certification by Chief Justice Hill establishes Judge Casseb's retirement status. An attack on this certification is an attack on Judge Casseb's authority to function as a retired [855] judge. Consequently, such authority can only be challenged by a quo warranto proceeding, which is beyond the capacity of a rule 18a proceeding.

      668

      Texaco also argues that Judge Casseb is not protected from collateral attack because he did not hold an office. As such, the de facto officer doctrine related to the quo warranto theory is not applicable. Furthermore, Texaco argues that where there is a de jure officeholder (Judge Farris), there can be no de facto officeholder. Finally, Texaco contends that the record fails to establish that Judge Casseb ever took the oath of office upon resumption of his duties as a retired judge.

      669

      Texaco cites no applicable authority for any of the preceding assertions. First of all, Texaco's entire de facto argument is refuted in the case of Tart v. State, 642 S.W.2d at 244, which involved a retired judge. In Tart, the appellant challenged the validity of the authority of the retired judge, who presided at the trial, on the basis that he had been assigned to another district court and therefore, had no authority to hold a hearing or enter an order in the court of record. In relying upon Ex parte Lefors and the cases cited therein, the Texas Fourteenth Court of Appeals held that such attack could only be brought through a quo warranto hearing. The Fourteenth Court of Appeals declined to make a distinction between retired judges and duly-elected judges, noting that the assignment of the retired judge to the district court gave him "all the powers of a judge thereof."

      670

      Furthermore, Texaco's oath of office claims are without merit. The cases cited by Texaco concern the appointment of "special judges" who are required to take the oath of office before assignment. "A retired district judge who elects to continue in his judicial capacity is not a `special judge,' but is still a district judge." Olivares v. State, 693 S.W.2d 486, 489 (Tex.Civ.App.—San Antonio 1985, writ dism'd); Tart, 642 S.W.2d at 246; Tex. Gov't Code § 74.032 (Vernon 1987). Absent some showing to the contrary, it will be presumed that the assignment was properly made pursuant to all statutory requirements. Buchanan v. State, 471 S.W.2d 401 (Tex.Crim.App.), cert. denied, 405 U.S. 930, 92 S.Ct. 984, 30 L.Ed.2d 804 (1972).

      671

      We hold that the proper method to attack the judicial qualifications of a retired judge is through a quo warranto proceeding, not a collateral attack under rule 18a that provides for a recusal procedure.

      672

      The remaining question is whether Judge Stovall erred in failing to conduct a hearing on the recusal motion.

      673

      Judge Stovall held a "status conference" with all counsel on January 21, 1986. Judge Casseb's certification was presented to Judge Stovall, who ultimately determined that no additional hearing was merited.

      674

      Texaco argues that in addition to the January 21 status conference, Judge Stovall should have conducted a further hearing, pursuant to rule 18a, citing McLeod v. Harris, 582 S.W.2d 772 (Tex. 1979). In McLeod, the supreme court held that pursuant to the following language from Tex.Rev.Civ.Stat.Ann. art. 200a, § 6 (Vernon 1977), the trial court has a mandatory duty to request that the presiding judge assign another judge to hear the motion to recuse:

      675

      A district judge shall request the Presiding Judge to assign a judge of the Administrative District to hear any motions to recuse such district judge from a case pending in his court.

      676

      While rule 18a does mandate a hearing on a motion to recuse, such requirement is not triggered unless the recusal motion states valid grounds for disqualification. In Gaines v. Gaines, 677 S.W.2d 727, 731 (Tex.App.—Corpus Christi 1984, no writ), the court held that the contentions raised were without merit because "[o]n his motion to disqualify, appellant does not establish enough information to warrant referral of the motion to the presiding judge," citing [856] McClenan v. State, 661 S.W.2d 108 (Tex.Crim.App.1983).

      677

      In the instant case, the challenge to Judge Casseb's qualification as judge on this case was a challenge to his qualification to serve as a retired judge on any case; the only proper proceeding for review of such was a quo warranto proceeding. Consequently, Texaco's rule 18a motion was inadequate. Therefore, no additional hearing was mandated.

      678

      Furthermore, no due process violation is evidenced. Texaco has been afforded a hearing on its allegations by Judge Stovall, the Texas Fourteenth Court of Appeals, the Texas Supreme Court, and this Court. The procedure chosen by appellant was not the proper proceeding; Texas law does not permit such a collateral attack on a judge's qualifications.

      679

      Texaco's Point of Error 85 is overruled.

      680
      ALLEGED CONSTITUTIONAL ERRORS
      681

      In Points of Error 86 through 90, Texaco claims that it was denied certain rights under the supremacy clause, the commerce clause, the full faith and credit clause, and the due process clause of the United States Constitution.

      682

      Texaco's points of error that the judgment violates the supremacy, commerce, full faith and credit, and due process clauses of the United States Constitution were not raised until its motion for judgment n.o.v. Pennzoil asserted in its reply to the motion for judgment n.o.v. and asserts on appeal that appellant has waived these defenses because they were not timely pled. Texaco responds that because Pennzoil's claim was based in tort and not on a statute, there was no pleading requirement to raise a constitutional issue. We note that Texaco's sole authority for such proposition, Pennington v. Singleton, 606 S.W.2d 682 (Tex.1980), is distinguishable from our case.

      683

      In Pennington, plaintiff brought suit alleging common law fraud. The trial court held that although plaintiff failed to prove common law fraud, he did prove a cause of action under the Texas Deceptive Trade Practices Act. On appeal, the court of appeals initially affirmed the judgment. However, in his motion for rehearing, defendant alleged that the treble damages provision of the DTPA could not be constitutionally applied because it had not been pled. The court of appeals agreed and reversed the judgment and rendered judgment that plaintiff take nothing.

      684

      On appeal to the Texas Supreme Court, petitioner Pennington alleged that Singleton should not be entitled to challenge the constitutionality of the DTPA because he did not raise the argument until his motion for rehearing, citing cases that hold that the unconstitutionality of a statute is an affirmative defense that is waived if not pled at trial. The supreme court noted that "because Pennington's petition alleged common law fraud and did not mention the DTPA, the applicability of these cases is questionable." Id. at 688.

      685

      Texaco asserts that such holding means that "when a plaintiff's claim is not based on a statute, there is no pleading requirement to raise a constitutional issue"; consequently, it argues that it has not waived its complaint.

      686

      The constitutionality of a statute is an affirmative defense that must be timely pled; otherwise, it is waived. State v. Scott, 460 S.W.2d 103, 107 (Tex.1970), cert. denied, 402 U.S. 1012, 91 S.Ct. 2188, 29 L.Ed.2d 435 (1971). The instant case does not involve constitutional objections to a statute, it involves constitutional objections to the judgment rendered. The initial question to be answered is whether the Texaco timely asserted its constitutional objections.

      687

      Constitutional objections may be waived by a failure to raise them at a proper time. Curtis Publishing Co. v. Butts, 388 U.S. 130, 144, 87 S.Ct. 1975, 1985, 18 L.Ed.2d 1094 (1967). In Michel v. State, 350 U.S. 91, 99, 76 S.Ct. 158, 163, 100 [857] L.Ed. 83 (1955), the Supreme Court held that the test for making a claim to a constitutional right is whether the defendant has had a reasonable opportunity to have the issue heard and determined by the court. "No procedural principle is more familiar to this Court than that a constitutional right may be forfeited in criminal as well as civil cases by the failure to make timely assertion of that right." Michel v. State, 350 U.S. at 99, 76 S.Ct. at 163 (quoting Yakus v. United States, 321 U.S. 414, 444, 64 S.Ct. 660, 677, 88 L.Ed. 834 (1944)).

      688

      However, in some instances, "the mere failure to interpose such a defense prior to the announcement of a decision that might support it cannot prevent a litigant from later invoking such a ground." Curtis Publishing Co., 388 U.S. at 143, 87 S.Ct. at 1985 (1967). An effective waiver must be one of a known right or privilege. Almost without exception, this requirement of a knowing and intelligent waiver has been applied only to those rights that the constitution guarantees to a criminal defendant in order to preserve a fair trial. Schneckloth v. Bustamonte, 412 U.S. 218, 236-237, 93 S.Ct. 2041, 2052, 36 L.Ed.2d 854 (1973). However, in Curtis, the United States Supreme Court applied this standard in a civil action.

      689

      Curtis involved the defamation of a public figure. The defendant-petitioner had asserted no constitutional defenses prior to the verdict. However, after the plaintiff obtained a verdict, the Supreme Court announced its decision in New York Times Co. v. Sullivan, 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964), which for the first time held that the first amendment requires proof of actual malice before a public official is entitled to recover damages for a defamatory falsehood. Consequently, the defendant presented this constitutional defense to the trial court, which rejected the claim as did the court of appeals.

      690

      Plaintiff-respondent made two arguments before the United States Supreme Court in support of his contention that petitioner-defendant's failure to raise the constitutional defense, articulated in New York Times, amounted to a knowing waiver: (1) the general state of the law at the time of the Curtis trial was such that the defendant should have seen "the handwriting on the wall," i.e., that New York Times merely drew from earlier precedents in state law and that there were intimations in an earlier opinion that some applications of libel law might be in conflict with the first amendment; and (2) some of defendant's lawyers were involved in the New York Times litigation and should have been alerted to the constitutional contentions.

      691

      In rejecting these arguments, the Supreme Court noted several factors that pointed to the justice of its decision. Primary to this consideration was the fact that the constitutional objection raised was a previously unrecognized constitutional right. Furthermore, the constitutional objection was raised early enough so that the United States Supreme Court was given an opportunity to observe the attitude of the courts below regarding these issues, noting that although the New York Times decision was before the trial judge, he found it inapplicable, and that "[i]t was almost certain that he would have rebuffed any effort to interpose general constitutional defenses at the time of trial." 388 U.S. at 145, fn. 10, 87 S.Ct. at 1986, fn. 10. Finally, the Supreme Court noted that the constitutional protection that was allegedly waived,

      692

      safeguards a freedom which is the `matrix, the indispensable condition, of nearly every other form of freedom.'

      Where the ultimate effect of sustaining a claim of waiver might be an imposition on that valued freedom [of speech], we are unwilling to find waiver in circumstances which fall short of being clear and compelling.

      693

      Id. at 145, 87 S.Ct. at 1986.

      694

      The present case is distinguishable from the Curtis case. Texaco has alleged no previously unrecognized constitutional objection and there is no first amendment objection lodged. Rather, the arguments presented are as follows: (1) [858] Supremacy Clause: the agreement violated SEC Rule 10b-13; such a void agreement will not support a cause of action for tortious interference; the judgment redefines New York law, bringing it into conflict with the federal regulatory scheme under the Williams Act; (2) Commerce Clause: the judgment will "chill" interstate tender offers and therefore restrain interstate commerce; (3) Full Faith and Credit Clause: Texas failed to respect the basic policy decisions of New York whose substantive law was applicable here; and (4) Due Process Clause: the judgment amounts to an "arbitrary assertion of power."

      695

      Many of these assertions encompass previously made arguments on appeal but now are couched in constitutional terms. Texaco's supremacy clause, commerce clause, and due process clause arguments are waived because these assertions could have been pled timely. However, we consider Texaco's full faith and credit clause argument because it could not have been addressed until judgment was entered.

      696

      The full faith and credit clause, article IV, § 1 of the United States Constitution, requires each state to give effect to the official acts of the other states. Nevada v. Hall, 440 U.S. 410, 421, 99 S.Ct. 1182, 1188, 59 L.Ed.2d 416 (1979). A judgment that is entered in one state must be respected in another, provided that the first state had subject matter jurisdiction and jurisdiction over the parties. In certain limited situations, the courts of one state must apply the statutory laws of another state, subject to the forum's own interest in furthering its public policy. Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 105 S.Ct. 2965, 2979, 86 L.Ed.2d 628 (1985).

      697

      In the instant case, there is no dispute that the governing substantive law was New York law. The sole objection here is that the court erroneously applied and often misstated the governing law. This argument is simply a re-urging of Texaco's previous assertions that are now couched in constitutional terms. Since we have determined that the trial court properly applied New York law, Texaco's argument is without merit.

      698

      Finally, Texaco argues that the judgment rendered undermines federal interests by deterring the initiation of contests for corporate control across the country. Texaco argues that such resulting restraint on interstate commerce is in derogation of the commerce clause.

      699

      Texaco relies solely upon Edgar v. MITE Corp., 457 U.S. 624, 102 S.Ct. 2629, 73 L.Ed.2d 269 (1982), which is not on point. In MITE, the United States Supreme Court struck down an Illinois statute that required a tender offeror to notify the secretary of state and the target company of its intent to make a tender offer and the material terms of the offer 20 business days before the offer expired. Id. at 636, 102 S.Ct. at 2637. During that 20-day period, the offeror could not communicate its offer to the shareholders, but the target company could disseminate information to its shareholders, many of whom lived out of state, regarding the pending offer.

      700

      The court held that for several reasons, the statute was unconstitutional under the commerce clause. The court noted that because only 27% of the target company shareholders lived in the state, any transaction regarding communication of the offer to its shareholders would be interstate commerce; thus, the statute sought to prevent MITE from making its offer and concluding interstate transactions not only with the Illinois shareholders, but also with those out of state. If Illinois could impose such regulations on interstate commerce, so might other states, which would "thoroughly stifl[e]" interstate commerce in securities transactions generated by tender offers. Id. at 642, 102 S.Ct. at 2640.

      701

      The court determined also that on its face, the Illinois statute applied even if not one of the target company's shareholders lived in Illinois; the commerce clause precludes the application of a state statute to commence wholly outside the state's borders. Finally, the court held the Illinois [859] statute imposed an excessive burden on commerce in relation to the local interests served by the statute. The court noted:

      702

      The effects of allowing the Illinois Secretary of State to block a nationwide tender offer are substantial. Shareholders are deprived of the opportunity to sell their shares at a premium. The reallocation of economic resources to their highest valued use, a process which can improve efficiency and competition, is hindered. The incentive the tender offer mechanism provides incumbent management to perform well so that stock prices remain high is reduced.

      703

      Id. at 643, 102 S.Ct. at 2641.

      704

      The instant case does not involve a statute by which the State attempts to regulate tender offers. This cause of action is for tortious interference with a contract. Judgment was not rendered because Texaco won in a competitive tender offer situation. Rather, it was rendered pursuant to the jury's finding that Texaco had tortiously interfered with a binding agreement. A judgment based upon such a finding will not deter the "invitation of contests for corporate control throughout the country"; however, it should deter tortious interference with a binding agreement between parties.

      705

      Additionally, Texaco's commerce clause argument is one that could have been pled prior to judgment. Texaco had full knowledge of the cause of action filed against it. Its position throughout trial and this appeal has been that the facts prove a competitive tender offer situation only, and any judgment rendered against Texaco would "chill" corporate tender offers. The fact that the jury accepted Pennzoil's position rather than Texaco's does not afford Texaco an opportunity to belatedly assert new defenses. Because Texaco waited until after judgment to urge this argument, it is waived.

      706

      Points of Error 86, 87, 88, 89, and 90 are overruled.

      707
      DAMAGES
      708

      In its 57th through 69th points of error, Texaco claims that the evidence was legally and factually insufficient to support the jury's compensatory and punitive damage awards.

      709

      Texaco attacks Pennzoil's use of a replacement cost model to prove its compensatory damages. It urges that: (1) the court should have instructed the jury that the correct measure of Pennzoil's compensatory damages was the difference between the market price and contract price of Getty stock at the time of the breach; (2) the punitive damages award is contrary to New York law and public policy; (3) the punitive and compensatory damages are excessive; (4) and prejudgment interest should not have been allowed.

      710

      In a cause involving a tortious interference with an existing contract, New York courts allow a plaintiff to recover the full pecuniary loss of the benefits it would have been entitled to under the contract. Guard-Life Corp. v. S. Parker Hardware Manufacturing Corp., 50 N.Y.2d 183, 428 N.Y.S.2d 628, 406 N.E.2d 445 (1980). The plaintiff is not limited to the damages recoverable in a contract action, but instead is entitled to the damages allowable under the more liberal rules recognized in tort actions. Id.

      711

      New York courts have cited and relied extensively on the Restatement (Second) of Torts in deciding damages issues, compensatory as well as punitive.

      712

      Section 774A of the Restatement (Second) of Torts (1977), reads in pertinent part:

      713

      (1) One who is liable to another for interference with a contract ... is liable for damages for

      (a) the pecuniary loss of the benefits of the contract ...; [and]

      (b) consequential losses for which the interference is a legal cause....

      714

      Comment (a) under the above section provides that since the tort is an intentional one, punitive damages are recoverable in these actions under appropriate circumstances. Although section 908 of the Restatement (Second) of Torts provides general [860] guidelines, the particular circumstances under which a plaintiff is entitled to punitive damages are not clearly defined under New York law; there seem to be different tests, depending on the tort. A frequently cited New York Court of Appeals opinion, Walker v. Sheldon, 10 N.Y.2d 401, 223 N.Y.S.2d 488, 179 N.E.2d 497 (1961), sets forth the theory for favoring the awarding of punitive damages and lists many examples of actions in which New York courts have allowed punitive damages. We will discuss those standards under our punitive damages section.

      715

      Pennzoil relied on two witnesses to prove the amount of its damages: Dr. Thomas Barrow and Dr. Ronald Lewis. Dr. Barrow holds a Ph.D. in petroleum engineering from Stanford University, and a bachelor's and master's degree from the University of Texas in geology and petroleum engineering. He has been president of Humble Oil & Refining Company, a senior vice-president of Exxon Corporation, chairman and chief executive officer of Kennecott Corporation, and president of Standard Oil of Ohio. He sits on the board of directors of many major corporations and charitable institutions.

      716

      Dr. Lewis is employed by Pennzoil as a vice-president in charge of offshore operations. He holds a bachelor of science degree and a master of science degree in petroleum engineering from Colorado School of Mines, and a Ph.D. with emphasis on petroleum engineering from the University of Texas. He has held responsible positions with the government, Mobil Oil Company, and Pennzoil, and taught petroleum engineering for seven years.

      717

      Texaco presented no witnesses to refute the testimony of Dr. Barrow or Dr. Lewis.

      718

      Dr. Barrow prepared three damages models, as follows:

      719

      (1) a replacement cost model,

      720

      (2) a discounted cash flow model, and

      721

      (3) a cost acquisition model.

      722

      Because the jury based its award of damages on the replacement cost model, the other two models will not be discussed. By Dr. Barrow's testimony, Pennzoil showed that because of Texaco's interference with its Getty contract, it was deprived of its right to acquire 3/7th's of Getty's proven reserves, amounting to 1.008 billion barrels of oil equivalent (B.O.E.), at a cost of $3.40 a barrel. Pennzoil's evidence further showed that its cost to find equivalent reserves (based on its last five years of exploration costs) was $10.87 per barrel. Therefore, Pennzoil contended that it suffered damages equal to 1.008 billion B.O.E. times $7.47 (the difference between $10.87, the cost of finding equivalent reserves, and $3.40, the cost of acquiring Getty's reserves) or $7.53 billion. The jury agreed.

      723

      Texaco first alleges that the trial judge should have instructed the jury that the measure of Pennzoil's damages was the difference between the market value of Getty Oil stock and its contract price at the time of the breach. We reject this contention. The Getty/Pennzoil agreement contemplated something more than a simple buy-sell stock transaction. Pennzoil's cause of action against Texaco was in tort, not in contract, and Pennzoil's measure of damages was the pecuniary loss of the benefits it would have been entitled to under the contract. Guard-Life Corporation, 50 N.Y.2d 183, 428 N.Y.S.2d 628, 406 N.E.2d 445. There was ample evidence that the reason Pennzoil (and later, Texaco) wanted to buy Getty was to acquire control of Getty Oil's reserves, and not for any anticipated profit from the later sale of Getty stock. There was evidence that such fluctuations in market price are primarily of interest to holders of small, minority share positions.

      724

      The court in Special Issue No. 3 correctly instructed the jury that the measure of damages was the amount necessary to put Pennzoil in as good a position as it would have been in if its agreement, if any, with the Getty entities had been performed. If the measure of damages suggested by Texaco was correct, then there would have been no necessity to submit an issue at all, [861] because no issue of fact would have existed, there being no dispute about the market value of the stock or the contract price of the stock at the time of the breach.

      725

      Texaco next contends that the replacement cost theory is based on the speculative and remote contention that Pennzoil would have gained direct access to Getty's assets. Texaco strongly urges that Pennzoil had a "good faith" obligation under its alleged contract to attempt to reorganize and restructure Getty Oil rather than to divide its assets. We agree. Under New York law, a duty of fair dealing and good faith is implied in every contract. Teachers Insurance & Annuity Association of America v. Butler, 626 F.Supp. 1229, 1231-32 (S.D.N.Y.1986) (citing Rowe v. Great Atlantic & Pacific Tea Co., 46 N.Y.2d 62, 412 N.Y.S.2d 827, 385 N.E.2d 566 (1978)). But a duty of good faith and fair dealing does not require that Pennzoil completely subordinate its financial well-being to the proposition of reorganization or restructuring.

      726

      The directors of Pennzoil would have had a duty to the company's shareholders to obtain the greatest benefit from the merger assets, by either restructuring, reorganizing, or taking the assets in kind. If taking the assets in kind would be the most advantageous to Pennzoil, its directors would, in the absence of a great detriment to Getty, have a duty to take in kind. So the acquisition of a pro rata share of Getty Oil's reserves would be more than a mere possibility, unless the restructuring or reorganization of Getty would be just as profitable to Pennzoil as taking the assets in kind.

      727

      Next, Texaco urges that the jury's use of the replacement cost model resulted in a gross overstatement of Pennzoil's loss because:

      728

      (a) Pennzoil sought to replace Getty's low value reserves with reserves of a much higher value;

      (b) Pennzoil based its replacement cost on its costs to find oil only during the period from 1980 to 1984, rather than over a longer period;

      (c) Pennzoil improperly included future development costs in its exploration costs;

      (d) Pennzoil used pre-tax rather than post-tax figures; and

      (e) Pennzoil failed to make a present value adjustment of its claim for future expenses.

      729

      Our problem in reviewing the validity of these Texaco claims is that Pennzoil necessarily used expert testimony to prove its losses by using three damages models. In the highly specialized field of oil and gas, expert testimony that is free of conjecture and speculation is proper and necessary to determine and estimate damages. Amoco Production Co. v. Alexander, 594 S.W.2d 467, 477 (Tex.Civ.App.— Houston [1st Dist.] 1979), modified on other grounds, 622 S.W.2d 563 (Tex.1981). Texaco presented no expert testimony to refute the claims but relied on its cross-examination of Pennzoil's experts to attempt to show that the damages model used by the jury was flawed. Dr. Barrow testified that each of his three models would constitute an accepted method of proving Pennzoil's damages. It is inevitable that there will be some degree of inexactness when an expert is attempting to make an educated estimate of the damages in a case such as this one. Prices and costs vary, depending on the locale, and the type of crude found. The law recognizes that a plaintiff may not be able to prove its damages to a certainty. But this uncertainty is tolerated when the difficulty in calculating damages is attributable to the defendant's conduct. Whitney v. Citibank, N.A., 782 F.2d 1106 (2d Cir.1986).

      730

      In his replacement cost model, Dr. Barrow estimated the cost to replace 1.008 billion barrels of oil equivalent that Pennzoil had lost. Dr. Barrow admitted that some of Getty's reserves consisted of heavy crude, which was less valuable than lighter crude, and that he had made no [862] attempt to determine whether there was an equivalency between the lost Getty barrels and the barrels used to calculate Pennzoil's exploration costs. Dr. Barrow also testified that there was no way to determine what grade of reserves Pennzoil would find in its future exploration; they could be better or worse than the Getty reserves. Finally Dr. Barrow testified that in spite of his not determining the value equivalency, the replacement cost model was an accepted method of figuring Pennzoil's loss. Dr. Lewis testified that with improved refining technology, the difference in value between light and heavy crude was becoming less significant.

      731

      Texaco next urges that Pennzoil should have calculated replacement cost by using a longer time period and industry wide figures rather than using only its own exploration costs, over a five year period. Dr. Lewis admitted that it might have been more accurate to use a longer period of time to estimate exploration costs, but he and Dr. Barrow both testified that exploration costs had been consistently rising each year and that the development cost estimates were conservative. Dr. Barrow testified that in his opinion, Pennzoil would, in the future, have to spend a great deal more than $10.87 a barrel to find crude. Dr. Lewis testified that industry wide exploration costs were higher than Pennzoil's, and those figures would result in a higher cost estimate than the $10.87 per barrel used by Pennzoil.

      732

      Next, Texaco claims that Pennzoil inflated its exploration costs by $1.86 per barrel by including "future development cost" in its historical exploration costs. Both Dr. Lewis' and Dr. Barrow's testimony refuted that contention. Texaco neither offered evidence to refute their testimony, nor did its cross-examination reveal that this was an unwarranted cost.

      733

      Texaco also claims that Pennzoil should have used post-tax rather than pre-tax figures in figuring its loss calculations. First, it contends that there are large tax incentives for exploration and development that are not applicable to acquisition of reserves. Second, it contends that there was a $2 billion tax penalty attached to the Pennzoil/Getty agreement, and Pennzoil's $900 million share of that penalty would have increased its $3.40 pre-tax acquisition cost by nearly a dollar.

      734

      Dr. Barrow testified that the fact that Pennzoil included $997 million as recapture tax in its costs of acquiring the Getty reserves, made the pre-tax comparison between the $3.40 per barrel to acquire Getty reserves and the $10.87 per barrel for Pennzoil to find new oil, "apples and apples"; in other words, the $997 million tax adjustment compensated for the tax benefits reaped when discovering, as compared with purchasing, reserves. Further, there was no conclusive proof that the Internal Revenue Service would have assessed a $2 billion penalty to Getty's purchase of the Museum's shares under the Pennzoil/Getty agreement, as alleged by Texaco. Several witnesses, familiar with tax law, testified that it was unlikely that such a tax would be imposed; therefore it was for the jury to decide when assessing damages, whether Pennzoil's pro rata share of the speculative tax penalty should reduce the amount of its damages.

      735

      Texaco's contention that Pennzoil's cost replacement model should be discounted to present value ignores the fact that Pennzoil's suit is not for future damages but for those already sustained. Pennzoil would have had an interest in the Getty reserves immediately if the agreement had been consummated, and it did not seek damages for reserves to be recovered in the future. The cases cited by Texaco are inapposite here because all involve damages that the plaintiff would incur in the future, such as lost wages or future yearly payments. Also, Texaco requested no jury instruction on a discount or a discount rate; therefore, any complaint of the court's failure to submit the issue or instruction is waived. See Tex.R.Civ.P. 279. Nor was Texaco entitled to an omitted finding by the court under rule 279, because [863] the omitted discount and discount rate were not issues "necessarily referable" to the damages issue. Id.

      736

      Texaco's Points of Error 57 through 60 are overruled.

      737

      In its 69th point of error, Texaco claims that the court erroneously applied New York Law when it allowed prejudgment interest, because most of the damages are to compensate for expenses to be incurred over the next 25 years. We have previously considered and rejected Texaco's contention that Pennzoil's recovery, or any part thereof, was for future damages.

      738

      Under New York law, a plaintiff in an action for inducing a breach of contract is entitled as a matter of right to interest on the amount of recovery, measured from the date of the accrual of the cause of action. De Long Corp. v. Morrison-Knudsen Co., 14 N.Y.2d 346, 251 N.Y.S.2d 657, 200 N.E.2d 557 (1964).

      739

      Point of Error 69 is overruled.

      740
      PUNITIVE DAMAGES
      741

      Texaco alleges five legal reasons why punitive damages were not available to Pennzoil in this case.

      742

      First, Texaco incorrectly claims that punitive damages are not available to a plaintiff in an inducement of breach of contract cause, where the alleged tortfeasor acted for its own economic benefit rather than gratuitously to injure the defendant, citing Guard-Life Corp., 67 A.D.2d 658, 412 N.Y.S.2d 623 (App.Div. 1979), modified on other grounds, 50 N.Y.2d 183, 428 N.Y.S.2d 628, 406 N.E.2d 445. The Guard-Life Corp. court disallowed punitive damages because there was no evidence of malice, ill will, or a wrongful act done willfully or maliciously. The court there noted that the defendant's motive was to secure an economic advantage and merely contrasted that fact with the absence of evidence of malice or ill will. On appeal, New York's highest court stated that the defendant's status as a competitor would not protect it from the consequences of interfering with an existing contract, though it might excuse him from interfering with a prospective contract or a contract terminable at will.

      743

      Second, Texaco says that New York law prohibits punitive damages where the defendant was acting pursuant to the advice of counsel and believed its actions were proper. Texaco incorrectly, for the purposes of this argument, states that the court wrongfully excluded evidence proffered by Texaco concerning the legal advice it was given and its consequent belief that its conduct was proper. The court specifically informed Texaco that it could offer this testimony for the limited purpose of disproving that Pennzoil was entitled to punitive damages, but Texaco refused to make the limited offer. Further, there is much testimony in the record that Texaco's attorneys advised it that there was no binding contract between the Getty entities and Pennzoil, and that Texaco's management acted pursuant to that advice. The jury could have considered that testimony together with the other evidence when determining whether to assess punitive damages.

      744

      We agree that a good faith reliance on the advice of counsel is an important factor in determining whether a defendant's conduct is willful, wanton, or reckless, but we are of the opinion that such reliance would not necessarily preclude an award of punitive damages under New York law. Texaco cites Russian Church of Our Lady of Kazan v. Dunkel, 67 Misc.2d 1032, 326 N.Y.S.2d 727 (Sup.Ct.1971), modified on other grounds, 41 A.D.2d 746, 341 N.Y. S.2d 148 (App.Div.1973), aff'd, 33 N.Y.2d 456, 354 N.Y.S.2d 631, 310 N.E.2d 307 (1974), in support of its contention, but in that case, the court held that plaintiff's proof of punitive damages was deficient because the evidence failed to show that the defendants' conduct was wanton, willful, or reckless. The court then commented that the defendants had been acting pursuant to the advice of counsel, and [864] that such conduct was not tantamount to criminality justifying punitive damages. We do not consider this language to announce a general rule that acting pursuant to the advice of counsel precludes punitive damages, any more than we consider that a showing of criminal conduct is necessary to such an award.

      745

      Third, Texaco claims that New York law precludes an award of punitive damages absent a showing that Texaco's conduct constituted morally culpable conduct aimed at the public. Where the conduct of a party is of such a nature that similar behavior should be discouraged, the court can award punitive damages. 14 N.Y.Jur., Damages, § 176 et seq. We are of the opinion that Borkowski v. Borkowski, 39 N.Y.2d 982, 387 N.Y.S.2d 233, 355 N.E.2d 287 (1976), and Whitney v. Citibank, N.A., 782 F.2d at 1118, both refute Texaco's contention that a showing of conduct aimed at the public generally is necessary to support a punitive damage award. Even if there were such a requirement, Texaco's conduct, as found by the jury, could be considered conduct aimed at the public that punitive damages are designed to deter.

      746

      Fourth, Texaco claims that the culpable conduct that the jury had in mind in awarding punitive damages was not even attributable to Texaco, but instead was the conduct of the Getty entities. Texaco contends that the argument of counsel and the court's instruction in Special Issue No. 2 allowed the jury to punish Texaco for the acts of the Getty's entities. There is no testimony to support this allegation. We have no way, other than speculation, of knowing what specific acts the jury considered when assessing punitive damages.

      747

      Texaco's fifth contention is that the amount of punitive damages awarded is unreasonable. This contention will be discussed with the following points of error wherein Texaco requests a remittitur.

      748
      REMITTITUR
      749

      In its 65th through 68th points of error, Texaco claims that the jury's award of both compensatory and punitive damages are grossly excessive and prays that we remand on that basis or grant a remittitur. Though the size of the award was indeed large, so were the stakes.

      750

      Although the verdict is large and the trial court, in the exercise of its sound discretion, could have set it aside, an appellate court will not disturb the verdict in the absence of circumstances tending to show that it was the result of passion, prejudice, or other improper motive; or that the amount fixed was not the result of a deliberate and conscientious conviction in the minds of the jury and the court; or that the amount was so excessive as to shock a sense of justice of the appellate court.

      751

      Under former rule 440, Texas Rules of Civil Procedure, the appellate court could suggest a remittitur if it was of the opinion that the verdict was excessive. If the remittitur was not filed, the court could reverse the judgment. Effective September 1, 1986, Tex.R.Civ.P. 440 was repealed and replaced by rule 85, Texas Rules of Appellate Procedure. The successor rule reads in pertinent part:

      752

      [I]f such court [Court of Appeals] is of the opinion that the trial court abused its discretion in refusing to suggest a remittitur and that said cause should be reversed for that reason only, then said appellate court shall indicate to such party, or his attorney, within what time he may file a remittitur of such excess.

      753

      Because appellate review occurs after September 1, 1986, we are of the opinion that we are required to apply the "abuse of discretion" test set forth in rule 85, Tex.R. App.P. But we are also of the opinion that the result on the question of remittitur in this case would be the same under either rule.

      754

      Under the new rule, we may order a remittitur only if we find that the trial judge abused his discretion in refusing to suggest a remittitur. In reviewing remittitur points to determine whether the amount of damages awarded is excessive, [865] we consider only the evidence that is favorable to the award. Wharf Cat, Inc. v. Cole, 567 S.W.2d 228 (Tex.Civ.App.—Corpus Christi 1978, writ ref'd n.r.e.).

      755

      Though the compensatory damages are large, they are supported by the evidence, and were not the result of mere passion, prejudice, or improper motive. We have received many amicus curae briefs suggesting that the verdict should be greatly reduced or overturned because of the adverse economic impact it would have, if allowed to stand, on certain states and industries, and on Texaco's many shareholders. Though we are mindful of the economic effect the judgment might have on some individuals and institutions, and we are sympathetic with those who might be affected by the verdict through no fault of their own, we are not authorized by law to substitute our judgment for that of the jury, and to make redress as we deem appropriate. Because we are of the opinion that the evidence supports the jury's award of compensatory damages, we do not consider a remittitur of those damages appropriate.

      756

      In New York, punitive damages have been allowed in cases where the wrong complained of is morally culpable, or is actuated by evil and reprehensible motives, not only to punish the defendant but to deter him as well as others from indulging in similar conduct in the future. Walker v. Sheldon, 10 N.Y.2d 401, 223 N.Y.S.2d 488, 179 N.E.2d 497. It is not the form of the action that gives the right to punitive damages, but the moral culpability of the defendant. Id. Punitive damages are recoverable in tort actions where there exist ingredients of malice, fraud, oppression, insult, wanton or reckless disregard of plaintiff's rights, or other circumstances of aggravation. Such damages are also recoverable for intentional torts committed wantonly or maliciously. Rupert v. Sellers, 65 A.D.2d 473, 411 N.Y.S.2d 75 (App.Div.1978) (J. Cardamone concurring), aff'd, 50 N.Y.2d 881, 430 N.Y.S.2d 263, 408 N.E.2d 671, cert. denied, 449 U.S. 901, 101 S.Ct. 272, 66 L.Ed.2d 132 (1980); Oehlhof v. Solomon, 73 A.D. 329, 76 N.Y.S. 716 (App.Div.1902). In Rupert, the court upheld an award of punitive damages in an action for tortious interference with a contractual relationship, and impliedly held that the interference by an insurance broker with a group insurance contract between a medical society and a competing broker constituted a tort aimed at the public. In Russian Church of Our Lady of Kazan, 67 Misc. 1032, 326 N.Y.S.2d 727, the court stated that "[w]here the conduct of a party is of such a nature that similar behavior should be discouraged, the court can award punitive or exemplary damages. However, the court or the jury must be satisfied that such conduct was wanton, willful or malicious." Id., 326 N.Y.S.2d at 757.

      757

      The jury in our case found that Texaco's actions were intentional, willful, and in wanton disregard of the rights of Pennzoil. We consider this a sufficient finding under New York law to support an award of punitive damages in a tortious inducement of a breach of contract cause of action.

      758

      The amount of exemplary or punitive damages to be awarded depends on the facts of the case and rests largely within the sound discretion of the jury. Carr v. Galvan, 650 S.W.2d 864 (Tex.App.—San Antonio 1983, writ ref'd n.r.e.); Toomey v. Farley, 2 N.Y.2d 71, 156 N.Y.S.2d 840, 138 N.E.2d 221 (1956). Under Texas law, exemplary damages must be reasonably proportioned to actual damages. Alamo National Bank v. Kraus, 616 S.W.2d 908 (Tex.1981). Factors to be considered in determining whether an award of exemplary damages is reasonable include: (1) the nature of the wrong, (2) the character of the conduct involved, (3) the degree of culpability of the wrongdoer, (4) the situation and sensibilities of the parties concerned, and (5) the extent to which such conduct offends a public sense of justice and propriety. Id. at 910.

      759

      The proportion of punitive damages to actual damages presents no problem. [866] The punitive damages awarded only amount to approximately 40% of actual damages, which in itself is not excessive. Under New York law, punitive damages need bear no ratio to compensatory damages. Hartford Accident & Indemnity Co. v. Village of Hempstead, 48 N.Y.2d 218, 422 N.Y.S.2d 47, 397 N.E.2d 737 (1979).

      760

      But when considering the other factors listed above, our task is more difficult. From the evidence, the jury could have concluded that Texaco deliberately seized upon an opportunity to wrest an immensely valuable contract from a less affluent competitor, by using its vast wealth to induce the Museum, Gordon Getty, and Getty Oil to breach an existing contract. The evidence shows that the wrongful conduct came not from servants or mid-level employees but from top level management. Apparently the jury believed that the conduct of Texaco's top level management was less than the public was entitled to expect from persons of such stature. There is no evidence that Texaco interfered with the contract to injure Pennzoil, but the jury could reasonably conclude from the evidence at trial that Texaco cared little if such injury resulted from its interference. Points of Error 61 through 66 and Point 68 are overruled.

      761

      Considering the type of action, the conduct involved, and the need for deterrence, we are of the opinion that the punitive damages are excessive and that the trial court abused its discretion in not suggesting a remittitur. Though our Texas guidelines are similar to those of New York, New York courts have adopted a more conservative stance on punitive damages. There is a point where punitive damages may overstate their purpose and serve to confiscate rather than to deter or punish. In this case, punitive damages of one billion dollars are sufficient to satisfy any reason for their being awarded, whether it be punishment, deterrence, or encouragement of the victim to bring legal action. We conclude that the award of punitive damages is excessive by two billion dollars. Point of Error 67 is sustained.

      762

      If within 30 days from the date of this opinion, Pennzoil files in this Court a remittitur of two billion dollars, the judgment of the trial court will be reformed, and the award of one billion dollars punitive damages will be affirmed; otherwise, the cause will be reversed and remanded.

      763

      Finally, we respectfully refuse to certify to the Texas Supreme Court the question of the judgment's propriety under New York law. We are of the opinion that this question is not an appropriate one for certification.

      764

      Texaco's Points of Error 1 through 66, and 68 through 90 are overruled. Point of Error 67 is sustained.

      765

      If within thirty days from the date of this judgment, Pennzoil files in this Court a remittitur of two billion dollars, as suggested above, the judgment will be reformed and affirmed as to the award of $7.53 billion in compensatory damages and $1 billion in exemplary damages; otherwise the judgment will be reversed and remanded.

      766

      [1] Rule 701 provides: "If the witness is not testifying as an expert, his testimony in the form of opinions or inferences is limited to those opinions or inferences which are (a) rationally based on the perception of the witness and (b) helpful to a clear understanding of his testimony or the determination of a fact in issue."

      767

      [2] SEC Rule 10b-13 provides that once a party has publicly announced a tender offer, the tender offeror is prohibited from directly or indirectly purchasing or arranging to purchase securities of the target company, other than through the tender offer, so long as the tender offer remains open. 17 C.F.R. § 240.10b-13 (1985).

    • 1.4 Empro Mfg. Co. Inc. v. Ball-Co Mfg. Inc.

      1
      870 F.2d 423 (1989)
      2
      EMPRO MANUFACTURING CO., INC., Plaintiff-Appellant,
      v.
      BALL-CO MANUFACTURING, INC., et al., Defendants-Appellees.
      3
      No. 88-2480.
      4

      United States Court of Appeals, Seventh Circuit.

      5
      Argued February 17, 1989.
      6
      Decided March 16, 1989.
      7

      [424] Thomas P. Luning, Schiff Hardin & Waite, Chicago, Ill., for plaintiff-appellant.

      8

      John L. Hines, Jr., Tuite, Mejia & Giacchetti, Chicago, Ill., for defendants-appellees.

      9

      Before EASTERBROOK, RIPPLE, and MANION, Circuit Judges.

      10
      EASTERBROOK, Circuit Judge.
      11

      We have a pattern common in commercial life. Two firms reach concord on the general terms of their transaction. They sign a document, captioned "agreement in principle" or "letter of intent", memorializing these terms but anticipating further negotiations and decisions — an appraisal of the assets, the clearing of a title, the list is endless. One of these terms proves divisive, and the deal collapses. The party that perceives itself the loser then claims that the preliminary document has legal force independent of the definitive contract. Ours is such a dispute.

      12

      Ball-Co Manufacturing, a maker of specialty valve components, floated its assets on the market. Empro Manufacturing showed interest. After some preliminary negotiations, Empro sent Ball-Co a three-page "letter of intent" to purchase the assets of Ball-Co and S.B. Leasing, a partnership holding title to the land under Ball-Co's plant. Empro proposed a price of $2.4 million, with $650,000 to be paid on closing and a 10-year promissory note for the remainder, the note to be secured by the "inventory and equipment of Ballco." The letter stated "[t]he general terms and conditions of such proposal (which will be subject to and incorporated in a formal, definitive Asset Purchase Agreement signed by both parties)". Just in case Ball-Co might suppose that Empro had committed itself to buy the assets, paragraph four of the letter stated that "Empro's purchase shall be subject to the satisfaction of certain conditions precedent to closing including, but not limited to" the definitive Asset Purchase Agreement and, among five other conditions, "[t]he approval of the shareholders and board of directors of Empro".

      13

      Although Empro left itself escape hatches, as things turned out Ball-Co was the one who balked. The parties signed the letter of intent in November 1987 and negotiated through March 1988 about many terms. Security for the note proved to be the sticking point. Ball-Co wanted a security interest in the land under the plant; Empro refused to yield.

      14

      When Empro learned that Ball-Co was negotiating with someone else, it filed this diversity suit. Contending that the letter of intent obliges Ball-Co to sell only to it, Empro asked for a temporary restraining order. The district judge set the case for a prompt hearing and, after getting a look at the letter of intent, dismissed the complaint under Fed.R.Civ.P. 12(b)(6) for failure to state a claim on which relief may be granted. Relying on Interway, Inc. v. Alagna, 85 Ill.App.3d 1094, 41 Ill.Dec. 117, 407 N.E.2d 615 (1st Dist.1980), the district judge concluded that the statement, appearing twice in the letter, that the agreement is "subject to" the execution of a definitive contract meant that the letter has no independent force.

      15

      Empro insists on appeal that the binding effect of a document depends on the parties' intent, which means that the [425] case may not be dismissed — for Empro says that the parties intended to be bound, a factual issue. Empro treats "intent to be bound" as a matter of the parties' states of mind, but if intent were wholly subjective there would be no parol evidence rule, no contract case could be decided without a jury trial, and no one could know the effect of a commercial transaction until years after the documents were inked. That would be a devastating blow to business. Contract law gives effect to the parties' wishes, but they must express these openly. Put differently, "intent" in contract law is objective rather than subjective — a point Interway makes by holding that as a matter of law parties who make their pact "subject to" a later definitive agreement have manifested an (objective) intent not to be bound, which under the parol evidence rule becomes the definitive intent even if one party later says that the true intent was different. As the Supreme Court of Illinois said in Schek v. Chicago Transit Authority, 42 Ill.2d 362, 364, 247 N.E.2d 886, 888 (1969), "intent must be determined solely from the language used when no ambiguity in its terms exists". See also Feldman v. Allegheny International, Inc., 850 F.2d 1217 (7th Cir.1988) (Illinois law); Skycom Corp. v. Telstar Corp., 813 F.2d 810, 814-17 (7th Cir.1987) (New York and Wisconsin law). Parties may decide for themselves whether the results of preliminary negotiations bind them, Chicago Investment Corp. v. Dolins, 107 Ill.2d 120, 89 Ill.Dec. 869, 871, 481 N.E.2d 712, 715 (1985), but they do this through their words.

      16

      Because letters of intent are written without the care that will be lavished on the definitive agreement, it may be a bit much to put dispositive weight on "subject to" in every case, and we do not read Interway as giving these the status of magic words. They might have been used carelessly, and if the full agreement showed that the formal contract was to be nothing but a memorial of an agreement already reached, the letter of intent would be enforceable. Borg-Warner Corp. v. Anchor Coupling Co., 16 Ill.2d 234, 156 N.E.2d 513 (1958). Conversely, Empro cannot claim comfort from the fact that the letter of intent does not contain a flat disclaimer, such as the one in Feldman pronouncing that the letter creates no obligations at all. The text and structure of the letter — the objective manifestations of intent — might show that the parties agreed to bind themselves to some extent immediately. Borg-Warner is such a case. One party issued an option, which called itself "firm and binding"; the other party accepted; the court found this a binding contract even though some terms remained open. After all, an option to purchase is nothing if not binding in advance of the definitive contract. The parties to Borg-Warner conceded that the option and acceptance usually would bind; the only argument in the case concerned whether the open terms were so important that a contract could not arise even if the parties wished to be bound, a subject that divided the court. See 156 N.E.2d at 930-36 (Schaefer, J., dissenting).

      17

      A canvass of the terms of the letter Empro sent does not assist it, however. "Subject to" a definitive agreement appears twice. The letter also recites, twice, that it contains the "general terms and conditions", implying that each side retained the right to make (and stand on) additional demands. Empro insulated itself from binding effect by listing, among the conditions to which the deal was "subject", the "approval of the shareholders and board of directors of Empro". The board could veto a deal negotiated by the firm's agents for a reason such as the belief that Ball-Co had been offered too much (otherwise the officers, not the board, would be the firm's final decision-makers, yet state law vests major decisions in the board). The shareholders could decline to give their assent for any reason (such as distrust of new business ventures) and could not even be required to look at the documents, let alone consider the merits of the deal. See Earl Sneed, The Shareholder May Vote As He Pleases: Theory and Fact, 22 U.Pittsburgh L.Rev. 23, 31-36, 40-42 (1960) (collecting cases). Empro even took care to require the return of its [426] $5,000 in earnest money "without set off, in the event this transaction is not closed", although the seller usually gets to keep the earnest money if the buyer changes its mind. So Empro made clear that it was free to walk.

      18

      Neither the text nor the structure of the letter suggests that it was to be a one-sided commitment, an option in Empro's favor binding only Ball-Co. From the beginning Ball-Co assumed that it could negotiate terms in addition to, or different from, those in the letter of intent. The cover letter from Ball-Co's lawyer returning the signed letter of intent to Empro stated that the "terms and conditions are generally acceptable" but that "some clarifications are needed in Paragraph 3(c) (last sentence)", the provision concerning Ball-Co's security interest. "Some clarifications are needed" is an ominous noise in a negotiation, foreboding many a stalemate. Although we do not know what "clarifications" counsel had in mind, the specifics are not important. It is enough that even on signing the letter of intent Ball-Co proposed to change the bargain, conduct consistent with the purport of the letter's text and structure.

      19

      The shoals that wrecked this deal are common hazards in business negotiations. Letters of intent and agreements in principle often, and here, do no more than set the stage for negotiations on details. Sometimes the details can be ironed out; sometimes they can't. Illinois, as Chicago Investment, Interway, and Feldman show, allows parties to approach agreement in stages, without fear that by reaching a preliminary understanding they have bargained away their privilege to disagree on the specifics. Approaching agreement by stages is a valuable method of doing business. So long as Illinois preserves the availability of this device, a federal court in a diversity case must send the disappointed party home empty-handed. Empro claims that it is entitled at least to recover its "reliance expenditures", but the only expenditures it has identified are those normally associated with pre-contractual efforts: its complaint mentions the expenses "in negotiating with defendants, in investigating and reviewing defendants' business, and in preparing to acquire defendants' business." Outlays of this sort cannot bind the other side any more than paying an expert to tell you whether the painting at the auction is a genuine Rembrandt compels the auctioneer to accept your bid.

      20

      AFFIRMED.

  • 2 II .A. 2. Indefiniteness

    • 2.1 Martin Deli v. Schumacher

      1
      52 N.Y.2d 105 (1981)
      2
      Joseph Martin, Jr., Delicatessen, Inc., Appellant-Respondent,
      v.
      Henry D. Schumacher, Respondent-Appellant.
      3

      Court of Appeals of the State of New York.

      4
      Argued November 10, 1980.
      5
      Decided January 20, 1981.
      6

      Edward Flower for appellant-respondent.

      7

      David S. J. Rubin for respondent-appellant.

      8

      Chief Judge COOKE and Judges GABRIELLI, JONES and WACHTLER concur with Judge FUCHSBERG; Judge MEYER concurs in a memorandum; Judge JASEN dissents in part and on defendant's appeal votes to affirm in a memorandum.

      9
      [108] FUCHSBERG, J.
      10

      This case raises an issue fundamental to the law of contracts. It calls upon us to review a decision of the Appellate Division, which held that a realty lease's provision that the rent for a renewal period was "to be agreed upon" may be enforceable.

      11

      The pertinent factual and procedural contexts in which the case reaches this court are uncomplicated. In 1973, the appellant, as landlord, leased a retail store to the respondent for a five-year term at a rent graduated upwards from $500 per month for the first year to $650 for the fifth. The renewal clause stated that "[t]he Tenant may renew this lease for an additional period of five years at annual rentals to be agreed upon; Tenant shall give Landlord thirty (30) days written notice, to be mailed certified mail, return receipt requested, of the intention to exercise such right". It is not disputed that the tenant gave timely notice of its desire to renew or that, once the landlord made it clear that he would do so only at a rental starting at $900 a month, the tenant engaged an appraiser who opined that a fair market rental value would be $545.41.

      12

      The tenant thereupon commenced an action for specific performance in Supreme Court, Suffolk County, to compel the landlord to extend the lease for the additional term at the appraiser's figure or such other sum as the court would decide was reasonable. For his part, the landlord in due course brought a holdover proceeding in the local District Court to evict the tenant. On the landlord's motion for summary judgment, the Supreme Court, holding that a bald agreement to agree on a future rental was unenforceable for uncertainty as a matter of law, dismissed the tenant's complaint. Concordantly, it denied as moot the tenant's motion to remove the District Court case to the Supreme Court and to consolidate the two suits.

      13

      It was on appeal by the tenant from these orders that the Appellate Division, expressly overruling an established line of cases in the process, reinstated the tenant's complaint and granted consolidation. In so doing, it reasoned that "a renewal clause in a lease providing for future agreement on the rent to be paid during the renewal term is enforceable if it is established that the parties' intent was not to [109] terminate in the event of a failure to agree". It went on to provide that, if the tenant met that burden, the trial court could proceed to set a "reasonable rent". One of the Justices, concurring, would have eliminated the first step and required the trial court to proceed directly to the fixation of the rent. Each party now appeals by leave of the Appellate Division pursuant to CPLR 5602 (subd [b], par 1). The tenant seeks only a modification adopting the concurrer's position. The question formally certified to us by the Appellate Division is simply whether its order was properly made. Since we conclude that the disposition at the Supreme Court was the correct one, our answer must be in the negative.

      14

      We begin our analysis with the basic observation that, unless otherwise mandated by law (e.g., residential emergency rent control statutes), a contract is a private "ordering" in which a party binds himself to do, or not to do, a particular thing (Fletcher v Peck, 6 Cranch [10 US] 87, 136; Hart and Sachs, Legal Process, 147-148 [1958]). This liberty is no right at all if it is not accompanied by freedom not to contract. The corollary is that, before one may secure redress in our courts because another has failed to honor a promise, it must appear that the promisee assented to the obligation in question.

      15

      It also follows that, before the power of law can be invoked to enforce a promise, it must be sufficiently certain and specific so that what was promised can be ascertained. Otherwise, a court, in intervening, would be imposing its own conception of what the parties should or might have undertaken, rather than confining itself to the implementation of a bargain to which they have mutually committed themselves. Thus, definiteness as to material matters is of the very essence in contract law. Impenetrable vagueness and uncertainty will not do (1 Corbin, Contracts, § 95, p 394; 6 Encyclopedia of New York Law, Contracts, § 301; Restatement, Contracts 2d, § 32, Comment a).

      16

      Dictated by these principles, it is rightfully well settled in the common law of contracts in this State that a mere agreement to agree, in which a material term is left for future negotiations, is unenforceable (Willmott v Giarraputo, 5 N.Y.2d 250, 253; [110] Sourwine v Truscott, 17 Hun 432, 434).[1] This is especially true of the amount to be paid for the sale or lease of real property (see Forma v Moran, 273 App Div 818; Huber v Ruby, 187 Misc 967, 969, app dsmd 271 App Div 927; see, generally, 58 ALR 3d 500, Validity and Enforceability of Provision for Renewal of Lease at Rental to be Fixed by Subsequent Agreement of the Parties). The rule applies all the more, and not the less, when, as here, the extraordinary remedy of specific performance is sought (11 Williston, Contracts [Jaeger 3d ed], § 1424; Pomeroy, Equity Jurisprudence, § 1405).

      17

      This is not to say that the requirement for definiteness in the case before us now could only have been met by explicit expression of the rent to be paid. The concern is with substance, not form. It certainly would have sufficed, for instance, if a methodology for determining the rent was to be found within the four corners of the lease, for a rent so arrived at would have been the end product of agreement between the parties themselves. Nor would the agreement have failed for indefiniteness because it invited recourse to an objective extrinsic event, condition or standard on which the amount was made to depend. All of these, inter alia, would have come within the embrace of the maxim that what can be made certain is certain (9 Coke 47a). (Cf. Backer Mgt. Corp. v Acme Quilting Co., 46 N.Y.2d 211, 219 [escalation of rent keyed to building employees' future wage increases]; City of Hope v Fisk Bldg. Assoc., 63 AD2d 946 [rental increase to be adjusted for upward movement in US Consumer Price Index]; see, generally, 87 ALR3d 986; Lease Provisions Providing for Rent Adjustment Based on Event or Formula Outside Control of Parties.)

      18

      But the renewal clause here in fact contains no such ingredients. [111] Its unrevealing, unamplified language speaks to no more than "annual rentals to be agreed upon". Its simple words leave no room for legal construction or resolution of ambiguity. Neither tenant nor landlord is bound to any formula. There is not so much as a hint at a commitment to be bound by the "fair market rental value" which the tenant's expert reported or the "reasonable rent" the Appellate Division would impose, much less any definition of either. Nowhere is there an inkling that either of the parties directly or indirectly assented, upon accepting the clause, to subordinate the figure on which it ultimately would insist, to one fixed judicially, as the Appellate Division decreed be done, or, for that matter, by an arbitrator or other third party.

      19

      Finally, in this context, we note that the tenant's reliance on May Metropolitan Corp. v May Oil Burner Corp. (290 N.Y. 260) is misplaced. There the parties had executed a franchise agreement for the sale of oil burners. The contract provided for annual renewal, at which time each year's sales quota was "to be mutually agreed upon". In holding that the defendant's motion for summary judgment should have been denied, the court indicated that the plaintiff should be given an opportunity to establish that a series of annual renewals had ripened into a course of dealing from which it might be possible to give meaning to an otherwise uncertain term. This decision, in the more fluid sales setting in which it occurred, may be seen as a precursor to the subsequently enacted Uniform Commercial Code's treatment of open terms in contracts for the sale of goods (see Uniform Commercial Code, § 1-205, subd [1]; § 2-204, subd [3]; see, also, Restatement, Contracts 2d, § 249). As the tenant candidly concedes, the code, by its very terms, is limited to the sale of goods. The May case is therefore not applicable to real estate contracts. Stability is a hallmark of the law controlling such transactions (see Heyert v Orange & Rockland Utilities, 17 N.Y.2d 352, 362).

      20

      For all these reasons, the order of the Appellate Division should be reversed, with costs, and the orders of the Supreme Court, Suffolk County, reinstated. The certified question, therefore, should be answered in the negative. As to the [112] plaintiff's appeal, since that party was not aggrieved by the order of the Appellate Division, the appeal should be dismissed (CPLR 5511), without costs.

      21
      MEYER, J. (concurring).
      22

      While I concur in the result because the facts of this case do not fit the rule of May Metropolitan Corp. v May Oil Burner Corp. (290 N.Y. 260), I cannot concur in the majority's rejection of that case as necessarily inapplicable to litigation concerning leases. That the setting of that case was commercial and that its principle is now incorporated in a statute (the Uniform Commercial Code) which by its terms is not applicable to real estate is irrelevant to the question whether the principle can be applied in real estate cases.

      23

      As we recognized in Farrell Lines v City of New York (30 N.Y.2d 76, 82, quoting from A.Z.A. Realty Corp. v Harrigan's Cafe, 113 Misc 141, 147): "An agreement of lease possesses no peculiar sanctity requiring the application of rules of construction different from those applicable to an ordinary contract." To the extent that the majority opinion can be read as holding that no course of dealing between the parties to a lease could make a clause providing for renewal at a rental "to be agreed upon" enforceable I do not concur.

      24
      JASEN, J. (dissenting in part).
      25

      While I recognize that the traditional rule is that a provision for renewal of a lease must be "certain" in order to render it binding and enforceable, in my view the better rule would be that if the tenant can establish its entitlement to renewal under the lease, the mere presence of a provision calling for renewal at "rentals to be agreed upon" should not prevent judicial intervention to fix rent at a reasonable rate in order to avoid a forfeiture. Therefore, I would affirm the order of the Appellate Division for the reasons stated in the opinion of Justice LEON D. LAZER at the Appellate Division.

      26

      On defendant's appeal: Order reversed, with costs, the orders of Supreme Court, Suffolk County, reinstated and the question certified answered in the negative.

      27

      On plaintiff's appeal: Appeal dismissed, without costs.

      28

      [1] Other States which are in accord include: Arkansas (Lutterloh v Patterson, 211 Ark 814); Maine (Metcalf Auto Co. v Norton, 119 Me 103); Missouri (State ex rel. Johnson v Blair, 351 Mo 1072; North Carolina (Young v Sweet, 266 NC 623); Oregon (Karamanos v Hamm, 267 Ore 1); and Rhode Island (Vartabedian v Peerless Wrench Co., 46 RI 472). But see: Alaska (Hammond v Ringstad, 10 Alaska 543); Arizona (Hall v Weatherford, 32 Ariz 370); California (Chaney v Schneider, 92 Cal App 2d 88); Ohio (Moss v Olson, 148 Ohio St 625); and Tennessee (Playmate Clubs v Country Clubs, 62 Tenn App 383).

    • 2.2 Lafayette Place Associates v. Boston Redevelopment Authority

      1
      427 Mass. 509 (1998)
      2
      LAFAYETTE PLACE ASSOCIATES
      v.
      BOSTON REDEVELOPMENT AUTHORITY & another.[1]
      3

      Supreme Judicial Court of Massachusetts, Suffolk.

      4
      March 9, 1998.
      5
      May 20, 1998.
      6

      Present: WILKINS, C.J., ABRAMS, LYNCH, GREANEY, FRIED, MARSHALL, & IRELAND, JJ.

      7

      [510] Stephen H. Oleskey (Lisa J. Pirozzolo with him) for the plaintiff.

      8

      Saul A. Schapiro (Nina F. Lempert with him) for Boston Redevelopment Authority.

      9

      Rory FitzPatrick (Irene C. Freidel & Merita Hopkins with him) for the city of Boston.

      10
      FRIED, J.
      11

      A jury found the defendants, the city of Boston (city) and the Boston Redevelopment Authority (BRA), liable for monetary damages for having breached a contract with the plaintiff, Lafayette Place Associates (LPA), for the sale of certain land (Hayward Parcel), and the BRA liable for the tort of intentional interference with LPA's contractual relation with another entity, Campeau Massachusetts, Inc. (Campeau). The trial judge entered judgment against the city, and granted judgment notwithstanding the verdict in favor of the BRA, on the ground that it was not amenable to suit for an intentional tort. We conclude that there was a valid contract between the city and LPA but that the city did not breach it. We also affirm the judgment entered in favor of the BRA, and the dismissal of LPA's claims under G. L. c. 93A.

      12
      I
      13

      This dispute arises out of efforts going back to the administration of Boston Mayor Kevin White in the late 1970's to rehabilitate the "Combat Zone," a dilapidated area adjacent to a shopping area on Washington Street. A grand scheme was devised by LPA's entrepreneurs for the construction of a department store, a retail mall, and a hotel in the area. In 1978, an agreement (Tripartite Agreement) was signed between LPA, the city, and the BRA for the development of the area in two phases. Phase I was to encompass a shopping mall and a hotel and was eventually built.[2] It is not a subject of these suits. Phase II was to include one or more office buildings, further retail space, and a department store. It was to be built on four parcels of land to be assembled into a single parcel, called the Hayward Parcel, at the time partially occupied by a city parking structure, the Hayward Place parking garage. Whether Phase II would ever be undertaken was made contingent in the Tripartite Agreement on [511] the city's decision to remove the parking structure. If it did, the city would still be allowed to build an underground parking garage on the site with LPA being granted air rights to build over it.

      14

      The agreement as to the development of the Hayward Parcel was principally set out in Section 6.02 of the Tripartite Agreement. Section 6.02 is expressed in terms of the grant of an option to LPA to purchase the Hayward Parcel. The option is contingent on notice by the city that it plans to discontinue the Hayward Place garage. By agreement, LPA could thereupon notify the city within the option period if it "desires to purchase the rights hereby made available to it [and] the City shall sell the same...." The Tripartite Agreement and accompanying maps identify the boundaries of the Hayward Parcel, but indicate several alternatives concerning the rights to be conveyed. In the Tripartite Agreement, the city is stated to have in hand appraisals of the fair market value of two of the four component parcels of the Hayward Parcel, and agrees "forthwith" to obtain appraisals of the two remaining parcels.[3] The price to be paid was to be one-half of the appraised fair market value as of 1978, plus one-half of the increase in value attributable to "the construction of the Public Improvements and the Project."[4] In other words, the formula accounted for the possibility that between 1978 and the future sale of the Hayward Parcel, the value of the parcel could change as a result of the construction of Phase I on adjacent land. The Tripartite Agreement further provided that "[t]he existence and amount of increase in fair market values attributable to the construction of the Public Improvements and the Project shall be determined by independent appraisal." Section 13.01 of the Tripartite Agreement also provides, after giving a standard definition of fair market value, that such value shall be determined by a procedure, akin to arbitration, by which by giving written notice either party may designate a first appraiser, the other party may designate a second appraiser, and a third appraiser may be appointed by the first and second, by the Chief Judge of the United States District Court [512] for the District of Massachusetts, or by the president of the Boston Bar Association.[5]

      15

      The Tripartite Agreement also provides,

      16
      "[t]he Developer may exercise the right and option set forth in this Section 6.02 by giving notice of its desire to purchase such rights to the City at any time within the Option Period. After the receipt of and following such notice from the Developer, the parties shall in good faith negotiate and enter into an agreement calling for the purchase and sale of the rights in question. Such agreement shall be in the customary form of agreements for the purchase and sale of real estate in the greater Boston area except that the agreement shall reflect such reservation and shall contain other appropriate provisions with respect to the integration of construction and other matters relevant to coordinated use of the rights conveyed and the rights retained by the City."
      17

      On February 26, 1982, the parties agreed, in what is known as the Second Supplemental Agreement, to certain changes to the Tripartite Agreement concerning the construction and operation of a parking garage by the city under the Hayward Parcel. In addition, the parties amended Section 6.02 by adding the following:

      18
      "[I]f the Developer shall exercise the right and option set forth in this Section 6.02, there shall automatically be created an agreement by the Developer to buy and by the City to sell the ... Parcels .... [A]ppropriate details of the purchase and sale shall be worked out by the parties so as to conform to their intent under this Section 6.02., but if they shall be unable to do so then the matter shall be resolved by arbitration in accordance with the arbitration procedure set forth in ARTICLE EIGHT of the Deed and Agreement, dated as of September 11, 1979, between the City and the Developer."
      19

      Article 8 of the deed sets out a binding arbitration procedure for [513] the resolution of disputes.[6] On December 16, 1983, the city gave notice to LPA that it intended to discontinue the Hayward Place garage and build a parking garage beneath the Hayward Parcel, thereby commencing LPA's option period. In that notice, the city listed five contingencies to closing the sale of the Hayward Parcel, including that "the parties are able to agree, via appraisals, on the increased value of parcels D-1, D-2 and D-3, as the result of the construction of the Lafayette Place Project."

      20

      On July 2, 1986, as all parties agree, LPA exercised its option to purchase the Hayward Parcel. On October 27, 1987, the parties extended the date on which closing might take place by providing, in what is known as the Third Supplemental Agreement, that:

      21
      "Section 6.02 of the Tripartite Agreement is amended by deleting the proviso in the fourth full paragraph thereof... and substituting in its place the following: `provided that, unless the City and the Developer shall agree to a further extension, the Developer shall lose its rights hereunder to proceed with an acquisition if a closing has not occurred by January 1, 1989, unless the City and/or the Authority shall fail to work in good faith with the Developer through the design review process to conclude a closing.'"
      22

      By virtue of the Third Supplemental Agreement, LPA had until January 1, 1989, a date which all parties refer to as the "drop dead date," to "proceed with an acquisition."

      23

      LPA never demanded and the city never tendered a deed within the required time period or at any other time. The basis of its contract action against the city is that the city in bad faith failed to carry out those of its obligations under the Tripartite Agreement necessary to allow LPA to proceed to demand a closing, and indeed that it engaged in bad faith actions designed to impede LPA in effecting a timely closing. The reason for these obstructionist tactics by the city, as LPA sought to show by testimony and documents, was that the new administration [514] of Mayor Raymond Flynn believed that the price established by the Section 6.02 formula, which was based on 1978 values, was grossly unfair to the city in the light of a strong surge in real estate prices in the intervening years. LPA offered evidence of several instances of what it claimed were the city's obstructionist tactics. These included failing to complete the appraisals necessary to establish the price for the Hayward Parcel, initiating zoning changes that would have greatly reduced the allowable height of the office towers planned for the site, lack of cooperation about determining whether Avenue de Lafayette and New Essex Street would be closed, and threatening to put a new street through the middle of the parcel, which would have made its development economically unviable.

      24

      In November, 1987, after the conclusion of the Third Supplemental Agreement but before the final breakdown of dealings in 1989, LPA negotiated the sale of its development rights in the Hayward Parcel to Campeau. LPA was to receive $24.5 million in return for its rights under Phase I of the project. The sale was subject to approval by the BRA, and on December 4, 1987, LPA filed an application for approval. On February 1, 1988, LPA withdrew its application; the BRA had not acted on it in the interim. In March, 1988, LPA entered into a lease agreement with Campeau whereby Campeau assumed LPA's debts under Phase I and was to pay LPA approximately $21.5 million in cash and notes in return for LPA's rights to the project. Under the lease agreement, Campeau agreed to pay LPA additional consideration if the BRA approved the sale of the Hayward Parcel.

      25

      Thereafter, LPA was not directly involved in negotiations regarding the sale of the Hayward Parcel. Campeau began elaborate plans for a development called "Boston Crossing," which included construction of a department store and office tower on the Hayward Parcel, the rebuilding of the Phase I mall on its nearby parcel, and the construction of an office tower above a rebuilt Jordan Marsh. During 1988, representatives from Campeau and the BRA met repeatedly to negotiate about Campeau's plans. When it became clear that Campeau could not secure BRA approval for the Boston Crossing project by the expiration of LPA's option period, Campeau requested a further extension of the drop dead date. The BRA refused to extend the January 1, 1989, deadline. On December 19, 1988, Campeau's president sent a letter to Mayor Flynn describing the current [515] state of the project, renewing Campeau's request for an extension of the option period, and informing Mayor Flynn that "we have no recourse but to officially notify the city that we wish to complete the transaction and make payment immediately." On December 30, 1988, Stephen Coyle, director of the BRA, responded. He stated that, "once the development review process is complete, the City's parcel can be sold for its fair reuse value," and noted that "[b]y their own terms, prior agreements on Hayward Place will expire on January 1, 1989. This event does not in our judgment alter our willingness to work with you ... [i]t simply puts the question of the disposition of Hayward Place in a current context."

      26

      LPA's option period expired on January 1, 1989. In June, 1989, the BRA approved Campeau's "Boston Crossing" design, but by June, 1990, Campeau had defaulted on its payments to LPA under the lease agreement and LPA terminated its lease with Campeau. Manufacturers Hanover Trust Company, as lender, foreclosed on LPA's and Campeau's interests in the Lafayette Place Mall in February, 1991, and the project collapsed. On March 16, 1992, LPA filed suit against the city and the BRA.[7] LPA alleged that the city had breached the Tripartite Agreement by failing to work out the necessary details to effect the transfer of the Hayward Parcel after LPA exercised its option to buy, and LPA sought specific performance, or, alternatively, damages for breach of the Tripartite Agreement. LPA also sought damages for breach of the implied covenant of good faith and fair dealing, interference with contractual relations, and violation of G. L. c. 93A.

      27

      On October 21, 1994, a jury returned a verdict against the city and the BRA. The jury found that there was a contract for the purchase of the Hayward Parcel, that both the city and the BRA breached the contract, but that the BRA was not acting as an agent of the city in connection with the contract. The jury awarded LPA $9.6 million against the city. The jury also found that the BRA intentionally interfered with contractual relations between LPA and Campeau, and awarded LPA $6.4 million in damages. The trial judge then ruled that the $6.4 million verdict [516] against the BRA was "encompassed" within the $9.6 million award against the city. On August 17, 1995, the judge granted the BRA's motion for judgment notwithstanding the verdict,[8] ruling that the BRA is a public employer under the Massachusetts Tort Claims Act and is therefore immune from suit for intentional torts. We granted LPA's application for direct appellate review.

      28
      II
      29

      The city makes two principal arguments in this appeal: that the Tripartite Agreement was too indefinite to constitute a binding contract, and that in any event the city was not in breach. Although the city treats these as quite distinct arguments we believe that they must be considered together to come to a fair and sensible view of the arrangement between the parties and their dealings with each other pursuant to it. There were certainly contingencies left open at the time that the parties concluded the Tripartite Agreement, principally the price to be paid, the treatment of Avenue de Lafayette and New Essex Street, and whether or not the city would choose to build an underground garage on the Hayward Parcel. But these open matters did not preclude the formation of a binding agreement. The parties specified formulae and procedures that would determine a price under the several contingencies. It would be most unfortunate if parties could not make binding, reliable agreements about such complex projects, allowing them to make commitments and seek financing for their conclusion. If the degree of specificity the city claims is necessary were insisted on, no such agreements could be concluded. But it is the other side of this same coin that the procedures necessary to lend specificity to what at the outset is not entirely specific are an integral part of the agreement the parties concluded, and, if a party does not follow those procedures, it should not be able to claim that the other side is in breach of what is necessarily still an open-ended arrangement. We conclude that there was sufficient [517] evidence to find a binding agreement, as the jury indeed did find, but it is also clear, as a matter of law, that LPA failed to follow the steps required of it under the Tripartite Agreement as supplemented to put the city in breach.

      30
      A
      31

      The first question is whether there was a valid and enforceable contract between LPA and the city or whether, as the city claims, the terms of the Tripartite Agreement as amended were too indefinite to constitute a contract. The Tripartite Agreement states that "the parties shall in good faith negotiate and enter into an agreement," which the city argues indicates that no binding agreement had been concluded. The city points out that Section 6.02 leaves undetermined the contract price and exactly what is to be included in the Hayward Parcel. In some cases, the failure to reduce uncertainties to definite terms is fatal, particularly where parties have not yet formalized their negotiations or have left essential terms completely open. See Mendel Kern, Inc. v. Workshop, Inc., 400 Mass. 277, 280-281 (1987) ("an intention to do something is not necessarily a promise to do it"); Lucey v. Hero Int'l Corp., 361 Mass. 569, 574 (1972) (no option contract for purchase of land where parties merely specified boundaries to be "mutually agreed upon by both parties"); Saxon Theatre Corp. v. Sage, 347 Mass. 662, 666 (1964) (no contract for lease of property where parties merely signed letter of intent that provided no description of the land nor means of determining rent). But see Shayeb v. Holland, 321 Mass. 429, 431 (1947) (enforcing contract despite absence of price term). We adhere to the principle that "[a]n agreement to reach an agreement is a contradiction in terms and imposes no obligation on the parties thereto," Rosenfield v. United States Trust Co., 290 Mass. 210, 217 (1935), in the circumstances that justify and gave rise to it: where parties have merely reached the stage of "imperfect negotiation" prior to formalizing a contract, and have not yet reduced their agreement to terms. Id. When parties have progressed beyond that stage, however, a competing principle applies: a contract should be interpreted "so as to make it a valid and enforceable undertaking rather than one of no force and effect." Shayeb v. Holland, supra at 432. See McMahon v. Monarch Life Ins. Co., 345 Mass. 261, [518] 264 (1962).[9] Rules of contract must not preclude parties from binding themselves in the face of uncertainty. If parties specify formulae and procedures that, although contingent on future events, provide mechanisms to narrow present uncertainties to rights and obligations, their agreement is binding. See generally Hastings Assocs. v. Local 369 Bldg. Fund, Inc., 42 Mass. App. Ct. 162, 169 (1997) (accepting contract calling for appointment of neutral third party to determine lease price under formula); Cataldo v. Zuckerman, 20 Mass. App. Ct. 731, 737 (1985) (accepting formula for determination of compensation as sufficiently specific to create contract).

      32

      The Tripartite Agreement provided a pricing formula to determine the price to be paid for the Hayward Parcel. When the parties signed the Tripartite Agreement, most of the information needed to complete that formula was available. Because the formula incorporated the fair market value of the parcel at the time of the future transaction, which, by definition, was unknown at the time of contracting, Section 13.01 detailed an appraisal procedure to be used for securing that information. By using that procedure, which called for the creation of a threemember appraisal board, the parties could have determined the price to be paid. In addition, the Second Supplemental Agreement states that "if the Developer shall exercise the right and option set forth in Section 6.02, there shall automatically be created an agreement by the Developer to buy and the City to sell" the Hayward Parcel. Moreover, it specified that "appropriate details of the purchase and sale ... shall be resolved by arbitration" in accordance with a specified procedure. Although this provision was not added until 1982, it created a means for resolving disputes that might arise in the course of effecting the ultimate sale of the Hayward Parcel. In particular, questions about the exact size of the parcel and the allocation of air rights over the relevant public streets were the kind of "details" that [519] could be worked out using this process.[10] To borrow Justice Holmes's metaphor, the machinery was built and had merely to be set in motion. See Drummond v. Crane, 159 Mass. 577, 579 (1893) (a future writing was merely "additional wheel in the machinery" of a contract). See also Sands v. Arruda, 359 Mass. 591, 594 (1971); Coan v. Holbrook, 327 Mass. 221, 224 (1951). We therefore conclude that the Tripartite Agreement, as amended, was an enforceable contract, under which both parties had certain rights and obligations.

      33
      B
      34

      Because the Tripartite Agreement, as amended, was an enforceable contract, upon LPA's exercise of its option in 1986, there arose a bilateral contract for the purchase and sale of the Hayward Parcel. See American Oil Co. v. Cherubini, 351 Mass. 581, 585 (1967) (exercise of option creates bilateral contract for purchase and sale); C. & W. Dyeing & Cleaning Co. v. DeQuattro, 344 Mass. 739, 741 (1962) (same). See also Blum v. Kenyon, 29 Mass. App. Ct. 417, 420 (1990) (same). The question then becomes whether LPA can, as a matter of law, maintain a claim against the city for breach of that contract. "The general rule is that when performance under a contract is concurrent one party cannot put the other in default unless he is ready, able, and willing to perform and has manifested this by some offer of performance." Leigh v. Rule, 331 Mass. 664, 668 (1954). See 6 Corbin, Contracts § 1258 (1962). Any material failure by a plaintiff to put a defendant in breach bars recovery, see Kanavos v. Hancock Bank & Trust Co., 395 Mass. 199, 202-203 (1985); Pas-Teur, Inc. v. Energy Sciences, Inc., 11 Mass. App. Ct. 967, 968-969 (1981) (citing cases), unless the plaintiff is excused from tender because the other party has shown that he cannot or will not perform. Leigh v. Rule, supra. Even if a potential buyer notifies the seller of the buyer's intention to tender on a certain date and appears at the registry of deeds on that date with the required consideration, there may [520] not be the "readiness to perform" that is a necessary condition of placing the defendant in breach. See Mayer v. Boston Metro. Airport, Inc., 355 Mass. 344, 350-352, 354-355 (1969).

      35

      Applying these principles to the facts most favorable to LPA in this case, the question becomes whether LPA, as a matter of law, was ready, able, and willing to close the sale of the Hayward Parcel prior to January 1, 1989, and whether LPA indicated as much to the city.[11] There is no evidence in the record, and LPA does not now argue, that LPA attempted to tender payment for the Hayward Parcel between July, 1986, when it exercised its option under the Tripartite Agreement, and March, 1988, when it transferred its rights to Campeau. LPA must therefore rely on the possibility that Campeau fulfilled LPA's contractual obligations by tendering payment or demanding the deed. On December 19, 1988, less than two weeks prior to the drop dead date, Campeau informed Mayor Flynn by letter that "we have no recourse but to officially notify the city that we wish to complete the transaction and make payment immediately." This is the best evidence in the record of an attempt to tender payment to force the city to close the sale of the Hayward Parcel.[12] It is not sufficient. To place a seller in default, a buyer must manifest that he is ready, able, and willing to perform by setting a time and place for passing papers or making some other concrete offer of performance. See Leigh v. Rule, supra at 668; LeBlanc v. Molloy, 335 Mass. 636, 637-638 (1957); Mayer v. Boston Metro. Airport, Inc., supra at 354. Even attributing to [521] LPA Campeau's action in sending the letter to Mayor Flynn (an attribution the city urges us not to make), Campeau's letter does not specify when, where, or how Campeau intends to tender payment, nor does it indicate what Campeau believes the city's obligations were at that point in time.[13] Compare Fox of Boylston St. Ltd. Partnership v. Mayor of Boston, 418 Mass. 816, 819-820 (1994) (notice letter specified closing date and location); Bucciero v. Drinkwater, 13 Mass. App. Ct. 551, 552-553 (1982) (buyer was ready, willing, and able to perform when he arrived at closing with payment). Campeau provided no suggested purchase price, nor even a suggestion as to when Campeau and the city should meet to resolve the remaining differences. Finally, this single sentence is embedded in a long letter to the mayor sent only weeks prior to the termination of the option period. It was an empty gesture that could not possibly have been acted on in the time remaining until LPA and Campeau forfeited their rights under the Tripartite Agreement.

      36

      LPA might claim that neither it nor Campeau could have tendered and thus put the city in breach, because absent a final delineation of what the parcel contained and an appraisal of what the parcel was worth there was no basis for a definitive tender. But the agreement between the parties specified mechanisms for resolving just these open questions. Indeed it is only because such mechanisms were specified that we have been willing to hold that the arrangement between the parties is definite enough to constitute a binding agreement.

      37

      Under the Section 6.02 price formula, the parties could not have completed the transaction without using the procedure set forth in Section 13.01 to determine whether any increase in the fair market value of the parcel since 1978 was attributable to the construction of Phase I. The Tripartite Agreement does not specify which party has the obligation to trigger Section 13.01's appraisal process; both parties share this responsibility. Neither party could be ready, able, and willing to close the sale until this procedure was at least initiated. Given that this information had not been obtained, and that neither LPA nor Campeau ever sought to obtain it, LPA cannot, as a matter of law, have put the city in default. See Kanavos v. Hancock Bank & Trust, supra at [522] 203 ("[i]f neither could perform, even if the [defendant] repudiated the contract, neither could recover").

      38

      Similarly, under the arbitration clause of the Second Supplemental Amendment, LPA, the city, and the BRA shared responsibility for using arbitration to resolve the remaining differences that LPA claims prevented it from closing the transaction.[14] Neither LPA nor the city activated those procedures. LPA's complaint that the city and the BRA breached the contract by failing to determine the exact size and composition of the Hayward Parcel is undermined by LPA's failure to initiate arbitration about the undecided details or even to propose to the city that the procedures specified in the Tripartite Agreement should be used to resolve these differences. Similarly, questions about the treatment of Avenue de Lafayette and the allocation and value of air rights over it and other streets could have been answered in arbitration, but neither LPA nor Campeau ever sought such answers.

      39

      LPA's claims must thus rest on the possibility that even if its tender — particularly the December 19, 1988, letter from Campeau to Mayor Flynn — was insufficient, LPA (and Campeau) should be excused from its obligation to tender because the city's tactics and delays demonstrated that it would not perform under the contract. See Leigh v. Rule, supra at 668 ("the law does not require a party to tender performance if the other party has shown that he cannot or will not perform"). LPA claims, and the trial judge in denying the city's motion for directed verdict or judgment notwithstanding the verdict cites the fact, that the city failed to secure needed appraisals with which to determine the price for the Hayward Parcel,[15] that the BRA had proposed zoning regulations that placed unacceptable height restrictions on the parcel, that the city's transportation department was threatening to route a street through the parcel, and that LPA, Campeau, the city, and the BRA had failed to reach agreement as to how to treat the Avenue de Lafayette. These facts, taken alone or together, do not excuse the obligation to [523] tender. There was testimony from Marco Ottieri, LPA's project manager, that throughout the mid-1980's, LPA was committed to purchasing the Hayward Parcel regardless of its ultimate configuration and of restrictions placed upon the parcel by the city, because it would "build whatever we could build there profitably." He stated that LPA would have bought the parcel regardless of height restrictions and whether or not the city kept open Avenue de Lafayette. This seriously weakens LPA's argument that the city's proposed regulation of the Hayward Parcel materially affected the transaction or amounted to a repudiation.

      40

      Unlike a situation in which a defendant clearly expresses an unwillingness to perform, thereby repudiating the contract,[16] here LPA seeks to attribute repudiation to the city based on the mere fact that uncertainties remained that LPA shared responsibility for resolving. Compare Hastings Assocs. v. Local 369 Bldg. Fund, Inc., 42 Mass. App. Ct. 162, 177 (1997) (where defendant indicated that it would not fulfil its obligations, defendant was in default and plaintiff was not obliged to use specified procedures to determine value of business). In this circumstance, where a complex contract leaves certain key terms to be decided by formulae and procedures, and where both parties share responsibility for activating those procedures, the plaintiff cannot be ready, able, and willing to tender, nor can the plaintiff put the defendant in default, unless the plaintiff attempts to use the contractually specified mechanisms to overcome the very uncertainties they were designed for. If two parties form an agreement that incorporates procedural devices to overcome unknowns, a plaintiff must at least attempt to make use of those devices before he can claim that the unknowns prevented meeting his obligations at law. This is particularly true in a complex and heavily regulated transaction such as this one, where public entities and public and elected officials with changing policies and constituencies are involved, and the transaction spans many years. This is not to say that governments are absolved from performing contractual obligations, but where a government contract specifies procedures and methods [524] a private party must be particularly assiduous to comply with them. "Men must turn square corners when they deal with the Government." Rock Island, Ark. & La. R.R. v. United States, 254 U.S. 141, 143 (1920) (Holmes, J.). LPA knew at the time it entered into the contract with the city that political bodies have various obligations and constraints, and that closing the sale after exercising its option would require agreeing on the transaction's specifics. We therefore conclude as a matter of law that LPA was not excused from its obligation to put the city in default, and that LPA did not fulfil this obligation.

      41
      C
      42

      LPA alleges not only that the city breached the Tripartite Agreement but that it did so in bad faith. This allegation of bad faith does not change our analysis in the preceding subsection.

      43

      The last clause of the Third Supplemental Agreement states that the January 1, 1989, drop dead date shall not apply if "the City and/or the [BRA] shall fail to work in good faith with the Developer through the design review process to conclude a closing." The Third Supplemental Agreement, however, was not signed until October 29, 1987, immediately prior to LPA's transfer of its rights to Campeau.[17] There is overwhelming evidence that the review process progressed appropriately as soon as Campeau initiated the process in the spring of 1988,[18] [525] only months prior to the drop dead date.[19] Campeau's letters to the BRA during 1988 consistently demonstrate that the design review process was proceeding smoothly and in a collaborative fashion.[20] Thus, LPA cannot argue that the BRA or the city acted in bad faith with regard to the design review process during this period.[21]

      44

      Had bad faith infected the design review process itself, the drop dead date would have been extended automatically according to the terms of the Third Supplemental Agreement. As the review process was not so infected, LPA's bad faith claim rests on the fact that the BRA refused to extend the drop dead date despite Campeau's repeated requests for such an extension. A duty of good faith and fair dealing is implicit in the performance of a party's contractual obligations, see Fortune v. National Cash Register Co., 373 Mass. 96, 102-103 (1977), and generally if parties modify an existing contract, their modification must be made in good faith: one party cannot extract the modification from the other wrongfully. See U.C.C. § 2-209, comment 2 (1989). But LPA cites no authority for the proposition that the refusal by one party to accede to a modification that would inure to the benefit of the other party is, in itself, bad faith, where the only ill motive alleged is a desire to avoid the benefit in question. Absent bad faith in the design review [526] process, the city and the BRA were under no contractual obligation to grant an extension to LPA. Even if the defendants' refusal to extend the deadline was motivated by the possibility of evading the pricing formula in the Tripartite Agreement, as LPA suggests,[22] that refusal could not constitute bad faith, because the BRA had no contractual duty to grant the extension that LPA sought. Compare Anthony's Pier Four, Inc. v. HBC Assocs., 411 Mass. 451, 472 (1991) (finding of bad faith justified where contract required defendant to approve a development plan and defendant refused to do so in order to extract monetary concessions from plaintiff). See Restatement of Contracts § 205 comment a (1979).

      45

      Finally, the mere fact that the city did not convey the Hayward Parcel to Campeau prior to January 1, 1989, does not support a claim of bad faith. Particularly given the uncertainties that LPA added to the transaction — including the substitution of Campeau for LPA and Campeau's including in its design proposals submitted for review designs for a much larger project, the Boston Crossing project, than LPA's original project that referred only to the Hayward Parcel — LPA cannot maintain that the city acted in bad faith by not completing the transaction, unless LPA and Campeau had also done all they could to force the city to close the sale. Had LPA, or Campeau, been serious about putting the city in default, it could either have indicated more clearly that it was ready, able, and willing to close the sale by indicating its understanding of the exact composition of and price to be paid for the Hayward Parcel and setting a time and place for a transfer of the deed, thereby forcing the city to make use of the appraisal and arbitration procedures, or itself pressed the appraisal and arbitration procedures specified in the Tripartite Agreement to resolve all remaining disagreements. That it did none of these things bars [527] its claim against the city.[23] Neither party tendered performance, and neither was in breach or default. See Flynn v. Wallace, 359 Mass. 711, 716 (1971); Hapgood v. Shaw, 105 Mass. 276, 279 (1870). See also Corbin, Contracts § 663 (1960); § 1258 (1962).

      46
      III
      47

      We turn now to LPA's claims against the BRA. The Superior Court jury found that the BRA tortiously and intentionally interfered with LPA's contractual relations with Campeau. The judge granted the BRA's motion for judgment notwithstanding the jury's verdict. The judge ruled that the Massachusetts Tort Claims Act (Act), G. L. c. 258, § 10 (c), renders the BRA, as a "public employer," immune from suit for "any claim arising out of an intentional tort, including ... interference with contractual relations." LPA argues that the BRA was not entitled to this ruling because it had raised the bar of the statute in an untimely fashion; because the BRA was an "independent body politic and corporate" and as such explicitly excluded by G. L. c. 258, § 1, from the immunity accorded by § 10 (c); and because, even if § 10 (c) did apply to the BRA, this would only remit the BRA to its situation before the enactment of c. 258, at which time the BRA was amenable to suit for intentional torts.

      48
      A
      49

      Although the BRA did not raise the bar of the statute in a motion to dismiss or at summary judgment, it did do so in its motion for a directed verdict at the close of all the evidence. The BRA renewed this argument in a motion for judgment notwithstanding the verdict. The judge ruled that this was sufficient, and that there had been a "flurry of arguments from both sides" on the issue. The only relevant authorities LPA cites for the proposition that the BRA raised this issue too late have to do with refusals to grant leave to amend pleadings because of prejudice to the nonmoving party. See Mathis v. Massachusetts Elec. Co., 409 Mass. 256, 264 (1991); Hamed v. Fadili, 408 Mass. 100, 105 (1990). These authorities recognize that this sort of matter is committed to the discretion of the judge. Assuming [528] that this should be treated as a motion to amend the pleadings, we conclude that the judge did not abuse his discretion. This is particularly so because the status of the BRA for purposes of § 10 (c) is a purely legal question not requiring recourse to the jury.

      50
      B
      51

      In Whitney v. Worcester, 373 Mass. 208, 212 (1977), and Morash & Sons v. Commonwealth, 363 Mass. 612 (1973), we warned that, if the Legislature did not act to abrogate the immunity from liability in tort accorded at common law to governmental entities, this court would do so. The Massachusetts Tort Claims Act followed in 1978, providing a scheme of tort liability for "public employers" in certain circumstances and subject to several conditions. See generally Glannon, Governmental Tort Liability under the Massachusetts Tort Claims Act of 1978, 66 Mass. L. Rev. 7, 10 (1981). Section 10 (c) excludes liability for intentional torts from the scope of c. 258 and specifically mentions the tort of interference with contractual relations. See G. L. c. 258, § 10 (c). Section 1 defines a public employer as

      52
      "the commonwealth and any county, city, town, educational collaborative, or district, including any public health district or joint district or regional health district or regional health board established pursuant to the provisions of section twenty-seven A or twenty-seven B of chapter one hundred and eleven, and any department, office, commission, committee, council, board, division, bureau, institution, agency or authority thereof ... which exercises direction and control over the public employee, but not a private contractor with any such public employer, the Massachusetts Bay Transportation Authority, the Massachusetts Port Authority, the Massachusetts Turnpike Authority, or any other independent body politic and corporate. With respect to public employees of a school committee of a city or town, the public employer for the purposes of this chapter shall be deemed to be said respective city or town."
      53

      The Superior Court judge ruled that the BRA was not an "independent body politic and corporate." Neither the statute [529] itself nor our prior decisions allow a ready answer to the controversy the parties raise about this classification. Certainly the term is not self-defining. The leading case on this matter, the learned opinion of the Appeals Court in Kargman v. Boston Water & Sewer Comm'n, 18 Mass. App. Ct. 51 (1984), see Commesso v. Hingham Hous. Auth., 399 Mass. 805, 808 (1987), traces the history of the term "body corporate and politic" from its original appearance in the Preamble to our Constitution to its present usage to designate "a legal entity [created by the Legislature] to perform specified tasks deemed to be essential public functions." Kargman, supra at 55. It is only the subset of independent bodies corporate and politic that do not enjoy immunity from intentional torts under § 10 (c). What entities, in addition to the three specifically mentioned in § 1, are to be identified as independent bodies corporate and politic we have been left to discern from a rather inadequate set of hints. The term itself is not very helpful, so that the Appeals Court in Kargman sought to extrapolate from the list of authorities specifically designated as independent in § 1 to instances not specifically named. It identified two general features of the designated entities: financial independence and political independence. The court went on to identify certain indicia of financial and political independence, id. at 56-58, and concluded that the Boston water and sewer commission was such an independent body. By defining the term independence in terms of financial and political independence, the Kargman analysis at least has the virtue of disaggregating the term into two possibly more manageable units, but the norm is still defined by reference to itself, and that is a problem.

      54

      The Superior Court judge, in a thorough and closely reasoned memorandum, applied the Kargman analysis to the situation of the BRA. He reached his conclusion that the BRA is not an independent body politic by emphasizing the factors that detract from the BRA's political independence: when initiating urban renewal projects it is subject to stringent public notice requirements and requires approval for many of its actions at the State and local level. He also found lacking indicia of financial independence, in that the BRA must account for its expenditures at the State and the local level and may receive State financial assistance for its urban renewal projects and advances to cover certain of its expenses. He concluded that "the BRA is subject to many checks on its power to initiate and carry out redevelopment [530] projects in Boston, which do not comport with political and financial independence. It is significantly less autonomous than either the MBTA, Turnpike, or Massport." LPA points out the many ways in which the BRA has financial and political independence similar to that of the three authorities named in § 1: removal of authority members only for cause; its ability to sue and be sued in its own name; its ability to hold title to property in its own name; its enjoyment of the power of eminent domain; its ability to incur indebtedness and issue bonds without pledging the credit of the State or city; and its ability to charge market rents for its properties. LPA also compares the BRA to the Boston water and sewer commission, which was held to be independent in Kargman. Moreover, LPA points out that some of the features urged by the BRA as indicia of a lack of independence, such as the oversight by the State auditor of its expenditures which the judge mentions, apply to the three named authorities as well. This battle of factors seems much closer to a standoff than either the BRA's or the judge's analysis would acknowledge.

      55

      Any analysis that relies heavily on the Kargman factors must cope with the embarrassment that just the factors that are discerned in Kargman as the indicia of independence of the three named entities are present with at least as much force in the case of Boston, other cities and towns, and the Commonwealth itself — all of which are designated at the beginning of § 1 as public employers. The BRA suggests that perhaps recourse to a possible underlying rationale for the designation of the three named entities might assist analysis: they all provide services for a fee not to the general public but to that specific segment of the public that chooses to use those services, and so it is fair that the users bear the cost in higher fees of the injuries intentionally inflicted by the authorities. This is only mildly convincing. We do not see why the costs of injuries inflicted by non-independent bodies should be borne by the injured parties alone and not by the public in general.[24]

      56

      Though we do not decline the illumination that these proposals and analyses might offer, we probably cannot do much better in this case than to rely on analogy, that logically imperfect but inveterate tool of the law in tight corners. See generally Brewer, Exemplary Reasoning: Semantics, Pragmatics, and the [531] Rational Force of Legal Argument by Analogy, 109 Harv. L. Rev. 925 (1996); Levi, An Introduction to Legal Reasoning (1949). And here the closest analogy to the BRA are the local housing authorities, to which in Commesso we declined to assign independent status for the purposes of §§ 1 and 10 (c). See Commesso, supra at 809. As the Superior Court judge noted, it is significant that redevelopment authorities were created by the Legislature to assume the powers, such as land assembly and the carrying out of redevelopment projects, formerly held by housing authorities. See St. 1952, c. 617, § 4, amending G. L. c. 121, § 26QQ. In communities that choose not to establish redevelopment authorities, the powers assigned to redevelopment authorities remain with the housing authorities. See G. L. c. 121B, § 9. If a community chooses to establish a redevelopment authority, the governance of that authority is the same as that which applies to a housing authority, G. L. c. 121B, §§ 5-7. And, as the Superior Court judge pointed out,

      57
      "As operating agencies, housing and redevelopment authorities enjoy the same powers, including but not limited to the power to: sue and be sued; work with the federal government on urban renewal projects; receive public or private loans and grants; take property by eminent domain; clear and improve property; enter into contracts necessary to carry out housing and urban renewal projects; make relocation payments to displaced businesses or persons; borrow money upon the security of their bonds or notes; invest in securities; contract with organizations undertaking c. 121A projects; make and amend rules and regulations; and join with other operating agencies in exercising their respective powers. G. L. c. 121B, § 11."
      58

      Indeed, the two-page chart provided by LPA as an appendix to its brief here comparing the political and financial situation of various types of entities in the Commonwealth shows only one nontrivial difference[25] between the BRA and a housing authority: the existence of statutory limits on the rent that housing authorities may charge tenants, see G. L. c. 121B, § 32, and the absence of such constraints on sales and leases of property [532] by a redevelopment authority under G. L. c. 121B, § 49. But of course this difference is merely the result of the assignment of functions to a redevelopment authority in communities that choose to establish one. If redevelopment functions remain in the housing authority, which then plays a dual role pursuant to G. L. c. 121B, § 9 (b) or (c), then the housing authority too, in respect to those functions, may charge market rents.[26] And it would be captious to suggest that a housing authority does or does not enjoy the immunities of the Act depending on whether redevelopment functions have been left with it.

      59

      The BRA is unique among redevelopment authorities and enjoys a special statutory basis. See generally Aronson, The Boston Redevelopment Authority: A Quasi Public Authority, 43 B.U. L. Rev. 466 (1963). The most significant difference between the BRA and other redevelopment authorities is that the BRA functions as the city's planning board and enjoys the powers of the State housing board in respect to c. 121A urban renewal projects.[27] See St. 1960, c. 652. See also Opinion of the Justices, 341 Mass. 760, 787-788 (1960). But both a city planning board and the State housing board would certainly be within the § 1 definition of public employers for the purposes of G. L. c. 258, § 10, and the addition of their powers should not make the designation of the BRA as a public employer less apt.

      60

      Finally, we resolve whatever indeterminacy this analysis may leave in favor of subjecting the BRA to the general regime of c. 258. The BRA is certainly a public body, a governmental entity of some sort performing public functions. Any doubts about the BRA's status under the difficult and uncertain designation of "independent body politic and corporate" should be resolved against such a designation, because of the desirability of making the c. 258 regime as comprehensive as possible, thus avoiding reintroducing the "crazy quilt" of immunities, Rogers v. Metropolitan Dist. Comm'n, 18 Mass. App. Ct. 337, 338-339 (1984), which the Act was meant to replace. This is particularly [533] so because any decision taking a governmental entity out of the category of "public employers" has the effect not only, as here, of making that entity liable for intentional torts, but also of removing the immunities provided by the other provisions of § 10. This may have large consequences to which none of our cases so far has attended. Of particular concern is removing a governmental body from the protection of the immunity of § 10 (b), which refers to

      61
      "any claim based upon the exercise or performance or the failure to exercise or perform a discretionary function or duty on the part of a public employer or public employee, acting within the scope of his office or employment, whether or not the discretion involved is abused."
      62

      We conclude that the BRA is a public employer not excluded from the scope of the Act.

      63
      C
      64

      We have less difficulty disposing of LPA's ingenious argument that, even if the BRA is not an independent body politic and corporate, § 10 (c) does not confer upon it immunity from liability for intentional torts. Section 10 of c. 258 provides that "[t]he provisions of sections one to eight, inclusive, shall not apply to" any of the claims listed in that section. G. L. c. 258, § 10. The list includes, among other things, claims based "on the exercise or performance or the failure to exercise or perform a discretionary function," § 10 (b); and claims arising out of intentional torts, § 10 (c). Other excluded claims relate to assessment or collection of taxes, § 10 (d); issuance, denial or revocation of permits or licenses, § 10 (e); inadequate or negligent inspections, § 10 (f); failure to provide fire protection or police services, § 10 (g)-(h); and negligent provision of medical services, § 10 (j) (2). Section 2 provides for liability of public employers for negligence, G. L. c. 258, § 2, and §§ 4-7 impose certain prerequisites for claims against public employers, including the prior presentation of such claims for administrative action, and provide for procedures for their resolution. G. L. c. 258, §§ 4-7. LPA argues that because § 10 provides that none of these provisions shall apply to intentional torts, the result is that such claims are simply remitted to the preexisting law governing liability. And because the BRA's [534] enabling statute, G. L. c. 121B, § 13, which preexisted c. 258, provided that the BRA shall be "liable ... in tort in the same manner as a private corporation," the BRA continues to be liable for the intentional tort charged here. LPA finds confirmation for this conclusion in our decision in Spring v. Geriatric Auth. of Holyoke, 394 Mass. 274 (1985), in which we stated that "[b]y excluding intentional torts from the scope of G. L. c. 258, the Legislature left open the matter of governmental liability for intentional torts. Consistent with the common law principles of governmental immunity which preceded the Massachusetts Tort Claims Act, we conclude that public employers retain their immunity from suits arising from intentional torts." Id. at 284-285. Because the preexisting law, to which we are remitted according to LPA's argument, allowed for BRA's liability for intentional torts, the BRA does not enjoy immunity for intentional torts now.

      65

      LPA's reading of the statute is not in accord with its over-all purpose of enacting a comprehensive and uniform regime of tort liability for public employers in the wake of our decisions in Whitney v. Worcester, 373 Mass. 208, 212 (1977), and Morash & Sons v. Commonwealth, 363 Mass. 612 (1973). Although we have not undertaken a review of such legislation, it is likely that the enabling statutes of many public bodies contain a variety of provisions relating to the tort liability of those bodies. It would be the upshot of LPA's argument that, whenever any of the provisions of § 10 (including, for instance, those excluding liability for discretionary functions or for failure to grant or renew a license or permit) applied, we would be remitted to the preexisting law. It is sufficient to mention that the pre-existing law to which LPA refers, G. L. c. 121B, § 13, applies to the Boston Housing Authority (BHA) as well, so that the BHA on this argument would be liable for the whole range of claims excluded by § 10.[28] Compare Commesso v. Hingham Hous. Auth., supra at 809. Such a reading would be so manifestly against the intention of the Legislature to introduce a uniform regime of tort liability for public bodies, see Rogers v. [535] Metropolitan Dist. Comm'n, supra, that a mere drafting infelicity will not lead us to adopt it. Similarly the statement quoted from our decision in Spring will not move us in that direction. In context it was quite irrelevant to the Spring case whether § 10 (c) was described as prescribing immunity for intentional torts or as remitting the matter to the preexisting common law, which in that instance would have foreclosed tort liability altogether. See Spring, supra at 295 (Abrams, J., concurring) (Federal Tort Claims Act, 28 U.S.C. § 2680[h] [1982], on which c. 258 is patterned, provides an interpretive guide and has been construed "as immunizing public employers from suits arising out of intentional torts"). We therefore hold that the BRA is immune under G. L. c. 258, § 10 (c), from suit for intentional torts.

      66
      IV
      67

      LPA also claims that the motion judge erred in entering summary judgment against LPA on its G. L. c. 93A claims against the city and the BRA. Chapter 93A proscribes "unfair or deceptive practices in the conduct of any trade or commerce." G. L. c. 93A, § 2 (a). A party engages in trade or commerce when it acts in a "business context." "This court ... has repeatedly held that c. 93A does not apply to parties motivated by `legislative mandate, not business or personal reasons.'" Peabody N.E., Inc. v. Marshfield, 426 Mass. 436, 439-440 (1998), quoting Poznik v. Medical Professional Ins. Ass'n, 417 Mass. 48, 52 (1994). The gravamen of LPA's claim against the city and the BRA is that it was cheated out of the benefit that would have accrued to it if the agreement regarding the Hayward Parcel had been performed. This is indeed the kind of claim that is often made under c. 93A, see e.g., Anthony's Pier Four, Inc. v. HBC Assocs., 411 Mass. 451, 475 (1991), but that does not mean that the city was engaged in trade or commerce when it entered into the arrangement nor when it took the actions of which LPA now complains. It is perfectly possible for a governmental entity to engage in dishonest or unscrupulous behavior as it pursues its legislatively mandated ends. The allowance of the motion of summary judgment was correct because the defendants' involvement in these transactions was wholly in pursuit of the legislatively prescribed mandate of G. L. c. 121A, § 2, that "the redevelopment of land not only in sub-standard areas but also in blighted open and decadent areas in accordance with a [536] comprehensive plan to promote the sound growth of the community is necessary." There simply cannot be any doubt that the parties' dealings took place in the context of the pursuit of the urban renewal and redevelopment goals of c. 121A and c. 121B. That is the premise of every other part of this litigation. Although we have not yet addressed the question whether a public entity is ever a proper defendant in a c. 93A action, it is quite clear that in this case at least these public entities are not.[29]

      68
      V
      69

      Because we conclude as a matter of law that the city did not breach its contract with LPA, we reverse the judgment of the Superior Court and order entry of judgment for the city. Whatever contractual claims LPA may have against the BRA must fail for the same reason. The judgment in favor of the BRA is affirmed because we agree that it is immune from suit for an intentional tort. The judgment in favor of the city and the BRA dismissing LPA's c. 93A claims is also affirmed.

      70

      So ordered.

      71

      [1] City of Boston.

      72

      [2] The shopping mall, Lafayette Place Mall, was not a success. The bank that held the mortgage foreclosed on it on February 5, 1991. The hotel, originally known as the Lafayette Hotel, has been operating successfully as the Swissotel and separated itself from the development.

      73

      [3] The city completed an appraisal of the third parcel in 1979.

      74

      [4] This was the formula to be used if the city ultimately determined, as it in fact did, that it would retain subsurface rights to build a parking garage under the Hayward Parcel. Had the city decided not to retain subsurface rights, an alternate formula provided that the purchase price would be the full fair market value as of 1978 plus one-half of any increase in value attributable to the construction of "the Public Improvements and the Project."

      75

      [5] This appraisal process was to be used to determine the fair market value of the "project rights," which included the "Developer's present and future rights in and to the Project Area." The "project area" included parcels D-1, D-2, D-3, and D-4, which made up the Hayward Parcel.

      76

      [6] The September 11, 1979 deed, which was for the purchase of the "Lafayette Parcel" in connection with Phase I, provides that "[i]f a dispute shall arise ... and if ... such dispute is to be settled by arbitration, then either Owner may serve upon the other Owner a notice demanding that the dispute be arbitrated...." Each party is permitted to select an arbitrator, and the two chosen arbitrators then select a third.

      77

      [7] On July 18, 1990, LPA had filed suit against Campeau, alleging that Campeau had failed to use "commercially reasonable efforts" to go forward with Phase II, and therefore had violated the lease agreement between LPA and Campeau. In addition, LPA alleged that Campeau had failed to pay amounts due under the lease. The record does not reflect the disposition of this action.

      78

      [8] The judge had earlier ruled that the judgment against the BRA for breach of contract could not stand because it was inconsistent with the jury's specific finding that the BRA was not an agent of the city, and that the award of damages in tort against the BRA could not stand because they were subsumed in the contract damages awarded against the city. A claim against the defendants under G. L. c. 93A had been dismissed on motion for summary judgment prior to the commencement of the trial.

      79

      [9] As Judge Leval has said, "Notwithstanding the importance of protecting negotiating parties from involuntary judicially imposed contract, it is equally important that courts enforce and preserve agreements that were intended as binding, despite a need for further documentation or further negotiation. It is, of course, the aim of contract law to gratify, not to defeat, expectations that arise out of intended contractual agreement, despite informality or the need for further proceedings between the parties." (Footnotes omitted.) Teachers Ins. Annuity Ass'n v. Tribune Co., 670 F. Supp. 491, 497-498 (S.D.N.Y. 1987).

      80

      [10] There is little doubt that all parties understood the general boundaries of the Hayward Parcel, given that the parcel is bounded by streets and buildings in a small city block. Although the exact details of the boundaries of the parcel might have varied depending upon what building plan was ultimately approved by the city and the BRA, this was not a situation in which the parties agreed upon the purchase of a totally unspecified or undemarcated property. Compare Lucey v. Hero Int'l Corp., 361 Mass. 569, 573 (1972).

      81

      [11] The city's motion for directed verdict argued that there was no evidence to support a finding that "the plaintiff called for a closing to acquire title" to the Hayward Parcel, and that if there was a demand for closing it was insufficient. The city incorporated these defenses in its motion for judgment notwithstanding the verdict. It also argued that there was no evidence "of either the plaintiff or the city taking any steps to negotiate or enter into a purchase and sale agreement" during the option period. Moreover, the issue of LPA's failure to demand recourse to the specified arbitration procedure was raised repeatedly over the course of the litigation, including in the city's motion for special verdict, motion for directed verdict, by incorporation into its motion for judgment notwithstanding the verdict, and in the city's brief to this court. The city argued in its motion for judgment notwithstanding the verdict that LPA failed to activate the Section 13.01 appraisal procedure, and thus that the city could not be in breach.

      82

      [12] Prior to December, 1988, Campeau sent several letters to the BRA asking for an extension of the option period. In none of these letters, however, did Campeau demand tender of the deed to the Hayward Parcel or offer to tender payment.

      83

      [13] It was also unhelpful of Campeau to send this "tender" to Mayor Flynn, given that officials from both Campeau and LPA testified that they knew that the BRA, and not Mayor Flynn's office, had primary responsibility for the transaction.

      84

      [14] LPA only brought suit in 1992, long after such recourse to arbitration to fix obligations would have been pointless, and so the city is entitled simply to claim that it had never been put in breach.

      85

      [15] In the Tripartite Agreement, the city was obligated to obtain appraisals of the 1978 value of parcels D-3 and D-4. Although it secured an appraisal for parcel D-3, it did not for D-4. The city argues, however, that the appraisals for D-1, D-2, and D-3 sufficed to determine the value of D-4, which was a very small part of the over-all parcel.

      86

      [16] Compare Kanavos v. Hancock Bank & Trust Co., 395 Mass. 199, 201-202 (1985) (bank repudiated option contract to sell shares of stock by selling shares to a third party); Limpus v. Armstrong, 3 Mass. App. Ct. 19, 22 (1975) (defendants repudiated purchase and sale contract by selling property to third party).

      87

      [17] Campeau's actions in this regard must be attributed to LPA, for if they are not then the city's alternate argument that LPA abandoned the contract when it transferred its rights to Campeau would take on considerable force. LPA cannot have it both ways.

      88

      [18] Although LPA complains that the BRA's handling of the design review process prior to October, 1987, when the Third Supplemental Agreement was signed, violated the implied covenant of good faith, we reject this claim on two grounds. First, when the parties amended their agreement in 1987 and included a good faith clause, the slate was wiped clean for these purposes. Second, LPA failed to show that any delay in the design review process prior to 1988 was attributable to bad faith on the part of the city or the BRA rather than a lack of preparedness or persistence on LPA's part. LPA was engaged in discussions and negotiations with the BRA during 1984, 1985, and 1986, and may have completed the first phase of the BRA's four-stage authorization process by submitting an initial sketch of its plans for the Hayward Parcel, but LPA concedes that it did not progress beyond that very preliminary point. LPA did not press forward with its design, and it therefore cannot complain that its design was never approved.

      89

      [19] On April 25, 1988, Campeau's senior vice-president, Lenard McQuarrie, sent the BRA's director a letter indicating that Campeau had "begun to marshal" resources for the project and was about to "initiate" the review process. On May 16, 1988, McQuarrie stated that Campeau was "beginning to commit significant funds to preliminary design ... for the Hayward Place site."

      90

      [20] A June 17, 1988, letter from McQuarrie to the BRA stated that "[b]ased on the cooperation we are receiving from both yourself and your staff, we are optimistic that the project will proceed quickly through the ... Development Review process." Similarly, an October 21, 1988, letter stated that "[w]e are making excellent progress on the ... master planning of Boston Crossing and have begun the ... review process." And on December 19, 1988, Campeau's letter to Mayor Flynn stated that all parties were "making good progress towards the final approval of this project."

      91

      [21] Moreover, even if the city did act in bad faith in the design review process and thus the option period was extended beyond January 1, 1989, neither Campeau nor LPA ever attempted to enforce the agreement by seeking arbitration, tendering payment, or seeking a closing after that date. As noted above, Campeau received design authorization in June, 1989, but went bankrupt in 1990. LPA did not then renew its negotiations with the city, but instead filed suit against Campeau in July, 1990, and against the city and the BRA in March, 1992.

      92

      [22] LPA presented evidence that during the period in which LPA sought authorization of the sale to Campeau, the city's real property board publicly expressed concern that the pricing formula in the Tripartite Agreement was unfavorable to the city. On December 30, 1987, Commissioner J. Edward Roche of the city's real property department wrote Mayor Flynn expressing concern that a transfer of rights from LPA to Campeau might bring about a "windfall" to Campeau because of the pricing formula in Section 6.02. LPA also showed that the minutes of a meeting of the real property board on January 22, 1988, stated that "the Board expressed its desire ... to receive the fair market value for the Hayward Parcel (abandoning the Tripartite formula)."

      93

      [23] The jury returned a special verdict that affirmed that "L.P.A. perform[ed] its obligations under the contract." This verdict was incorrect as a matter of law, given the fact that LPA fulfilled none of the obligations set out above.

      94

      [24] In Kargman v. Boston Water & Sewer Comm'n, 18 Mass. App. Ct. 51, 56 n.5 (1984), the Appeals Court cast doubt on this criterion.

      95

      [25] LPA also notes that the BRA does not need planning board approval for projects, whereas a housing authority does. This is because the BRA has had transferred to it the functions of the city's planning board in respect to its projects.

      96

      [26] General Laws c. 121B, § 9, states that housing authorities with redevelopment authority have the powers granted regular redevelopment authorities under G. L. 121B, § 49.

      97

      [27] General Laws c. 121A, § 4, permits the housing board to make rules and regulations regarding the approval of redevelopment projects. The housing board must approve most redevelopment projects, G. L. c. 121A, § 5, and must inspect the construction of redevelopment projects to ensure that construction complies with the approved proposal. G. L. c. 121A, § 8.

      98

      [28] LPA seeks support for its argument in a 1983 amendment of G. L. c. 121B, § 13, that altered the treatment of the liability of employees of redevelopment and housing authorities. This is unpersuasive. The Legislature did not address itself directly to the operative first sentence of § 13, and we will not assume that an amendment of an independent portion of the section endorsed or reaffirmed that first sentence in the face of the strong Legislative mandate of c. 258.

      99

      [29] Cases such as Boston v. Aetna Life Ins. Co., 399 Mass. 569, 575 (1987), in which the public entity may act as a plaintiff in a c. 93A action, are not apposite. One who deals with a public entity, as for instance in providing it with goods or services, may very well be engaged in trade or commerce without the entity being so engaged as well.

    • 2.3 Restatement of Contacts, Second §33

    • 2.4 U.C.C. §2-305(1), (4)

    • 2.5 Southwest Engineering Co. Inc. v. Martin Tractor Co.

      1
      205 Kan. 684 (1970)
      2
      473 P.2d 18
      3
      SOUTHWEST ENGINEERING COMPANY, INC., a Corporation, Appellee,
      v.
      MARTIN TRACTOR COMPANY, INC., a Corporation, Appellant.
      4
      No. 45,735
      5

      Supreme Court of Kansas.

      6
      Opinion filed July 17, 1970.
      7

      Brock R. Snyder, of Lillard, Eidson, Lewis & Porter, of Topeka, argued the cause and was on the brief for the appellant.

      8

      Terry L. Bullock, of Cosgrove, Webb & Oman, of Topeka, argued the cause and was on the brief for the appellee.

      9

      The opinion of the court was delivered by

      10
      FONTRON, J.:
      11

      This is an action to recover damages for breach of contract. Trial was had to the court which entered judgment in favor of the plaintiff. The defendant has appealed.

      12

      Southwest Engineering Company, Inc., the plaintiff, is a Missouri corporation engaged in general contracting work, while the defendant, Martin Tractor Company, Inc., is a Kansas corporation. The two parties will be referred to hereafter either as plaintiff, or Southwest, on the one hand and defendant, or Martin, on the other.

      13

      We glean from the record that in April, 1966, the plaintiff was interested in submitting a bid to the United States Corps of Engineers for the construction of certain runway lighting facilities at McConnell Air Force Base at Wichita. However, before submitting a bid, and on April 11, 1966, the plaintiff's construction superintendent, Mr. R.E. Cloepfil, called the manager of Martin's engine department, Mr. Ken Hurt, who at the time was at Colby, asking for a price on a standby generator and accessory equipment. Mr. Hurt replied that he would phone him back from Topeka, which he did the next day, quoting a price of $18,500. This quotation was re-confirmed by Hurt over the phone on April 13.

      14

      Southwest submitted its bid on April 14, 1966, using Hurt's figure of $18,500 for the generating equipment, and its bid was accepted. On April 20, Southwest notified Martin that its bid had been accepted. Hurt and Cloepfil thereafter agreed over the phone to meet in Springfield on April 28. On that date Hurt flew to Springfield, where the two men conferred at the airfield restaurant for about an hour. Hurt took to the meeting a copy of the job specifications which the government had supplied Martin prior to the letting.

      15

      At the Springfield meeting it developed that Martin had upped its price for the generator and accessory equipment from $18,500 to $21,500. Despite this change of position by Martin, concerning [686] which Cloepfil was understandably amazed, the two men continued their conversation and, according to Cloepfil, they arrived at an agreement for the sale of a D353 generator and accessories for the sum of $21,500. In addition it was agreed that if the Corps of Engineers would accept a less expensive generator, a D343, the aggregate price to Southwest would be $15,000. The possibility of providing alternate equipment, the D343, was suggested by Mr. Hurt, apparently in an attempt to mollify Mr. Cloepfil when the latter learned that Martin had reneged on its price quotation of April 12. It later developed that the Corps of Engineers would not approve the cheaper generator and that Southwest eventually had to supply the more expensive D353 generator.

      16

      At the conference, Mr. Hurt separately listed the component parts of each of the two generators on the top half of a sheet of paper and set out the price after each item. The prices were then totaled. On the bottom half of the sheet Hurt set down the accessories common to both generators and their cost. This handwritten memorandum, as it was referred to during the trial, noted a 10 per cent discount on the aggregate cost of each generator, while the accessories were listed at Martin's cost. The price of the D353 was rounded off at $21,500 and the D343 at $15,000. The memorandum was handed to Cloepfil while the two men were still at the airport. We will refer to this memorandum further during the course of this opinion.

      17

      On May 2, 1966, Cloepfil addressed a letter to the Martin Tractor Company, directing Martin to proceed with shop drawings and submittal documents for the McConnell lighting job and calling attention to the fact that applicable government regulations were required to be followed. Further reference to this communication will be made when necessary.

      18

      Some three weeks thereafter, on May 24, 1966, Hurt wrote Cloepfil the following letter:

      19
      "MARTIN TRACTOR COMPANY, INC.
      20
      Topeka Chanute Concordia Colby
      21
      CATERPILLAR[*]
      22

      "P.O. Box 1698 Topeka, Kansas May 24, 1966 Mr. R.E. Cloepfil Southwest Engineering Co., Inc. P.O. Box 3314, Glenstone Station Springfield, Missouri 65804

      23

      [687] Dear Sir:

      24
      Due to restrictions placed on Caterpillar products, accessory suppliers, and other stipulations by the district governing agency, we cannot accept your letter to proceed dated May 2, 1966, and hereby withdraw all verbal quotations.
      25

      Regretfully, /s/ Ken Hurt Ken Hurt, Manager Engine Division"

      26

      On receipt of this unwelcome missive, Cloepfil telephoned Mr. Hurt who stated they had some work underway for the Corps of Engineers in both the Kansas City and Tulsa districts and did not want to take on any other work for the Corps at that time. Hurt assured Cloepfil he could buy the equipment from anybody at the price Martin could sell it for. Later investigation showed, however, that such was not the case.

      27

      In August of 1966, Mr. Cloepfil and Mr. Anderson, the president of Southwest, traveled to Topeka in an effort to persuade Martin to fulfill its contract. Hurt met them at the company office where harsh words were bandied about. Tempers eventually cooled off and at the conclusion of the verbal melee, hands were shaken all around and Hurt went so far as to say that if Southwest still wanted to buy the equipment from them to submit another order and he would get it handled. On this promising note the protagonists parted.

      28

      After returning to Springfield, Mr. Cloepfil, on September 6, wrote Mr. Hurt placing an order for a D353 generator (the expensive one) and asking that the order be given prompt attention, as their completion date was in early December. This communication was returned unopened.

      29

      A final effort to communicate with Martin was attempted by Mr. Anderson when the unopened letter was returned. A phone call was placed for Mr. Martin, himself, and Mr. Anderson was informed by the girl on the switchboard that Martin was in Colorado Springs on a vacation. Anderson then placed a call to the motel where he was told Mr. Martin could be reached. Martin refused to talk on the call, on learning the caller's name, and Anderson was told he would have to contact his office.

      30

      Mr. Anderson then replaced his call to Topeka and reached either the company comptroller or the company treasurer who responded by cussing him and saying "Who in the hell do you think you are? We don't have to sell you a damn thing."

      31

      [688] Southwest eventually secured the generator equipment from Foley Tractor Co. of Wichita, a company which Mr. Hurt had one time suggested, at a price of $27,541. The present action was then filed, seeking damages of $6,041 for breach of the contract and $9,000 for loss resulting from the delay caused by the breach. The trial court awarded damages of $6,041 for the breach but rejected damages allegedly due to delay. The defendant, only, has appealed; there is no cross-appeal by plaintiff.

      32

      The basic disagreement centers on whether the meeting between Hurt and Cloepfil at Springfield resulted in an agreement which was enforceable under the provisions of the Uniform Commercial Code (sometimes referred to as the Code), which was enacted by the Kansas Legislature at its 1965 session. K.S.A. 84-2-201 (1), being part of the Code, provides:

      33
      "Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing."
      34

      Southwest takes the position that the memorandum prepared by Hurt at Springfield supplies the essential elements of a contract required by the foregoing statute, i.e., that it is (1) a writing signed by the party sought to be charged, (2) that it is for the sale of goods and (3) that quantity is shown. In addition, the reader will have noted that the memorandum sets forth the prices of the several items listed.

      35

      It cannot be gainsaid that the Uniform Commercial Code has effected a somewhat radical change in the law relating to the formation of enforceable contracts as such has been expounded by this and other courts. In the Kansas Comment to 84-2-201, which closely parallels the Official UCC Comment, the following explanation is given:

      36
      "Subsection (1) relaxes the interpretations of many courts in providing that the required writing need not contain all the material terms and that they need not be stated precisely. All that is required is that the writing afford a basis for believing that the offered oral evidence rests on a real transaction. Only three definite and invariable requirements as to the writing are made by this subsection. First, it must evidence a contract for the sale of goods; second, it must be `signed,' a word which includes any authentication which identifies the party [689] to be charged; and third, it must specify quantity. Terms relating to price, time, and place of payment or delivery, the general quality of goods, or any particular warranties may all be omitted."
      37

      From legal treatises, as well, we learn that the three invariable requirements of an enforceable written memorandum under 84-2-201 are that it evidence a sale of goods, that it be signed or authenticated and that it specify quantity. In Vernon's Kansas Statutes Annotated, Uniform Commercial Code, Howe and Navin, the writers make this clear:

      38
      "Under the Code the writing does not need to incorporate all the terms of the transaction, nor do the terms need to be stated precisely. The Code does require that the writing be broad enough to indicate a contract of sale between the parties; that the party against whom enforcement is sought, or his agent, must have signed the writing; and that the quantity dealt with must be stated. Any error concerning the quantity stated in the memorandum prevents enforcement of the agreement beyond the precise quantity stated." (p. 116.)
      39

      The defendant does not seriously question the interpretation accorded the statute by eminent scriveners and scholars, but maintains, nonetheless, that the writing in question does not measure up to the stature of a signed memorandum within the purview of the Code; that the instrument simply sets forth verbal quotations for future consideration in continuing negotiations.

      40

      But on this point the trial court found there was an agreement reached between Hurt and Cloepfil at Springfield; that the formal requirements of K.S.A. 84-2-201 were satisfied; and that the memorandum prepared by Hurt contains the three essentials of the statute in that it evidences a sale of goods, was authenticated by Hurt and specifies quantity. Beyond that, the court specifically found that Hurt had apparent authority to make the agreement; that both Southwest and Martin were "merchants" as defined in K.S.A. 84-2-104; that the agreement reached at Springfield included additional terms not noted in the writing: (1) Southwest was to install the equipment; (2) Martin was to deliver the equipment to Wichita and (3) Martin was to assemble and supply submittal documents within three weeks; and that Martin's letter of May 24, 1966, constituted an anticipatory breach of the contract.

      41

      We believe the record supports all the above findings. With particular reference to the preparation and sufficiency of the written memorandum, the following evidence is pertinent:

      42

      Mr. Cloepfil testified that he and Hurt sat down at a restaurant table and spread out the plans which Hurt had brought with him; [690] that they went through the specifications item by item and Hurt wrote each item down, together with the price thereof; that while the specifications called for a D353 generator, Hurt thought the D343 model might be an acceptable substitute, so he gave prices on both of them and Southwest could take either one of the two which the Corps of Engineers would approve; that Hurt gave him (Cloepfil) the memorandum "as a record of what we had done, the agreement we had arrived at at our meeting in the restaurant at the airport."

      43

      We digress at this point to note Martin's contention that the memorandum is not signed within the meaning of 84-2-201. The sole authentication appears in handprinted form at the top left-hand corner in these words: "Ken Hurt, Martin Tractor, Topeka, Caterpillar." The court found this sufficient, and we believe correctly so.

      44

      K.S.A. 84-1-201 (39) provides as follows:

      45
      "`Signed' includes any symbol executed or adopted by a party with present intention to authenticate a writing."
      46

      The official U.C.C. Comment states in part:

      47
      "The inclusion of authentication in the definition of `signed' is to make clear that as the term is used in this Act a complete signature is not necessary. Authentication may be printed, stamped or written; .. . It may be on any part of the document and in appropriate cases may be found in a billhead or letterhead.... The question always is whether the symbol was executed or adopted by the party with present intention to authenticate the writing."
      48

      Hurt admittedly prepared the memorandum and has not denied affixing his name thereto. We believe the authentication sufficiently complies with the statute.

      49

      The evidence already cited would be ample to sustain the trial court's finding that an agreement was reached between Hurt and Cloepfil in Springfield. However, Cloepfil's testimony is not the only evidence in support of that finding. In a pretrial deposition, Mr. Hurt, himself, deposed that "we agreed on the section that I would be quoting on, and we come to some over-all general agreement on the major items." At the trial Hurt testified he did not wish to change that statement in any way.

      50

      Hurt further testified that in his opinion the thing which stood in the way of a firm deal was Martin's terms of payment — that had Southwest agreed with those terms of payment, so far as he was concerned, he would have considered a firm deal was made. Mr. [691] Hurt acknowledged while on the stand that he penned the memorandum and that as disclosed therein a 10 per cent discount was given Southwest on the price of either of the generators listed (depending on which was approved by the Corps of Engineers), and that the accessories common to both generators were to be net — that is, sold without profit.

      51

      It is quite true, as the trial court found, that terms of payment were not agreed upon at the Springfield meeting. Hurt testified that as the memorandum was being made out, he said they wanted 10 per cent with the order, 50 per cent on delivery and the balance on acceptance, but he did not recall Cloepfil's response. Cloepfil's version was somewhat different. He stated that after the two had shaken hands in the lobby preparing to leave, Hurt said their terms usually were 20 per cent down and the balance on delivery; while he (Cloepfil) said the way they generally paid was 90 per cent on the tenth of the month following delivery and the balance on final acceptance. It is obvious the parties reached no agreement on this point.

      52

      However, a failure on the part of Messrs. Hurt and Cloepfil to agree on terms of payment would not, of itself, defeat an otherwise valid agreement reached by them. K.S.A. 84-2-204(3) reads:

      53
      "Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy."
      54

      The official U.C.C. Comment is enlightening:

      55
      "Subsection (3) states the principle as to `open terms' underlying later sections of the Article. If the parties intend to enter into a binding agreement, this subsection recognizes that agreement as valid in law, despite missing terms, if there is any reasonably certain basis for granting a remedy. The test is not certainty as to what the parties were to do nor as to the exact amount of damages due the plaintiff. Nor is the fact that one or more terms are left to be agreed upon enough of itself to defeat an otherwise adequate agreement. Rather, commercial standards on the point of `indefiniteness' are intended to be applied, this Act making provision elsewhere for missing terms needed for performance, open price, remedies and the like.
      56
      "The more terms the parties leave open, the less likely it is that they have intended to conclude a binding agreement, but their actions may be frequently conclusive on the matter despite the omissions."
      57

      The above Code provision and accompanying Comment were quoted in Pennsylvania Co. v. Wilmington Trust Co., 39 Del. Ch. 453, 166 A.2d 726, where the court made this observation:

      58
      "There appears to be no pertinent court authority interpreting this rather [692] recent but controlling statute. In an article entitled "The Law of Sales In the Proposed Uniform Commercial Code,' 63 Harv. Law Rev. 561, 576, Mr. Williston wanted to limit omissions to `minor' terms. He wanted `business honor' to be the only compulsion where `important terms' are left open. Nevertheless, his recommendation was rejected (see note on p. 561). This shows that those drafting the statute intended that the omission of even an important term does not prevent the finding under the statute that the parties intended to make a contract." (pp. 731, 732.)
      59

      So far as the present case is concerned, K.S.A. 84-2-310 supplies the omitted term. This statute provides in pertinent part:

      60

      "Unless otherwise agreed

      61
      "(a) payment is due at the time and place at which the buyer is to receive the goods even though the place of shipment is the place of delivery;"
      62

      In our view, the language of the two Code provisions is clear and positive. Considered together, we take the two sections to mean that where parties have reached an enforceable agreement for the sale of goods, but omit therefrom the terms of payment, the law will imply, as part of the agreement, that payment is to be made at time of delivery. In this respect the law does not greatly differ from the rule this court laid down years ago.

      63

      In Thompson v. Seek, 84 Kan. 674, 115 Pac. 397, the parties entered into a written agreement for the sale of corn at a stated price to be delivered at Thompson's elevator. Terms of payment were not mentioned. Thompson was unable to pay cash on delivery but proposed to pay by check instead. Seek refused this tender and rescinded the contract, whereupon Thompson sued for breach of contract. The decision of the court is reflected in Syllabus 1:

      64
      "A written contract for the purchase of corn to be delivered at the buyer's elevator implies payment in cash, and upon offer to deliver, and refusal to pay except by check, at a time when banks are not honoring checks by paying cash, the buyer is not entitled to damages for failure to deliver."
      65

      We do not mean to infer that terms of payment are not of importance under many circumstances, or that parties may not condition an agreement on their being included. However, the facts before us hardly indicate that Hurt and Cloepfil considered the terms of payment to be significant, or of more than passing interest. Hurt testified that while he stated his terms he did not recall Cloepfil's response, while Cloepfil stated that as the two were on the point of leaving, each stated their usual terms and that was as far as it went. The trial court found that only a brief and casual conversation ensued as to payment, and we think that is a valid summation of what took place.

      66

      [693] Moreover, it is worthy of note that Martin first mentioned the omission of the terms of payment, as justifying its breach, in a letter written by counsel on September 15, 1966, more than four months after the memorandum was prepared by Hurt. On prior occasions Martin attributed its cancellation of the Springfield understanding to other causes. In its May 24 letter, Martin ascribed its withdrawal of "all verbal quotations" to "restrictions placed on Caterpillar products, accessory suppliers, and other stipulations by the district governing agency." In explaining the meaning of the letter to Cloepfil, Hurt said that Martin was doing work for the Corps of Engineers in the Kansas City and Tulsa districts and did not want to take on additional work with them at this time.

      67

      The entire circumstances may well give rise to a suspicion that Martin's present insistence that future negotiations were contemplated concerning terms of payment, is primarily an afterthought, for use as an escape hatch. Doubtless the trial court so considered the excuse in arriving at its findings.

      68

      We are aware of Martin's argument that Southwest's letter of May 2, 1966, referring to the sale is evidence that no firm contract had been concluded. Granted that some of the language employed might be subject to that interpretation, the trial court found, on what we deem to be substantial, competent evidence, that an agreement of sale was concluded at Springfield. Under our invariable rule those findings are binding upon this court on appeal even though there may have been evidence to the contrary. (See cases in 1 Hatcher's Kansas Digest [Rev. Ed.] Appeal & Error, §§ 507, 508.)

      69

      The defendant points particularly to the following portion of the May 2 letter, as interjecting a new and unacceptable term in the agreement made at Springfield.

      70
      "... We are not prepared to make a partial payment at the time of placing of this order. However, we will be able to include 100% of the engine generator price in our first payment estimate after it is delivered, and only 10% will have to be withheld pending acceptance. Ordinarily this means that suppliers can expect payment of 90% within about thirty days after delivery."
      71

      It must be conceded that the terms of payment proposed in Southwest's letter had not been agreed to by Martin. However, we view the proposal as irrelevant. Although terms of payment had not been mutually agreed upon, K.S.A. 84-2-310 supplied the missing terms, i.e., payment on delivery, which thus became part of the agreement already concluded. In legal effect the proposal was no more than [694] one to change the terms of payment implied by law. Since Martin did not accept the change, the proposal had no effect, either as altering or terminating the agreement reached at Springfield. As the Michigan Court of Appeals said in American Parts v. Arbitration Assn., 8 Mich. App. 156, 154 N.W.2d 5:

      72
      "... Surely a party who has entered into an agreement cannot change that agreement by the simple expedient of sending a written `confirmation' containing additional or different terms ..." (p. 174.)
      73

      Neither, may we add, will an extraneous proposal which materially alters the original agreement, be included unless agreed to by the other party. (Application of Doughboy Industries, Inc., 233 N.Y.S.2d 488, 17 A.D.2d 216.)

      74

      Substantial parts of the briefs filed by both parties are devoted to discussions of the meaning and effect of K.S.A. 84-2-207. This murky bit of prose, which the United States Court of Appeals, First Circuit, characterized in Roto-Lith, Ltd. v. F.P. Bartlett & Co., 297 F.2d 497 (1962) as "not too happily drafted" has given rise to a good deal of litigation and has prompted a spate of learned articles from legal savants. Section (1) and (2) of this statute read:

      75
      "(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.
      76
      "(2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:
      77
      "(a) the offer expressly limits acceptance to the terms of the offer;
      78

      "(b) they materially alter it; or

      79
      "(c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received."
      80

      The discussions centering on this section of the Code are occasioned by findings of the trial court that Southwest's letter of May 2 is both an "acceptance" and a "confirmation" within the purview thereof; that as either an "acceptance" or "confirmation" the letter stated additional terms which were different from those agreed upon and which constituted a material alteration of the agreement. In view of the court's previous findings that a viable contract had already been concluded at Springfield, we deem these findings superfluous and extraneous.

      81

      We do not propose to engage in an extended dissertation upon the purpose or meaning of 84-2-207. In our view the statute is not [695] germane to the facts of this case; we think it designed for situations where an open offer is accepted by "an expression of acceptance" (we presume in writing) or where an oral agreement is later confirmed in writing. Neither situation is presented in the case now before us.

      82

      The trial court found that an enforceable agreement, memorialized in writing, had been reached in Springfield. This finding implies both offer and acceptance, the two being merged into the resulting contract. When the letter of May 2, 1966, was written there was no outstanding offer to accept — conditionally or otherwise. Neither was there an oral agreement to confirm — the agreement having previously been memorialized in the written memorandum of April 28.

      83

      As we read the authorities pointed out by counsel on both sides, as they have attempted to divine for us the sense of 84-2-207, none of them appear to fit the pattern of the present action. The cited cases involve either an outstanding offer, accepted by written instrument containing different or added terms, or an oral agreement later confirmed by a writing which states new or additional terms. In this connection, while we recognize that the term "confirmation" may be employed in a variety of meanings, we think it is used in 84-2-207 in the sense of "a written order or agreement that verifies or substantiates an agreement previously concluded orally." (Webster's Third New International Dictionary, Unabridged.)

      84

      Neither confirmation nor acceptance by Southwest was needed on May 2 to breathe life into the agreement previously concluded at Springfield, for it was memorialized in writing at the time of making. In an article entitled "The Law of Sales Under the Uniform Commercial Code, 17 Rutgers Law Review 14, Professor Calvin W. Corman writes:

      85
      "The Code Provision merely requires that the writing be sufficient to indicate that a contract for sale has been made between the parties." (p. 20.)
      86

      In our opinion the instant memorandum amply satisfies that requirement, affording a substantial basis for the belief that it rests on a real transaction. (See Harry Rubin & Sons, Inc. v. Con. P. Co. of Am., 396 Pa. 506, 512, 153 A.2d 472.)

      87

      We find no error in this case and the judgment of the trial court is affirmed.

    • 2.6 U.C.C. §2-204

    • 2.7 Wheeler v. White

      1
      398 S.W.2d 93 (1965)
      2
      Ellis D. WHEELER, Petitioner,
      v.
      S. E. WHITE, Respondent.
      3
      No. A-10598.
      4

      Supreme Court of Texas.

      5
      November 10, 1965.
      6
      Rehearing Denied February 2, 1966.
      7

       

      8

      Adams & Browne, Beaumont, for petitioner.

      9

      Keith, Mehaffy & Weber, Beaumont, for respondent.

      10

      [94] SMITH, Justice.

      11

      This is a suit for damages brought by petitioner, Ellis D. Wheeler, against respondent, S. E. White. Wheeler alleged that White had breached a contract[1] to secure a loan or furnish the money to finance the construction of improvements upon land owned by Wheeler. Wheeler further pleaded, in the alternative, that if the contract itself was not sufficiently definite, then nevertheless White was estopped from asserting such insufficiency. White filed special exceptions to all of Wheeler's Third [95] Amended Original Petition. The special exceptions asserted that the pleaded contract did not contain essential elements to its enforceability in that it failed to provide the amount of monthly installments, the amount of interest due upon the obligation, how such interest would be computed, when such interest would be paid, and that the alternative plea of estoppel was, as a matter of law, insufficient to establish any ground of recovery. All special exceptions were sustained, and upon Wheeler's declination to amend his pleadings, the trial court entered its judgment dismissing the case and ordered that Wheeler take nothing from White by reason of his suit. The Court of Civil Appeals has affirmed the judgment of the trial court. 385 S.W. 2d 619. We have concluded that the trial court did not err in sustaining the special exceptions directed at the sufficiency of the contract itself, but that Wheeler's pleadings on the theory of estoppel state a cause of action. Accordingly, we reverse the judgments of the trial court and the Court of Civil Appeals and remand the cause for trial.

      12

      Since the trial court sustained White's special exceptions to Wheeler's petition, we necessarily must assume that all the alleged material facts are true. Wheeler alleged that as the owner of a three-lot tract of land in Port Arthur, Texas, he desired to construct a commercial building or shopping center thereon. He and White entered into an agreement, embodied in the written contract involved here, whereby White was to obtain the necessary loan for Wheeler from a third party or provide it himself on or before six months from the date of the contract. The loan as described in the contract, was to be "* * * in the sum of SEVENTY THOUSAND AND 00/100 ($70,000.00) DOLLARS and to be payable in monthly installments over a term of fifteen (15) years and bear interest at a rate of not more than six (6%) per cent per annum." Additionally, under the contract White was to be paid $5,000.00 for obtaining the loan and a five per cent commission on all rentals received from any tenants procured by White for the building. Wheeler alleged that he has been ready and willing to comply with his part of the agreement at all times since the contract was made.

      13

      After the contract had been signed by both parties, White assured Wheeler that the money would be available and urged him to proceed with the necessary task of demolishing the buildings presently on the site so as to make way for construction of the new building. The buildings on the site had a reasonable value of $58,500.00 and a rental value of $400.00 per month. By way of reassurance, White stressed the fact that in the event the money was unobtainable elsewhere, he would make the loan himself. Pursuant to such promises Wheeler proceeded to raze the old building and otherwise prepare the land for the new structure; thereafter, he was told by White that there would be no loan. After White's refusal to perform, Wheeler made reasonable efforts to obtain the loan himself but was unsuccessful. In the pleadings[2] Wheeler pleaded the necessary elements of inducement and reliance which entitle him to recover if he can prove the facts alleged.

      14

      [96] Where a promisee acts to his detriment in reasonable reliance upon an otherwise unenforceable promise, courts in other jurisdictions have recognized that the disappointed party may have a substantial and compelling claim for relief. The Restatement, Contracts, § 90, says:

      15
      "A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise."
      16

       

      17

      According to Dean Hildebrand's Texas Annotation to the Restatement, Texas follows Section 90, supra. See Ferguson v. Getzendaner, 98 Tex. 310, 83 S.W. 374 (1904); Morris v. Gaines, 82 Tex. 255, 17 S.W. 538 (1891); and others. These early cases do not speak of the doctrine of promissory estoppel in specific terms since those cases were written before the compilation of the Restatement, but, while many of them dealt with subscription transactions or transactions within the statute of frauds, it is readily apparent that the equities involved in those cases are applicable to the instant case. See also: Rouff v. Washington & Lee University, 48 S.W.2d 483 (Tex.Civ. App.1932, error ref.); Thompson v. McAllen Federated Woman's Bldg. Corp., 273 S.W.2d 105, 108 (Tex.Civ.App.1954, writ dis'm); Allegheny College v. National Chataqua County Bank, 246 N.Y. 369, 159 N.E. 173, 57 L.R.A. 980 (1927); Greiner v. Greiner, 131 Kan. 760, 293 P. 759 (1930); Ricketts v. Scothorn, 57 Neb. 51, 77 N.W. 365, 42 L.R.A. 794 (1898); 1 Corbin, Contracts, §§ 193-209 (1950); Boyer, Promissory Estoppel: Principle from Precedents, 50 Mich.L.Rev. 639, 874 (1952); and Boyer, Promissory Estoppel: Requirements and Limitations, 98 U.Pa.L.Rev. 459 (1950).

      18

      The binding thread which runs through the cases applying promissory estoppel is the existence of promises designedly made to influence the conduct of the promisee, tacitly encouraging the conduct, which conduct, although not necessarily constituting any actual performance of the contract itself, is something that must be done by the promisee before he could begin to perform, and was a fact known to the promisor. As to the argument that no new cause of action may be created by such a promise regardless of its established applicability as a defense, it has been answered that where one party has by his words or conduct made to the other a promise or assurance which was intended to affect the legal relations between them and to be acted on accordingly, then, once the other party has taken him at his word and acted on it, the party who gave the promise cannot afterward be allowed to revert to the previous relationship as if no such promise had been made. This does not create a contract where none existed before, but only prevents a party from insisting upon his strict legal rights when it would be unjust to allow him to enforce them. See 1 Williston, Contracts, §§ 139-40 (Rev.ed.1936); and 48 A.L.R.2d 1069 (1956).

      19

      The function of the doctrine of promissory estoppel is, under our view, defensive in that it estops a promisor from denying the enforceability of the promise. It was said in the case of Dickerson v. Colgrove, 100 U.S. 578, 580, 25 L.Ed. 618, that:

      20
      "The vital principle is that he who by his language or conduct leads another to do what he would not otherwise have done, shall not subject such person to loss or injury by disappointing the expectations upon which he acted. Such a change of position is sternly forbidden * * *. This remedy is always so applied as to promote the ends of justice."
      21

       

      22

      In the case of Goodman v. Dicker, 83 U.S. App.D.C. 353, 169 F.2d 684 (1948), the trial court held that a contract had not been proven but that "* * * appellants were estopped from denying the same by reason of their statements and conduct upon which appellees relied to their detriment." In [97] that case, Dicker relied upon a promise by Goodman that a franchise to sell radios would be granted and radios would be supplied. In reliance upon the promise, Dicker incurred expenses in making preparations to engage in the business of selling radios. The franchise was not granted and Goodman failed to deliver the radios. The appellate court in holding that Dicker was entitled to damages for moneys expended in preparing to do business, said:

      23
      "We are dealing with a promise by appellants that a franchise would be granted and radios supplied, on the faith of which appellees with the knowledge and encouragement of appellants incurred expenses in making preparations to do business. Under these circumstances we think that appellants cannot now advance any defense inconsistent with their assurance that the franchise would be granted. Justice and fair dealing require that one who acts to his detriment on the faith of conduct of the kind revealed here should be protected by estopping the party who has brought about the situation from alleging anything in opposition to the natural consequences of his own course of conduct. * *"
      24

       

      25

      The Court, having so held, rendered its judgment that Goodman was liable for moneys expended in preparing to do business under the promised dealer franchise, but was not liable for loss of profits on the radios which were never delivered.

      26

      The Court in the Goodman case, in refusing to allow damages based on a loss of anticipated profits, apparently acted in harmony with the theory that promissory estoppel acts defensively so as to prevent an attack upon the enforceability of a contract. Under this theory, losses of expected profits will not be allowed even if expected profits are provable with certainty. The rule thus announced should be followed in the present case. We agree with the reasoning announced in those jurisdictions that, in cases such as we have before us, where there is actually no contract the promissory estoppel theory may be invoked, thereby supplying a remedy which will enable the injured party to be compensated for his foreseeable, definite and substantial reliance. Where the promisee has failed to bind the promisor to a legally sufficient contract, but where the promisee has acted in reliance upon a promise to his detriment, the promisee is to be allowed to recover no more than reliance damages measured by the detriment sustained. Since the promisee in such cases is partially responsible for his failure to bind the promisor to a legally sufficient contract, it is reasonable to conclude that all that is required to achieve justice is to put the promisee in the position he would have been in had he not acted in reliance upon the promise. See Goodman v. Dicker, supra; Terre Haute Brewing Co. v. Dugan, 102 F.2d 425 (C.C.A.8th, 1939); Kearns v. Andree, 107 Conn. 181, 139 A. 695, 59 A.L. R. 599 (1928); Fuller and Perdue, The Reliance Interest in Contract Damages, 46 Yale L.J. 52 (Part I) and 373 (Part II) (1937); note 13 Vand.L.Rev. 705 (1960); and note 59 Dickinson L.Rev. 163 (1954).

      27

      The judgments of the trial court and the Court of Civil Appeals are both reversed and judgment is here entered remanding the cause to the trial court for trial on its merits in accordance with this opinion.

      28

      GREENHILL, Justice (concurring).

      29

      The Court of Civil Appeals denied a recovery of damages here because the contract, it felt, was too indefinite in its provisions under Bryant v. Clark, 163 Tex. 596, 358 S.W.2d 614 (1962). The holding in Bryant v. Clark was that the contract was not sufficiently definite to be specifically enforceable. The contract here in question, viewed in context, is different in some respects from that in the Bryant case; and I would not extend Bryant v. Clark. See the criticism of that case in 5A Corbin, Contracts 283 (1964).

      30

      [98] But assuming that the contract here, under Bryant v. Clark, is not definite enough to be specifically enforced, it is sufficiently definite to support an action for damages. Restatement, Contracts § 370, comment b.

      31

      There are Texas cases in which damages have been denied after a holding that the contract was not specifically enforceable. See, e. g., Wilson v. Fisher, 144 Tex. 53, 188 S.W.2d 150 (1945); Robertson v. Melton, 131 Tex. 325, 115 S.W.2d 624, 118 A. L.R. 1505 (1938); and Alworth v. Ellison, 27 S.W.2d 639 (Tex.Civ.App.1930, writ refused). In each of these cases, however, the contracts were held to be within the Statute of Frauds and not enforceable for that reason in a suit for damages. 1 Williston, Contracts § 16 (Rev.ed. 1936). The contract here in question is not within the Statute of Frauds and will support an action for damages.

      32

      While I agree with the judgment entered by the Court, it seems to me that the above is a sounder ground upon which to rest our decision.

      33

      [1] Contract between Ellis D. Wheeler, Party of the First Part, and S. E. White, Party of the Second Part:

      34

      "That said Party of the First Part is the owner of Lots Nine (9), Ten (10), and Eleven (11) (excepting the South one hundred ten (110') feet of Lot Nine (9), all of Block Number Seven (7), of BRINKMAN ADDITION to the City of Port Arthur, Jefferson County, Texas. Said Party of the First Part hereby employs Party of the Second Part for the purpose of securing a loan to finance the construction of improvements upon said property; said improvements to face on the Port Arthur-Orange Highway one hundred forty feet (140') and extend back a depth of eighty feet (80'); said building to be constructed according to plans and specifications heretofore agreed on by the parties hereto. The loan to be made by, or obtained by, Party of the Second Part for the Party of the First Part, and to be in the sum of SEVENTY THOUSAND AND 00/100 ($70,000.00) DOLLARS and to be payable in monthly installments over a term of fifteen (15) years and bear interest at a rate of not more than six (6%) per cent per annum.

      35

      "Said loan is to be obtained on or before six (6) months from date of this contract, either from funds provided by Party of the Second Part or from third persons whom Party of the Second Part may negotiate with to provide such funds. In either event Party of the First Part agrees to sign all necessary papers required of Lendor to create proper liens.

      36

      "Party of the First Part agrees to pay to Party of the Second Part the sum of FIVE THOUSAND AND 00/100 ($5,000.00 DOLLARS for his services in making or securing said loan for Party of the First Part. Said FIVE THOUSAND AND 00/100 ($5,000.00) DOLLARS shall be due and payable to Party of the Second Part as soon as the SEVENTY THOUSAND AND 00/100 ($70,000.00) DOLLARS loan is made available for construction of said premises; and should party of the First Part fail and refuse to pay said FIVE THOUSAND DOLLARS ($5,000.00) when due, Party of the Second Part shall have the right to enforce payment by filing suit in a Court of competent jurisdiction, and Party of the First Part hereby specifically agrees to pay ten (10%) per cent additional on said sum as Attorney Fees and all costs of Court in connection with said suit.

      37

      "This agreement voids and takes precedence over previous agreements by and between Ellis D. Wheeler and S. E. White, concerning the hereinabove described property.

      38

      "Party of the First Part agrees that when said loan has been obtained that he will proceed with all reasonable haste and diligence in having the improvements for which said loan is obtained constructed, and to execute all necessary agreements, liens, etc., that may be required in the process of, and consummating said loan. In the event that Party of the Second Part obtains said loan but Party of the First Part does not use the financing thus obtained by Party of the Second Part for any reason, then Party of the First Part will pay to Party of the Second Part the sum of FIVE THOUSAND AND 00/100 ($5,000.00) DOLLARS for his services in obtaining said loan.

      39

      "In addition to the above, Party of the First Part agrees to allow Party of the Second Part six (6) months exclusive right to secure reliable tenants to occupy seventy (70') feet frontage in the Commercial Building which he contemplates building, said seventy (70') feet fronting on the Port Arthur-Orange Highway; said rentals to be not less than ONE AND 60/100 ($1.60) DOLLARS per square foot per year. Should Party of the Second Part secure tenants to the remaining seventy (70') feet frontage before tenants are secured by Party of the First Part, or others, then Party of the Second Part may secure tenants for the remaining portion of said building. Party of the First Part agrees to pay Party of the Second Part, in addition to the payment of said FIVE THOUSAND AND 00/100 ($5,000.00) DOLLARS as above specified, a five (5%) per cent commission on all rentals paid by tenants obtained by Party of the Second Part; said five (5%) per cent commission to be paid for the life of the lease granted to said tenants."

      40

      [2] "Pleading further plaintiff shows the Court that if for any reason said contract is not sufficiently specific and definite, then nevertheless defendant is estopped to so claim and to set up any insufficiency because of the defendant's act in entering into said contract and exhorting plaintiff to clear the premises to make ready for the construction and defendant's representations after the date of said contract to proceed with the demolition of said buildings and clearing the site and that the money would be forthcoming and that defendant would obtain said loan and if for any reason said money could not be obtained elsewhere then said defendant would himself loan the money and plaintiff in reliance on said contract and said exhortations and said representations, both in said contract and given verbally by the defendant after the date of said contract defendant is estopped to claim any deficiency of said contract."

    • 2.8 Hoffman v. Red Owl Stores

      1
      26 Wis.2d 683 (1965)
      2
      HOFFMAN and wife, Plaintiffs,
      v.
      RED OWL STORES, INC., and another, Defendants. [Two appeals.][*]
      3

      Supreme Court of Wisconsin.

      4
      February 5, 1965.
      5
      March 2, 1965.
      6

       

      7

      [693] For the defendants there was a brief by Benton, Bosser, Fulton, Menn & Nehs of Appleton, and oral argument by David L. Fulton.

      8

      For the plaintiffs there was a brief by Van Hoof, Van Hoof & Wylie of Little Chute, and oral argument by Gerard H. Van Hoof.

      9

      CURRIE, C. J.

      10

      The instant appeal and cross appeal present these questions:

      11

      (1) Whether this court should recognize causes of action grounded on promissory estoppel as exemplified by sec. 90 of Restatement, 1 Contracts?

      12

      (2) Do the facts in this case make out a cause of action for promissory estoppel?

      13

      (3) Are the jury's findings with respect to damages sustained by the evidence?

      14

      [694]

      15
      Recognition of a Cause of Action Grounded on Promissory Estoppel.
      16

       

      17

      Sec. 90 of Restatement, 1 Contracts, provides (at p. 110):

      18

      "A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise."

      19

      The Wisconsin Annotations to Restatement, Contracts, prepared under the direction of the late Professor William H. Page and issued in 1933, stated (at p. 53, sec. 90):

      20

      "The Wisconsin cases do not seem to be in accord with this section of the Restatement. It is certain that no such proposition has ever been announced by the Wisconsin court and it is at least doubtful if it would be approved by the court."

      21

      Since 1933, the closest approach this court has made to adopting the rule of the Restatement occurred in the recent case of Lazarus v. American Motors Corp. (1963), 21 Wis. (2d) 76, 85, 123 N. W. (2d) 548, wherein the court stated:

      22

      "We recognize that upon different facts it would be possible for a seller of steel to have altered his position so as to effectuate the equitable considerations inherent in sec. 90 of the Restatement."

      23

      While it was not necessary to the disposition of the Lazarus Case to adopt the promissory-estoppel rule of the Restatement, we are squarely faced in the instant case with that issue. Not only did the trial court frame the special verdict on the theory of sec. 90 of Restatement, 1 Contracts, but no other possible theory has been presented to or discovered by this court which would permit plaintiffs to recover. Of [695] other remedies considered that of an action for fraud and deceit seemed to be the most comparable. An action at law for fraud, however, cannot be predicated on unfulfilled promises unless the promisor possessed the present intent not to perform. Suskey v. Davidoff (1958), 2 Wis. (2d) 503, 507, 87 N. W. (2d) 306, and cases cited. Here, there is no evidence that would support a finding that Lukowitz made any of the promises, upon which plaintiffs' complaint is predicated, in bad faith with any present intent that they would not be fulfilled by Red Owl.

      24

      Many courts of other jurisdictions have seen fit over the years to adopt the principle of promissory estoppel, and the tendency in that direction continues.[1] As Mr. Justice MCFADDIN, speaking in behalf of the Arkansas court, well stated, that the development of the law of promissory estoppel "is an attempt by the courts to keep remedies abreast of increased moral consciousness of honesty and fair representations in all business dealings." Peoples National Bank of Little Rock v. Linebarger Construction Co. (1951), 219 Ark. 11, 17, 240 S. W. (2d) 12. For a further discussion of the doctrine of promissory estoppel, see 1A Corbin, Contracts, pp. 187 et seq., secs. 193-209; 3 Pomeroy's Equity Jurisprudence (5th ed.), pp. 211 et seq., sec. 808b; 1 Williston, Contracts (Jaeger's 3d ed.), pp. 607 et seq., [696] sec. 140; Boyer, Promissory Estoppel: Requirements and Limitations of the Doctrine, 98 University of Pennsylvania Law Review (1950), 459; Seavey, Reliance Upon Gratuitous Promises or Other Conduct, 64 Harvard Law Review (1951), 913; Annos. 115 A. L. R. 152, and 48 A. L. R. (2d) 1069.

      25

      The Restatement avoids use of the term "promissory estoppel," and there has been criticism of it as an inaccurate term. See 1A Corbin, Contracts, p. 232 et seq., sec. 204. On the other hand, Williston advocated the use of this term or something equivalent. 1 Williston, Contracts (1st ed.), p. 308, sec. 139. Use of the word "estoppel" to describe a doctrine upon which a party to a lawsuit may obtain affirmative relief offends the traditional concept that estoppel merely serves as a shield and cannot serve as a sword to create a cause of action. See Utschig v. McClone (1962), 16 Wis. (2d) 506, 509, 114 N. W. (2d) 854. "Attractive nuisance" is also a much-criticized term. See concurring opinion, Flamingo v. Waukesha (1952), 262 Wis. 219, 227, 55 N. W. (2d) 24. However, the latter term is still in almost universal use by the courts because of the lack of a better substitute. The same is also true of the wide use of the term "promissory estoppel." We have employed its use in this opinion not only because of its extensive use by other courts but also since a more-accurate equivalent has not been devised.

      26

      Because we deem the doctrine of promissory estoppel, as stated in sec. 90 of Restatement, 1 Contracts, is one which supplies a needed tool which courts may employ in a proper case to prevent injustice, we endorse and adopt it.

      27
      Applicability of Doctrine to Facts of this Case.
      28

       

      29

      The record here discloses a number of promises and assurances given to Hoffman by Lukowitz in behalf of Red [697] Owl upon which plaintiffs relied and acted upon to their detriment.

      30

      Foremost were the promises that for the sum of $18,000 Red Owl would establish Hoffman in a store. After Hoffman had sold his grocery store and paid the $1,000 on the Chilton lot, the $18,000 figure was changed to $24,100. Then in November, 1961, Hoffman was assured that if the $24,100 figure were increased by $2,000 the deal would go through. Hoffman was induced to sell his grocery store fixtures and inventory in June, 1961, on the promise that he would be in his new store by fall. In November, plaintiffs sold their bakery building on the urging of defendants and on the assurance that this was the last step necessary to have the deal with Red Owl go through.

      31

      We determine that there was ample evidence to sustain the answers of the jury to the questions of the verdict with respect to the promissory representations made by Red Owl, Hoffman's reliance thereon in the exercise of ordinary care, and his fulfilment of the conditions required of him by the terms of the negotiations had with Red Owl.

      32

      There remains for consideration the question of law raised by defendants that agreement was never reached on essential factors necessary to establish a contract between Hoffman and Red Owl. Among these were the size, cost, design, and layout of the store building; and the terms of the lease with respect to rent, maintenance, renewal, and purchase options. This poses the question of whether the promise necessary to sustain a cause of action for promissory estoppel must embrace all essential details of a proposed transaction between promisor and promisee so as to be the equivalent of an offer that would result in a binding contract between the parties if the promisee were to accept the same.

      33

      Originally the doctrine of promissory estoppel was invoked as a substitute for consideration rendering a gratuitous [698] promise enforceable as a contract. See Williston, Contracts (1st ed.), p. 307, sec. 139. In other words, the acts of reliance by the promisee to his detriment provided a substitute for consideration. If promissory estoppel were to be limited to only those situations where the promise giving rise to the cause of action must be so definite with respect to all details that a contract would result were the promise supported by consideration, then the defendants' instant promises to Hoffman would not meet this test. However, sec. 90 of Restatement, 1 Contracts, does not impose the requirement that the promise giving rise to the cause of action must be so comprehensive in scope as to meet the requirements of an offer that would ripen into a contract if accepted by the promisee. Rather the conditions imposed are:

      34

      (1) Was the promise one which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee?

      35

      (2) Did the promise induce such action or forbearance?

      36

      (3) Can injustice be avoided only by enforcement of the promise?[2]

      37

      We deem it would be a mistake to regard an action grounded on promissory estoppel as the equivalent of a breach-of-contract action. As Dean Boyer points out, it is desirable that fluidity in the application of the concept be maintained. 98 University of Pennsylvania Law Review (1950), 459, at page 497. While the first two of the above-listed three requirements of promissory estoppel present issues of fact which ordinarily will be resolved by a jury, the third requirement, that the remedy can only be invoked where necessary to avoid injustice, is one that involves a policy decision by the court. Such a policy decision necessarily embraces an element of discretion.

      38

      [699] We conclude that injustice would result here if plaintiffs were not granted some relief because of the failure of defendants to keep their promises which induced plaintiffs to act to their detriment.

      39
      Damages.
      40

       

      41

      Defendants attack all the items of damages awarded by the jury.

      42

      The bakery building at Wautoma was sold at defendants' instigation in order that Hoffman might have the net proceeds available as part of the cash capital he was to invest in the Chilton store venture. The evidence clearly establishes that it was sold at a loss of $2,000. Defendants contend that half of this loss was sustained by Mrs. Hoffman because title stood in joint tenancy. They point out that no dealings took place between her and defendants as all negotiations were had with her husband. Ordinarily only the promisee and not third persons are entitled to enforce the remedy of promissory estoppel against the promisor. However, if the promisor actually foresees, or has reason to foresee, action by a third person in reliance on the promise, it may be quite unjust to refuse to perform the promise. 1A Corbin, Contracts, p. 220, sec. 200. Here not only did defendants foresee that it would be necessary for Mrs. Hoffman to sell her joint interest in the bakery building, but defendants actually requested that this be done. We approve the jury's award of $2,000 damages for the loss incurred by both plaintiffs in this sale.

      43

      Defendants attack on two grounds the $1,000 awarded because of Hoffman's payment of that amount on the purchase price of the Chilton lot. The first is that this $1,000 had already been lost at the time the final negotiations with Red Owl fell through in January, 1962, because the remaining $5,000 of purchase price had been due on October 15, 1961. The record does not disclose that the lot owner had [700] foreclosed Hoffman's interest in the lot for failure to pay this $5,000. The $1,000 was not paid for the option, but had been paid as part of the purchase price at the time Hoffman elected to exercise the option. This gave him an equity in the lot which could not be legally foreclosed without affording Hoffman an opportunity to pay the balance. The second ground of attack is that the lot may have had a fair market value of $6,000, and Hoffman should have paid the remaining $5,000 of purchase price. We determine that it would be unreasonable to require Hoffman to have invested an additional $5,000 in order to protect the $1,000 he had paid. Therefore, we find no merit to defendants' attack upon this item of damages.

      44

      We also determine it was reasonable for Hoffman to have paid $125 for one month's rent of a home in Chilton after defendants assured him everything would be set when plaintiff sold the bakery building. This was a proper item of damage.

      45

      Plaintiffs never moved to Chilton because defendants suggested that Hoffman get some experience by working in a Red Owl store in the Fox River Valley. Plaintiffs, therefore, moved to Neenah instead of Chilton. After moving, Hoffman worked at night in an Appleton bakery but held himself available for work in a Red Owl store. The $140 moving expense would not have been incurred if plaintiffs had not sold their bakery building in Wautoma in reliance upon defendants' promises. We consider the $140 moving expense to be a proper item of damage.

      46

      We turn now to the damage item with respect to which the trial court granted a new trial, i.e., that arising from the sale of the Wautoma grocery-store fixtures and inventory for which the jury awarded $16,735. The trial court ruled that Hoffman could not recover for any loss of future profits for the summer months following the sale on June 6, 1961, but that damages would be limited to the difference between [701] the sales price received and the fair market value of the assets sold, giving consideration to any goodwill attaching thereto by reason of the transfer of a going business. There was no direct evidence presented as to what this fair market value was on June 6, 1961. The evidence did disclose that Hoffman paid $9,000 for the inventory, added $1,500 to it and sold it for $10,000 or a loss of $500. His 1961 federal income-tax return showed that the grocery equipment had been purchased for $7,000 and sold for $7,955.96. Plaintiffs introduced evidence of the buyer that during the first eleven weeks of operation of the grocery store his gross sales were $44,000 and his profit was $6,000 or roughly 15 percent. On cross-examination he admitted that this was gross and not net profit. Plaintiffs contend that in a breach-of-contract action damages may include loss of profits. However, this is not a breach-of-contract action.

      47

      The only relevancy of evidence relating to profits would be with respect to proving the element of goodwill in establishing the fair market value of the grocery inventory and fixtures sold. Therefore, evidence of profits would be admissible to afford a foundation for expert opinion as to fair market value.

      48

      Where damages are awarded in promissory estoppel instead of specifically enforcing the promisor's promise, they should be only such as in the opinion of the court are necessary to prevent injustice. Mechanical or rule-of-thumb approaches to the damage problem should be avoided. In discussing remedies to be applied by courts in promissory estoppel we quote the following views of writers on the subject:

      49

      "Enforcement of a promise does not necessarily mean Specific Performance. It does not necessarily mean Damages for breach. Moreover the amount allowed as Damages may be determined by the plaintiff's expenditures or change of position in reliance as well as by the value to him of the [702] promised performance. Restitution is also an `enforcing' remedy, although it is often said to be based upon some kind of a rescission. In determining what justice requires, the court must remember all of its powers, derived from equity, law merchant, and other sources, as well as the common law. Its decree should be molded accordingly." 1A Corbin, Contracts, p. 221, sec. 200.

      50

      "The wrong is not primarily in depriving the plaintiff of the promised reward but in causing the plaintiff to change position to his detriment. It would follow that the damages should not exceed the loss caused by the change of position, which would never be more in amount, but might be less, than the promised reward." Seavey, Reliance on Gratuitous Promises or Other Conduct, 64 Harvard Law Review (1951), 913, 926.

      51

      "There likewise seems to be no positive legal requirement, and certainly no legal policy, which dictates the allowance of contract damages in every case where the defendant's duty is consensual." Shattuck, Gratuitous Promises—A New Writ?, 35 Michigan Law Review (1936), 908, 912.[3]

      52

      At the time Hoffman bought the equipment and inventory of the small grocery store at Wautoma he did so in order to gain experience in the grocery-store business. At that time discussion had already been had with Red Owl representatives that Wautoma might be too small for a Red Owl operation and that a larger city might be more desirable. Thus Hoffman made this purchase more or less as a temporary experiment. Justice does not require that the damages awarded him, because of selling these assets at the behest of defendants, should exceed any actual loss sustained measured by the difference between the sales price and the fair market value.

      53

      [703] Since the evidence does not sustain the large award of damages arising from the sale of the Wautoma grocery business, the trial court properly ordered a new trial on this issue.

      54

      By the Court.—Order affirmed. Because of the cross appeal, plaintiffs shall be limited to taxing but two thirds of their costs.

      55

      [*] Motion for rehearing denied, with costs, on April 27, 1965.

      56

      [1] Among the many cases which have granted relief grounded upon promissory estoppel are: Goodman v. Dicker (D. C., D. C. 1948), 169 Fed. (2d) 684; Drennan v. Star Paving Co. (1958), 51 Cal. (2d) 409, 333 Pac. (2d) 757; Van Hook v. Southern California Waiters Alliance (1958), 158 Cal. App. (2d) 556, 323 Pac. (2d) 212; Chrysler Corp. v. Quimby (1958), 51 Del. 264, 144 Atl. (2d) 123, 144 Atl. (2d) 885; Lusk-Harbison-Jones, Inc., v. Universal Credit Co. (1933), 164 Miss. 693, 145 So. 623; Feinberg v. Pfeiffer Co. (Mo. App. 1959), 322 S. W. (2d) 163; Schafer v. Fraser (1955), 206 Or. 446, 290 Pac. (2d) 190, 294 Pac. (2d) 609; Northwestern Engineering Co. v. Ellerman (1943), 69 S. D. 397, 10 N. W. (2d) 879.

      57

      [2] See Boyer, 98 University of Pennsylvania Law Review (1950), 459, 460. "Enforcement" of the promise embraces an award of damages for breach as well as decreeing specific performance.

      58

      [3] For expression of the opposite view, that courts in promissory-estoppel cases should treat them as ordinary breach of contract cases and allow the full amount of damages recoverable in the latter, see note, 13 Vanderbilt Law Review (1960), 705.

  • 3 II .A. 3. Misunderstandings

    • 3.1 Embry v. Hargadine, Mckittrick Dry Goods Co.

      1
      105 S.W. 777
      2
      127 Mo. A. 383
      3
      EMBRY
      v.
      HARGADINE, McKITTRICK DRY GOODS CO.
      4
      St. Louis Court of Appeals. Missouri.
      5
      November 5, 1907.
      6
      Rehearing Denied December 3, 1907.
      7

      1. MASTER AND SERVANT — CONTRACT OF HIRING — EVIDENCE — INSTRUCTIONS.

      8

      Where, in an action on a parol contract of hiring alleged to have been entered into after the termination of a written contract of employment, the witnesses coincided as to the terms of the re-employment proposed in a conversation between the parties and defendant only proved that he refused to enter into a contract with the employé regarding another year's employment, a charge that, in order to find for plaintiff, the jury must find not only that the conversation occurred, but that by such conversation both parties intended to contract with each other, was erroneous.

      9

      2. CONTRACTS — INTENTION OF PARTIES.

      10

      To constitute a contract there must, in general, be a meeting of the minds of the parties, and both must agree to the same thing, in the same sense; but, in so far as their intention is an element, it is only such intention as the words or the acts of the parties predicate, and not one secretly cherished, which is inconsistent therewith.

      11

      3. SAME — QUESTION FOR COURT.

      12

      The general rule is that it is for the court to construe the effect of writings relied on to make a contract, and the effect of unambiguous oral words, but, where the words are in dispute, the question whether they were used or not is for the jury.

      13

      4. MASTER AND SERVANT — CONTRACT OF EMPLOYMENT — QUESTION FOR COURT.

      14

      A contract of employment terminated December 15th. Eight days thereafter the employé demanded a contract for another year, and stated that unless he obtained one he would cease work at once. The employer responded: "Go ahead, you are all right." Held, that the conversation, as a matter of law, created a contract for a year, and the court erred in making the formation of the contract depend on a finding that both parties intended to make one.

      15

      Appeal from St. Louis Circuit Court; O'Neill Ryan, Judge.

      16

      Action by Charles R. Embry against the Hargadine, McKittrick Dry Goods Company. From a judgment for defendant, plaintiff appeals. Reversed and remanded.

      17

      Sloan Pitzer, for appellant. Johnson, Allen & Richards, for respondent.

      18
      GOODE, J.
      19

      We dealt with this case on a former appeal (115 Mo. App. 130, 91 S. W. 170). It has been retried, and is again before us for the determination of questions not then reviewed. The appellant was an employé of the respondent company under a written contract to expire December 15, 1903, at a salary of $2,000 per annum. His duties were to attend to the sample department of respondent, of which he was given complete charge. It was his business to select samples for the traveling salesmen of the company, which is a wholesale dry goods concern, to use in selling goods to retail merchants. Appellant contends that on December 23, 1903, he was re-engaged by respondent, through its president, Thos. H. McKittrick, for another year at the same compensation and for the same duties stipulated in his previous written contract. On March 1, 1904, he was discharged, having been notified in February that, on account of the necessity of retrenching expenses, his services and that of some other employés would no longer be required. The respondent company contends that its president never re-employed appellant after the termination of his written contract, and hence that it had a right to discharge him when it chose. The point with which we are concerned requires an epitome of the testimony of appellant and the counter testimony of McKittrick, the president of the company, in reference to the alleged re-employment. Appellant testified: That several times prior to the termination of his written contract on December 15, 1903, he had endeavored to get an understanding with McKittrick for another year, but had been put off from time to time. That on December 23d, eight days after the expiration of said contract, he called on McKittrick, in the latter's office, and said to him that as appellant's written employment had lapsed eight days before, and as there were only a few days between then and the 1st of January in which to seek employment with other firms, if respondent wished to retain his services longer he must have a contract for another year, or he would quit respondent's service then and there. That he had been put off twice before and wanted an understanding or contract at once so that he could go ahead without worry. That McKittrick asked him how he was getting along in his department, and appellant said he was very busy, as they were in the height of the season getting men out — had about 110 salesmen on the line and others in preparation. That McKittrick then said: "Go ahead, you're all right. Get your men out, and don't let that worry you." That appellant took McKittrick at his word and worked until February 15th without any question in his mind. It was on February 15th that he was notified his services would be discontinued on March 1st. McKittrick denied this conversation as related by appellant, and said that, when accosted by the latter on December 23d, he (McKittrick) was working on his books in order to get out a report for a stockholders' meeting, and, when appellant said if he did not get a contract he would leave, that he (McKittrick) said: "Mr. Embry, I am just getting ready for the stockholders' meeting to-morrow. I have no time to take it up now. I have told you before I would not take it up until I had [778] these matters out of the way. You will have to see me at a later time. I said: `Go back upstairs and get your men out on the road.' I may have asked him one or two other questions relative to the department, I don't remember. The whole conversation did not take more than a minute."

      20

      Embry also swore that, when he was notified he would be discharged, he complained to McKittrick about it, as being a violation of their contract, and McKittrick said it was due to the action of the board of directors, and not to any personal action of his, and that others would suffer by what the board had done as well as Embry. Appellant requested an instruction to the jury setting out, in substance, the conversation between him and McKittrick according to his version, and declaring that those facts, if found to be true, constituted a contract between the parties that defendant would pay plaintiff the sum of $2,000 for another year, provided the jury believed from the evidence that plaintiff commenced said work believing he was to have $2,000 for the year's work. This instruction was refused, but the court gave another embodying in substance appellant's version of the conversation, and declaring it made a contract "if you (the jury) find both parties thereby intended and did contract with each other for plaintiff's employment for one year from and including December 23, 1903, at a salary of $2,000 per annum." Embry swore that, on several occasions when he spoke to McKittrick about employment for the ensuing year, he asked for a renewal of his former contract, and that on December 23d, the date of the alleged renewal, he went into Mr. McKittrick's office and told him his contract had expired, and he wanted to renew it for a year, having always worked under year contracts. Neither the refused instruction nor the one given by the court embodied facts quite as strong as appellant's testimony, because neither referred to appellant's alleged statement to McKittrick that unless he was re-employed he would stop work for respondent then and there.

      21

      It is assigned for error that the court required the jury, in order to return a verdict for appellant, not only to find the conversation occurred as appellant swore, but that both parties intended by such conversation to contract with each other for plaintiff's employment for the year from December, 1903, at a salary of $2,000. If it appeared from the record that there was a dispute between the parties as to the terms on which appellant wanted re-employment, there might have been sound reason for inserting this clause in the instruction; but no issue was made that they split on terms; the testimony of McKittrick tending to prove only that he refused to enter into a contract with appellant regarding another year's employment until the annual meeting of stockholders was out of the way. Indeed, as to the proposed terms McKittrick agrees with Embry, for the former swore as follows: "Mr. Embry said he wanted to know about the renewal of his contract. Said if he did not have the contract made he would leave." As the two witnesses coincided as to the terms of the proposed re-employment, there was no reason for inserting the above-mentioned clause in the instruction in order that it might be settled by the jury whether or not plaintiff, if employed for one year from December 23, 1903, was to be paid $2,000 a year. Therefore it remains to determine whether or not this part of the instruction was a correct statement of the law in regard to what was necessary to constitute a contract between the parties; that is to say, whether the formation of a contract by what, according to Embry, was said, depended on the intention of both Embry and McKittrick. Or, to put the question more precisely: Did what was said constitute a contract of re-employment on the previous terms irrespective of the intention or purpose of McKittrick?

      22

      Judicial opinion and elementary treatises abound in statements of the rule that to constitute a contract there must be a meeting of the minds of the parties, and both must agree to the same thing in the same sense. Generally speaking, this may be true; but it is not literally or universally true. That is to say, the inner intention of parties to a conversation subsequently alleged to create a contract cannot either make a contract of what transpired, or prevent one from arising, if the words used were sufficient to constitute a contract. In so far as their intention is an influential element, it is only such intention as the words or acts of the parties indicate; not one secretly cherished which is inconsistent with those words or acts. The rule is thus stated by a text-writer, and many decisions are cited in support of his text: "The primary object of construction in contract law is to discover the intention of the parties. This intention in express contracts is, in the first instance, embodied in the words which the parties have used and is to be deduced therefrom. This rule applies to oral contracts, as well as to contracts in writing, and is the rule recognized by courts of equity." 2 Paige, Contracts, § 1104. So it is said in another work: "Now this measure of the contents of the promise will be found to coincide in the usual dealings of men of good faith and ordinary competence, both with the actual intention of the promisor and with the actual expectation of the promisee. But this is not a constant or a necessary coincidence. In exceptional cases a promisor may be bound to perform something which he did not intend to promise, or a promisee may not be entitled to require that performance which he understood to be promised to him." Walds-Pollock, Contracts (3d Ed.) 309. In Brewington v. Mesker, 51 Mo. App. 348, 356, it is said that the meeting of minds, which is essential to the formation of a contract, is not determined [779] by the secret intention of the parties, but by their expressed intention, which may be wholly at variance with the former. In Machine Co. v. Criswell, 58 Mo. App. 471, an instruction was given on the issue of whether the sale of a machine occurred, which told the jury that an intention on the part of the seller to pass the title, and of the purchaser to receive and accept the machine for the purpose of making it his own, was essential to a sale, and if the jury believed such intention did not exist in the minds of both parties at the time, and was not made known to each other, then there was no sale, notwithstanding the delivery. In commenting on this instruction, the court said: "The latter clause of the instruction is erroneous and misleading. It is true that in every case of purchase the question of sale or no sale is a matter of intention; but such intention must always be determined by the conduct, acts, and express declarations of the parties, and not by the secret intention existing in the mind or minds of the contracting parties. If the validity of such a contract depended upon secret intentions of the parties, then no oral contract of sale could be relied on with safety." Machine Co. v. Criswell, 58 Mo., loc. cit. 473. In Smith v. Hughes, L. R. 6 Q. B. 597, 607, it was said: "If, whatever a man's real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party's terms." And that doctrine was adopted in Phillip v. Gallant, 62 N. Y. 256. In 9 Cyc. 245, we find the following text: "The law imputes to a person an intention corresponding to the reasonable meaning of his words and acts. It judges his intention by his outward expressions and excludes all questions in regard to his unexpressed intention. If his words or acts, judged by a reasonable standard, manifest an intention to agree in regard to the matter in question, that agreement is established, and it is immaterial what may be the real, but unexpressed, state of his mind on the subject." Even more pointed was the language of Baron Bramwell in Brown v. Hare, 3 Hurlst. & N. *484, *495: "Intention is immaterial till it manifests itself in an act. If a man intends to buy, and says so to the intended seller, and he intends to sell, and says so to the intended buyer, there is a contract of sale; and so there would be if neither had the intention." In view of those authorities, we hold that, though McKittrick may not have intended to employ Embry by what transpired between them according to the latter's testimony, yet if what McKittrick said would have been taken by a reasonable man to be an employment, and Embry so understood it, it constituted a valid contract of employment for the ensuing year.

      23

      The next question is whether or not the language used was of that character, namely, was such that Embry, as a reasonable man, might consider he was re-employed for the ensuing year on the previous terms, and act accordingly. We do not say that in every instance it would be for the court to pronounce on this question, because, peradventure, instances might arise in which there would be such an ambiguity in the language relied on to show an assent by the obligor to the proposal of the obligee that it would be for the jury to say whether a reasonable mind would take it to signify acceptance of the proposal. Belt v. Goode, 31 Mo. 128; Davies v. Baldwin, 66 Mo. App. 577. In Lancaster v. Elliott, 28 Mo. App. 86, 92, the opinion, as to the immediate point, reads: "The interpretation of a contract in writing is always a matter of law for determination by the court, and equally so, upon like principles, is the question what acts and words, in nearly every case, will suffice to constitute an acceptance by one party, of a proposal submitted by the other, so that a contract or agreement thereby becomes matured." The general rule is that it is for the court to construe the effect of writings relied on to make a contract, and also the effect of unambiguous oral words. Belt v. Goode, supra; Brannock v. Elmore, 114 Mo. 55, 21 S. W. 451; Norton v. Higbee, 38 Mo. App. 467, 471. However, if the words are in dispute, the question of whether they were used or not is for the jury. Belt v. Goode, supra. With these rules of law in mind, let us recur to the conversation of December 23d between Embry and McKittrick as related by the former. Embry was demanding a renewal of his contract, saying he had been put off from time to time, and that he had only a few days before the end of the year in which to seek employment from other houses, and that he would quit then and there unless he was reemployed. McKittrick inquired how he was getting along with the department, and Embry said they, i. e., the employés of the department, were very busy getting out salesmen. Whereupon McKittrick said: "Go ahead, you are all right. Get your men out, and do not let that worry you." We think no reasonable man would construe that answer to Embry's demand that he be employed for another year, otherwise than as an assent to the demand, and that Embry had the right to rely on it as an assent. The natural inference is, though we do not find it testified to, that Embry was at work getting samples ready for the salesmen to use during the ensuing season. Now, when he was complaining of the worry and mental distress he was under because of his uncertainty about the future, and his urgent need, either of an immediate contract with respondent, or a refusal by it to make one, leaving him free to seek employment elsewhere, McKittrick must have answered as he did for the purpose of assuring appellant that any apprehension was [780] needless, as appellant's services would be retained by the respondent. The answer was unambiguous, and we rule that if the conversation was according to appellant's version, and he understood he was employed, it constituted in law a valid contract of re-employment, and the court erred in making the formation of a contract depend on a finding that both parties intended to make one. It was only necessary that Embry, as a reasonable man, had a right to and did so understand.

      24

      Some other rulings are assigned for error by the appellant, but we will not discuss them because we think they are devoid of merit.

      25

      The judgment is reversed, and the cause remanded. All concur.

    • 3.2 8.2.2.1 Hotchkiss v. National City Bank of New York

      1

      HOTCHKISS v. NATIONAL CITY BANK OF NEW YORK, 200 F. 287, 293 (S.D.N.Y. 1911), aff’d, 201 F. 664 (2d Cir. 1912), 231 U.S. 50 (1913). LEARNED HAND, J.: "A contract has, strictly speaking, nothing to do with the personal, or individual, intent of the parties. A contract is an obligation attached by the mere force of law to certain acts of the parties, usually words, which ordinarily accompany and represent a known intent. If, however, it were proved by twenty bishops that either party, when he used the words, intended something else than the usual meaning which the law imposes upon them, he would still be held, unless there were some mutual mistake, or something else of the sort. Of course, if it appear by other words, or acts, of the parties, that they attribute a peculiar meaning to such words as they use in the contract, that meaning will prevail, but only by virtue of the other words, and not because of their unexpressed intent."

    • 3.3 Raffles v. Wichelhaus

      1

      2 Hurl. & C. 906, 159 Eng. Rep. 375 (Ex. 1864)

      2
      Raffles
      v.
      Wichelhaus.
      3

      To a declaration for not accepting Surat cotton which the defendant bought of the plaintiff " to arrive ex Peerless from Bombay," the defendant pleaded that he meant a ship called the "Peerless" which sailed from Bombay, in October, and the plaintiff was not ready to deliver any cotton which arrived by that ship, but only cotton which arrived by another ship called the " Peerless," which sailed from Bombay in December. -Held, on demurrer, that the plea was a good answer.

      4

      DECLARATION. -For that it was agreed between the plaintiff and the defendants, to wit, at Liverpool, that the plaintiff should sell to the defendants, and the defendants buy of the plaintiff, certain goods, to wit, 125 bales of Surat cotton, guaranteed middling fair merchant's Dhollorah, to arrive ex "Peerless" from Bombay; and that the cotton should be taken from the quay, and that the defendants would pay the plaintiff for the same at a certain rate, to wit, at the rate of 17¼ d. per pound, within a certain time then agreed upon after the arrival of the said goods in England. -Averments: that the said goods did arrive by the said ship from Bombay in England, to wit, at Liverpool, and the plaintiff was then and there ready, and willing and offered to deliver the said goods to the defendants, &c. Breach: that the defendants refused to accept the said goods or pay the plaintiff for them.

      5

      Plea. -That the said ship mentioned in the said agreement was meant and intended by the defendants to be the ship called the "Peerless," which sailed from Bombay, to wit, in October; and that the plaintiff was not ready and willing and did not offer to deliver to the defendants any bales of cotton which arrived by the last mentioned ship, but instead thereof was only ready and willing and offered to deliver to the defendants 125 bales of Surat cotton which arrived by another and different ship, which was also called the "Peerless," and which sailed from Bombay, to wit, in December.

      6

      Demurrer, and joinder therein.

      7

      Milward, in support of the demurrer. -The contract was for the sale of a number of bales of cotton of a particular description, which the plaintiff was ready to deliver. It is immaterial by what ship the cotton was to arrive, so that it was a ship called the "Peerless." The words " to arrive ex 'Peerless,'" only mean that if the vessel is lost on the voyage, the contract is to be at an end. [Pollock, C. B. -It would be a question for the jury whether both parties meant the same ship called the "Peerless."] That would be so if the contract was for the sale of a ship called the "Peerless;" but it is for the sale of cotton on board a ship of that name. [Pollock, C. B. -The defendant only bought that cotton which was to arrive by a particular ship. It may as well be said, that if there is a contract for the purchase of certain goods in warehouse A, that is satisfied by the delivery of goods of the same description in warehouse B.] In that case there would be goods in both warehouses; here it does not appear that the plaintiff had any goods on board the other "Peerless." [Martin, B. -It is imposing on the defendant a contract different from that which he entered into. Pollock, C. B. -It is like a contract for the purchase of wine coming from a particular estate in France or Spain, where there are two estates of that name.] The defendant has no right to contradict by parol evidence a written contract good upon the face of it. He does not impute misrepresentation or fraud, but only says that he fancied the ship was a different one. Intention is of no avail, unless stated at the time of the contract. [Pollock, C. B. -One vessel sailed in October and the other in December.] The time of sailing is no part of the contract.

      8

      Mellish (Cohen with him), in support of the plea. -There is nothing on the face of the contract to shew that any particular ship called the "Peerless" was meant; but the moment it appears that two ships called the "Peerless" were about to sail from Bombay there is a latent ambiguity, and parol evidence may be given for the purpose shewing that the defendant meant one "Peerless" and the plaintiff another. That being so, there was no consensus ad idem, and therefore no binding contract. -He was then stopped by the Court.

      9

      Per CURIAM. There must be judgment for the defendants.

      10

      Judgment for the defendants. Pollock, C. B., Martin, B., and Pigott, B. Jan. 27.

    • 3.4 Flower City Painting Etc. v. Gumina Const. Co.

      1
      591 F.2d 162 (1979)
      2
      FLOWER CITY PAINTING CONTRACTORS, INC., Appellant,
      v.
      GUMINA CONSTRUCTION COMPANY, Appellee.
      3
      No. 130, Docket 78-7217.
      4

      United States Court of Appeals, Second Circuit.

      5
      Argued September 13, 1978.
      6
      Decided January 9, 1979.
      7

      Sheldon M. Markel, Buffalo, N. Y., for appellant.

      8

      Paul R. Braunsdorf, Rochester, N. Y. (Harris, Beach, Wilcox, Rubin & Levey, Rochester, N. Y., of counsel), for appellee.

      9

      Before OAKES, GURFEIN and MESKILL, Circuit Judges.

      10
      GURFEIN, Circuit Judge:
      11

      This is an action for breach of contract, entertained in the District Court for the Western District of New York (Hon. Harold P. Burke, Judge) by virtue of the diversity of citizenship of the parties.[1] [163] 28 U.S.C. § 1332. Plaintiff-appellant, Flower City Painting Contractors, Inc. ("Flower") is a newly formed painting contracting firm in Rochester, New York, owned and managed by black minority personnel. Defendant-appellee, Gumina Construction Company ("Gumina") is an Ohio company with its principal place of business in Lorain, Ohio.

      12

      Gumina entered into a prime contract with the FIGHT Village Housing Development Fund Company, Inc., for the construction of a garden type apartment project called "FIGHT Village," on March 12, 1973. The project was federally funded and developed under the auspices of the Federal Housing Authority of the Department of Housing and Urban Development ("HUD"). Pursuant to Executive Order No. 11246, which prohibits employment discrimination by Government contractors, HUD regulations and the terms of the prime contract required the prime contractor to undertake an affirmative action program that included efforts to recruit and hire minority subcontractors. HUD Contract Compliance Handbook 8000.6 at 27 (1972). Compliance was a condition of the contract.

      13

      Part of Gumina's affirmative action obligation was satisfied by its award of a subcontract for painting in the FIGHT Village to Flower on April 16, 1973. As indicated by the cost breakdown summary sheet attached to the prime contract, the total anticipated cost of painting and decorating the entire FIGHT project was to be $101,000. This estimation of cost was significant, since an excess of cost in one aspect could have caused a cost overrun that would cut into the prime contractor's profits. The subcontract executed with Flower provided that Flower was to be paid $98,499.84 for its work, a sum that was roughly only $2500 less than the maximum allotted for painting and decorating the entire project.

      14

      The terms of the Gumina-Flower subcontract included the language of Flower's original bid on the subcontract which was incorporated in haec verba as Schedule A of the subcontract. That Schedule reads as follows:

      15
      "SCHEDULE A"
      16
         The painting of the above mentioned project in accordance   with the painting specifications and plans for this project.1. One bedroom units     $*335.00 per unit   $*17,420.002. Two bedroom units     $*371.00 per unit   $*28,196.003. Three bedroom units   $*428.00 per unit   $*29,960.004. Four bedroom units    $*477.58 per unit   $*22,923.84                           A Total of:       $*98,499.84  Please note: price given reflects no bonding requirement and               a non-union job operation.
      17

      The subcontract also incorporated by reference the prime contract, drawings, addenda, and specifications, as well as modifications subsequently issued. Indeed, Schedule A made specific reference to the contract specifications and plans in defining the scope of the subcontractor's work. The subcontract further provided that the subcontractor would "faithfully observe all requirements and conditions set forth by plans and specifications on file at the F.H.A. Office in Buffalo, N.Y. . . .," and that these documents were to be "available for inspection by the Subcontractor upon his request."

      18

      On March 18, 1974, nearly one year after Flower entered into the subcontract, it asserted in a letter to Gumina that the contract required Flower to paint interior walls of the individual apartment units only and that Flower was not obligated to paint exteriors or common buildings.[2] On March 25, 1974, Flower received from Gumina a copy of Article II of the subcontract with additional explanatory language typed in as a reminder of obligations which Gumina insisted that Flower had under its subcontract. This notation stated: "It is further [164] understood that this contract includes all exterior work, (encompasses all work, within specs and drawings) except exterior siding. The community building is also a part of this contract." On March 29, 1974, the president of Flower submitted to Gumina an itemization of additional costs for this "exterior work," claiming that it was not required to do the painting of apartment laundry rooms, storage rooms, and hallways, as well as of exterior doors, trim and certain common buildings.[3] On April 4, 1974 (the letter was erroneously dated March 4), Gumina responded to Flower's demand for extra payments by reiterating that the exterior work specified by Flower as requiring additional payment, was work which had already been agreed upon. Gumina, in the same letter, though the work had not yet begun, cancelled the contract. Appellant sued Gumina for damages.

      19

      At trial, Gumina defended its removal of Flower on the ground that the latter had misinterpreted the contract, and that by insisting upon extra payment for the painting of exteriors Flower had refused to comply with the terms of — and had thereby repudiated — the existing subcontract. Flower maintained the converse position: that Gumina had unilaterally attempted to enlarge the scope of Flower's obligation under the contract by requiring work outside the individual "unit" interiors. The trial court accepted the contract interpretation offered by Gumina. It found, despite Flower's contentions that it had been hired to paint only the walls in the "units," that, on the contrary, neither the subcontract nor the specifications incorporated by reference excluded common hallways, storage areas, laundry rooms, or exterior surfaces of FIGHT Village. The court determined that the specifications required the painting of "`all surfaces except those specifically excluded.'"

      20

      The court held that Flower committed a breach of contract "by asking for extra pay for work it was obligated to do under its contract." It found that "Flower City unequivocally declared its refusal to perform according to the contract" and that "cancellation was the proper response by Gumina Construction." It was on that basis that the complaint was dismissed after trial.

      21

      On this appeal, the defendant contends that an alternative ground upon which to uphold dismissal of Flower's suit is that no subcontract was actually formed between Flower and Gumina because there was no "meeting of the minds." This issue was not expressly considered by the District Court, although the assumption that a contract existed as interpreted by Gumina is implicit in its ruling.

      22

      If we hold Flower strictly to its obligation to recognize that the specifications were part of the subcontract, then its claim for additional payment as a condition of performance was unjustified, as Judge Burke found. This, in turn, would raise the question whether a refusal to perform part of an alleged contract, except in accordance with one's own interpretation, is a repudiation. If so, we would then have to decide whether such a repudiation by Flower was sufficiently material to be treated as a justification for unilateral rescission by Gumina. Thus, if we adopted the approach of the court below that there was a contract, even aside from the issue of what were its obligations, we would have considerable difficulty in weighing the correctness of the conclusion of law that there had been a repudiation sufficient to justify an immediate unilateral rescission.

      23

      We think, however, that this thorny problem need not be reached. Rather, we have concluded — using the objective criterion of judgment — that there was no meeting of the minds in the first instance and that, hence, there never was a contract enforcible by either party.

      24

      Viewing the subcontract itself as written, both Flower's and Gumina's interpretations of the document are plausible. The description of the subject matter of the contract in [165] Schedule A in terms of "units" and the fact that the total bid listed is the aggregate of the bids on the individual units suggest that nothing more was required to be painted than the actual units themselves. On the other hand, the incorporation of the specifications with their delineation of exterior painting chores and the use of the word "project" in Schedule A indicate that the scope of the work encompassed all painting in FIGHT City.

      25

      Resolution of this ambiguity might be effected by construing the contract on the assumption that it incorporated the habitual or customary practice of the construction industry in Rochester, New York, that painting subcontracts be awarded on an entire project basis.

      26

      Such usage, if operative, may be proved by parol, as was done here. See, e. g., Division of Triple T Service, Inc. v. Mobil Oil Corp., 60 Misc.2d 720, 730-31, 304 N.Y.S.2d 191 (Sup.Ct.1969). But proof of the usage is not enough by itself to establish the meaning of the contract, for "[a] party cannot be bound by usage unless he either knows or has reason to know of its existence and nature." Restatement (First) of Contracts § 247, comment b. See Walls v. Bailey, 49 N.Y. 464 (1872).

      27

      In an ordinary situation involving the painting subcontract on a construction job in Rochester, the court could find as a fact that a painting contractor "knows or has reason to know of [this usage's] existence and nature." It seems clear enough that Flower actually did not know the usage, as its President testified, and the court made no finding to the contrary. The question whether Flower had "reason to know" is the issue.

      28

      Flower was brought into the picture by the imposition on the contractor of an affirmative action program. While competence to do the job must have been the assumption of the Regulation, experience in the trade was not. Flower was a neophyte minority painting contractor. This was its first substantial subcontract on a construction job. It would be unrealistic to hold it strictly to a "reason to know" standard of trade usage.

      29

      The consequence of ruling that Flower cannot be held to trade usage is recognition, however, that the contract document could represent two different understandings of what the subject matter embraced. This means that Gumina, as well, was not bound since it takes two to make a contract. Unfortunately, there was no contract to enforce in favor of Flower, as there would have been no contract to enforce against Flower if Gumina had been the plaintiff in an action for breach. And we cannot say that either party acted so unreasonably as to justify construing the ambiguity in the contract against it. Each party, in fact, held a different and reasonable view of the undertaking, Flower on the basis of its literal reading of the word "units" and Gumina because of its suppositions concerning trade practice and its awareness that Flower was to be paid virtually the entire sum allocated to painting the FIGHT City project.[4]

      30

      Though the setting is new, the problem is old. In two nineteenth century cases, Raffles v. Wichelhaus, 159 Eng.Rep. 375 (Ex.1864) (the famous "Peerless" case) and Kyle v. Kavanagh, 103 Mass. 356 (1869), courts, when faced with an arguably material contract term that could mean or represent two different things, found that no contract existed. See O. Holmes, The Common Law 309-10 (1881).[5] As Judge Pollack [166] noted in Oswald v. Allen, 285 F.Supp. 488, 492 (S.D.N.Y.1968), aff'd, 417 F.2d 43 (2d Cir. 1969), the essence of the Raffles opinion was that "neither party had reason to know of the latent ambiguity. . . ." The rule of Raffles and Kyle was adopted and more fully formulated in the Restatement (First) of Contracts § 71(a).

      31
      If the manifestations of intention of either party are uncertain or ambiguous, and he has no reason to know that they may bear a different meaning to the other party from that which he himself attaches to them, his manifestations are operative in the formation of a contract only in the event that the other party attaches to them the same meaning. [Emphasis added.]
      32

      Accord, Oswald v. Allen, supra; Julius Kayser & Co. v. Textron, Inc., 228 F.2d 783, 789-90 (4th Cir. 1956); Hayford v. Century Insurance Co., 106 N.H. 242, 209 A.2d 716, 718 (1965); Wright v. Dutch, 140 Cal.App.2d 891, 296 P.2d 34 (Cal.App.1956); Restatement (Second) of Contracts § 21A (tent. draft); 3 Corbin on Contracts § 599, at 593-97; 1 Williston on Contracts § 95, at 344-48 (3d ed. Jaeger); Young, Equivocation in Agreements, 64 Colum.L.Rev. 619, 621 (1964); see Dadourian Export Corp. v. United States, 291 F.2d 178, 187 & n. 4 (2d Cir. 1961) (Friendly, J., dissenting).

      33

      We affirm the judgment of dismissal on the ground that no enforcible contract ever came into existence.

      34

      The dissenting opinion, finding a contract as interpreted by Flower, relies upon some testimony by Ellison, president of Flower, that he was told by the superintendent for Gumina in March 1974 — almost a year after the putative "contract" was signed — that there had been some "changes" since the signing and that the Gumina superintendent, therefore, had to add a "piece of contract document." The dissenting opinion finds that this bit of testimony indicated that Gumina was "redefining the scope of the work by a `further understanding'" and concludes that "[c]learly, Gumina made an initial mistake and then tried to get Flower to change the contract." Dissent op. at 168. But we are not the trial court, and this conclusion rests upon an opinion as to the credibility of a witness whom Judge Burke heard, and whom we have never seen. If Judge Burke had believed this parol evidence, it would have amounted to an admission regarding the construction of the contract by Gumina. Although this testimony was admitted, Judge Burke found, nevertheless, that the "piece" of document Flower received from Gumina later in March was "a copy of Article II of the subcontract, with additional explanatory language as a reminder of obligations Flower City had under its subcontract." Finding No. 14 [emphasis added]. One may assume, therefore, that, in reaching Finding No. 14, Judge Burke rejected Ellison's testimony to the contrary.

      35

      The judgment is affirmed.

      36
      OAKES, Circuit Judge (dissenting):
      37

      I respectfully dissent and would reverse the judgment.

      38

      It seems to me that we must construe the original contract against the general contractor who prepared it. To be sure, the parties based that contract on a proposal, which Flower submitted and Gumina accepted, stated precisely in the terms of the schedule attached to the contract. But Gumina [167] had indicated to Flower that the proposal was in the form necessary to win the bid; and it was important to Gumina for purposes of the affirmative action program required under HUD regulations, majority op. at 163, that Flower obtain the painting subcontract. As the majority notes, Schedule A does refer to the "painting of the above mentioned project in accordance with the painting specifications and plans for this project"; but it also specifically itemizes the work and the price in terms of the one, two, three, and four bedroom units, stating a price per unit, then the total price for each size apartment, and finally a grand total for all units of all sizes which equals the contract price of $98,499.84. To my mind this schedule means exactly that the painting envisioned under the contract included only the "units" themselves and that the exterior, the community building, and the interior halls were not included. Indeed there was evidence that when Flower submitted its proposal the interior halls were going to be brick and not painted at all.[6]

      39

      The contract itself, consisting of a standard American Institute of Architects (AIA) Subcontract of seven printed pages which the parties had completed in full by typewriting and duly executed along with a typewritten two-page rider and the "Schedule A," refers to the scope of the work as follows in Article 2, entitled "The Work":

      40
      The Subcontractor shall furnish all labor, materials and equipment and shall perform all the Work . . . described in Schedule A attached hereto and made a part hereof as if fully set forth in this space.
      41
      The subcontractor further agrees that it will faithfully observe all requirements and conditions set forth by plans and specifications on file at the F.H.A. Office in Buffalo, N.Y. and identified as F.H.A. Project No. 014-44028-NP-R-SUP.
      42

      Thus, it is Schedule A itself, duly quoted in the majority opinion at 163 and not repeated here, that sets forth the scope of the work. To be sure, in the second paragraph of Article 2, the subcontractor specifically agreed to observe "all requirements and conditions set forth by plans and specifications on file." But it does not seem to me that those words can be construed to cover work other than that specified in Schedule A, the incorporated description of the work under the contract. The subcontractor, Flower, promised to observe the "requirements and conditions" set forth in the plans and specifications, including the general conditions and standards and the modifications and supplements thereto as well as the requirements and conditions in the painting specifications as to quality and type of paint, method of application, and the like. I do not see, however, that any of these requirements and conditions adds to the scope of the painting work to be done.

      43

      The majority relies on the introductory clause in Schedule A reading, "The painting of the above mentioned project in accordance with the painting specifications and plans for this project." But the particular governs the general, and immediately below the quoted caption the schedule lists the per unit figures for the different size apartments and sets out a total price for size representing the price for the total number of units of each size. Moreover, the introductory clause in Schedule A does not say "all painting in the above mentioned project"; it says "the painting of the above mentioned project."

      44

      The majority suggests that had Flower examined Defendant's Exhibit 5, the prime contract with the cost breakdown for each type of labor and materials, which indicates a total painting cost of $101,000, Flower would have known that Gumina would require the painting of the exterior work, interior hallways, and the community building in addition to the units themselves for [168] less than $101,000 and that given Flower's contract for $98,499.84, the contractor would go over his projection for painting costs unless Flower did all the painting. I do not think, however, that we can hold the subcontractor to this kind of knowledge simply because the prime contract was on file. A contractor can over- or underestimate a particular portion of the work, and here Flower followed Gumina's own suggestions as to price, proposal format, and scope of work.

      45

      If there were any doubt as to the meaning of the subcontract — and it seems to me there cannot be because of the undisputed evidence that the general contractor, Gumina, drew the contract and that Flower submitted the proposal precisely in the terms of Schedule A at Gumina's specific request — the subsequent conduct of the parties is quite compelling.[7] Gumina's field superintendent, Brian Smith, asked Flower's president and general superintendent, Michael Ellison, to bring a copy of the contract "over to the job site." He then "informed [Ellison] that since we had signed the contract, there had been some changes and he needed to get [Ellison's] copy of [the] contract so that he could add a piece of contract document to [the contract]."[8] That "piece of contract document" was a new AIA subcontract page covering Articles 1-4 inclusive and redefining the scope of the work by a "further understanding," namely that all exterior work and the community building were included (at the original price).[9] Smith told Ellison "that he didn't think the exteriors or the common interior hallways were included" and that he thought that Ellison "ought to amend the contract."[10] Clearly, Gumina made an initial mistake and then tried to get Flower to change the contract. There had been a meeting of the minds on the terms of the contract as stated in Schedule A; but one party, the one in the more favorable bargaining position and the one which had drawn the contract, had made a unilateral mistake. It does not need citation of authority to suggest that this kind of mistake does not permit repudiation, rescission, or modification of the contract.

      46

      In short, I believe that Gumina entered into and breached a valid, enforceable contract with Flower and that the case should be remanded for the ascertainment of damages.[11]

      47

      [1]The jurisdictional basis for consideration of this suit was not discussed below. The complaint asserted federal question jurisdiction only under 28 U.S.C. § 1343 with regard to claims under 42 U.S.C. §§ 1981 and 1983 and Title VI of the Civil Rights Act of 1964, but the District Judge's findings make it evident that there is actual diversity of citizenship as well as the requisite jurisdictional amount.

      48

      The trial court did not make any specific rulings with respect to plaintiff's civil rights claims, which do not appear to have entered into the trial. On this appeal, plaintiff argues that the trial judge denied it the opportunity to present evidence on the discrimination issue. The record reveals no effort to present such a case. The contention that the trial judge was unfair is without merit. We do not consider the appropriateness of the statutory provisions the plaintiff invokes as a basis for its discrimination cause of action.

      49

      [2] There is some indication that this opening salvo was preceded by discussion. See infra.

      50

      [3] The extra work was estimated to cost an additional $14,545.17, about 15 percent of the subcontract price.

      51

      [4] We do note, however, that Flower's people expected to make a profit of about $60,000 on this $98,000 contract, which may be some indication that their view of the scope of the work was unrealistic.

      52

      [5] There is an even earlier case in which the problem was considered at some length by Justice Story sitting as Circuit Justice. In Hazard v. New England Marine Ins. Co., 11 Fed.Cases 934 (C.C.D.Mass.1832) (No. 6,282), the question arose as to whether the term "coppered ship" in a marine insurance contract was to be understood according to the usage in the shipowner's home port of New York or according to usage in the underwriters' city of Boston: the underwriters, defending a suit on the contract, maintained that the plaintiff had not provided a coppered ship as promised, while the plaintiff argued that the ship was coppered as he understood it. At one point in Justice Story's instructions to the jury, he charged that if the plaintiff and the underwriters had differing understandings of the term "coppered" and if neither had cause to know of the other's understanding, then no contract should be deemed formed because there was mutual mistake. Id.at 936-37.

      53

      On appeal, the judgment for the underwriters was reversed. Hazard's Admin. v. Marine Insurance Co., 33 U.S. (8 Pet.) 557 (1834). The Supreme Court reasoned that underwriters should be presumed to be aware of the usages of their clients as a matter of their business. The "meeting of the minds" question was not extensively considered in the reported oral argument; the participants viewed the real choice to be between accepting the shipowner's or the underwriters' interpretations and enforcing the contract one way or another.

      54

      [6]Michael Ellison, president and general superintendent of Flower, testified on cross-examination as follows:

      55

      The General Contractor informed us what had to be painted on the Fight Village project, because the preliminary specs were not complete. So he told me the public hallways there were going to be brick, so it was to my understanding from the General Contractor that was not going to be painted.

      56

      [7] The majority opinion says simply that nearly one year after Flower entered into the subcontract it asserted in a letter of March 18, 1974, that the contract required interior painting only. This recitation of the events omits the testimony referred to in text in this opinion immediately infra;it also omits the following testimony:

      57

      A. After we received the copy of the contract back from the General Contractor, it must have been about a month or so later we received a letter from the General Contractor asking us to post a performance and payment bond. And our contract bid proposal was stated, "No bond or union required."

      . . . . .

      Q. Did you submit a performance bond?

      A. No, I didn't.

      Q. Did you submit any other instruments?

      A. Yes. What we did, we turned it over to our attorney, and he wrote the General Contractor a letter.

      Q. Then what happened?

      A. We heard nothing else from the General Contractor.

      58

      (Testimony of Michael Ellison.)

      59

      [8] This was the undisputed testimony of Mr. Ellison. Gumina never called its field superintendent, Mr. Smith, to testify.

      60

      [9] I note that even the addition to the contract does not mention the interior hallways.

      61

      [10]As Flower was subsequently to write Gumina, on April 11, 1974 (Ex. 8):

      62

      In respond [sic] to your letter dated March 4, 1974, wherein you stated that we proposed additional cost for items already agreed upon in our formal contract, there must be a lack in communication between your field office and your home office. Mr. Bryant [sic] Smith advised our company to submit a price for the items that were not a part of our original contract. We have met three or four times to discuss these matters. Mr Bryant Smith gave us a set of plans, in order that we might apply cost to these additions.

      63

      [11]I agree with the majority on the argument pertaining to custom in the trade. If the contract were really ambiguous such evidence might be admissible generally, but it would not be admissible against Flower in this case.

      64

      The trial judge made a number of findings pertaining to damages; but these do not in my view support his conclusion, among others, that Flower "failed to establish a rational basis for its assertion of lost profit and failed to prove prospective lost profits with reasonable particularity and certainty." Flower City Painting Contractors, Inc. v. Gumina Constr. Co., Civ.No.74-552, at 9 (W.D.N.Y. Feb. 16, 1978). The evidence was somewhat vague and conclusory but, with all respect, not so uncertain in my view as to require dismissal of the case.

    • 3.5 Restatement of Contracts, Second §20

  • 4 II .A. 4. Termination of Offers

    • 4.1 II. A. 4. a. In General

    • 4.2 II. A. 4. b. Lapse of Time

      • 4.2.1 Textron Inc. v. Froelich

        1
        223 Pa. Superior Ct. 506 (1973)
        2
        Textron, Inc.
        v.
        Froelich, Appellant.
        3

        Superior Court of Pennsylvania.

        4
        Submitted November 16, 1972.
        5
        March 27, 1973.
        6

        [507] Before WRIGHT, P.J., WATKINS, JACOBS, HOFFMAN, SPAULDING, CERCONE, and PACKEL, JJ.

        7

        George F. Taylor, and Tucker, Arensberg & Ferguson, for appellant.

        8

        John K. Tabor, Donald E. Seymour, and Kirkpatrick, Lockhart, Johnson & Hutchison, for appellee.

        9
        OPINION BY HOFFMAN, J., March 27, 1973:
        10

        The appellant contends that the trial court erred in granting a compulsory nonsuit as to his contractual counterclaim. The existence of a contract in this case depends on (1) whether the oral offer here necessarily terminated at the end of a telephone conversation, or, (2) if it did, whether there was a counteroffer made and accepted.

        11

        The facts as set forth in the appellant's case are as follows: The appellee, a fabricator of steel and wire products, orally offered the appellant, a steel broker, a specified quantity of two different sizes of steel rods at specified prices. The appellant responded that he thought he wanted the rods but he wanted to check [508] with his customers. Some five weeks later the appellant called the appellee and agreed to buy one size of rods and then two days later agreed to purchase the other size at the prices originally discussed. The appellee replied "Fine, Thank you" to both phone calls.

        12

        The trial judge based his decision on the rule set forth in Boyd v. Merchants and Farmers Peanut Co., 25 Pa. Superior Ct. 199 (1904) that an oral offer ordinarily terminates with the end of the conversation. The dictum in Boyd, however, does not preclude the possibility that in some cases an oral offer does continue past the conversation. The general rule is that:

        13

        "(1) The power to create a contract by acceptance of an offer terminates at the time specified in the offer, or, if no time is specified, at the end of a reasonable time.

        14

        "(2) What is a reasonable time is a question of fact, depending on the nature of the contract proposed, the usages of business and other circumstances of the case which the offeree at the time of his acceptance either knows or has reason to know." Restatement of Contracts, § 40. (Emphasis added). Pennsylvania has adopted the similar general terminology of the Uniform Commercial Code, Act of October 2, 1959, P.L. 1023, § 2, 12A P.S. § 2-206(1) (a). See infra.

        15

        There may be times when a judge could find as a matter of law that an oral offer made in the course of a conversation terminates with the end of the conversation. If there is any doubt as to what is a reasonable interpretation, the decision should be left to the jury. In this case, the appellant had informed the appellee that he wanted time to contact some customers before accepting the offer, which was only natural for a steel broker. Under the circumstances, it is possible that a jury could have found that the oral offer continued beyond the end of the conversation.

        16

        [509] We need not, however, decide this appeal on that issue. Even if the original offer by appellee had lapsed, a jury could find that the required elements of offer and acceptance were present in appellant's two subsequent telephone conversations with appellee and that a contract therefore existed. If appellee's original offer lapsed, appellant's telephone calls agreeing to purchase the specific size and quantity of rods they had previously discussed, at a price also previously agreed upon, constituted new offers. Appellee's response, including the statement, "Fine, Thank you", indicated an acceptance of these offers. As the U.C.C. indicates: "Unless otherwise unambiguously indicated by the language or circumstances (a) an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances; . . . ." Act of October 2, 1959, P.L. 1023, § 2, 12A P.S. § 2-206 (1) (a). Here, appellee accepted in the same manner and medium and during the same conversation in which appellant's offers were made.

        17

        Viewing appellant's case in the light most favorable to him, there was sufficient evidence supporting his contractural counterclaim to go to the jury.

        18

        The order of the court below is reversed and the case remanded for a new trial.

    • 4.3 II. A. 4. c. Death or Incapacitation of Offerer or Offeree

      • 4.3.1 Davis v. Jacoby

        1
        1 Cal.2d 370 (1934)
        2
        FRANK M. DAVIS et al., Appellants,
        v.
        OLIN D. JACOBY et al., as Executors, etc., Respondents.
        3
        S. F. No. 14879.
        4

        Supreme Court of California. In Bank.

        5
        July 30, 1934.
        6

        Walter H. Linforth, Wm. M. Cannon and John L. McVey for Appellants.

        7

        Marshall Rutherford, Fitzgerald, Abbott & Beardsley, Calkins, Hagar, Hall & Linforth, Goudge, Robinson & Hughes, Chapman, Trefethen, Richards & Chapman and Cormac & Bolles for Respondents. [372]

        8

        THE COURT.

        9

        Plaintiffs appeal from a judgment refusing to grant specific performance of an alleged contract to make a will. The facts are not in dispute and are as follows:

        10

        The plaintiff Caro M. Davis was the niece of Blanche Whitehead who was married to Rupert Whitehead. Prior to her marriage in 1913 to her coplaintiff Frank M. Davis, Caro lived for a considerable time at the home of the Whiteheads, in Piedmont, California. The Whiteheads were childless and extremely fond of Caro. The record is replete with uncontradicted testimony of the close and loving relationship that existed between Caro and her aunt and uncle. During the period that Caro lived with the Whiteheads she was treated as and often referred to by the Whiteheads as their daughter. In 1913, when Caro was married to Frank Davis the marriage was arranged at the Whitehead home and a reception held there. After the marriage Mr. and Mrs. Davis went to Mr. Davis' home in Canada, where they have resided ever since. During the period 1913 to 1931 Caro made many visits to the Whiteheads, several of them being of long duration. The Whiteheads visited Mr. and Mrs. Davis in Canada on several occasions. After the marriage and continuing down to 1931 the closest and most friendly relationship at all times existed between these two families. They corresponded frequently, the record being replete with letters showing the loving relationship.

        11

        By the year 1930 Mrs. Whitehead had become seriously ill. She had suffered several strokes and her mind was failing. Early in 1931 Mr. Whitehead had her removed to a private hospital. The doctors in attendance had informed him that she might die at any time or she might linger for many months. Mr. Whitehead had suffered severe financial reverses. He had had several sieges of sickness and was in poor health. The record shows that during the early part of 1931 he was desperately in need of assistance with his wife, and in his business affairs, and that he did not trust his friends in Piedmont. On March 18, 1931, he wrote to Mrs. Davis telling her of Mrs. Whitehead's condition and added that Mrs. Whitehead was very wistful. "Today I endeavored to find out what she wanted. I finally asked her if she wanted to see you. She burst out crying and we had great difficulty in getting her to stop. [373] Evidently, that is what is on her mind. It is a very difficult matter to decide. If you come it will mean that you will have to leave again, and then things may be serious. I am going to see the doctor, and get his candid opinion and will then write you again. ... Since writing the above, I have seen the doctor, and he thinks it will help considerably if you come." Shortly thereafter, Mr. Whitehead wrote to Caro Davis further explaining the physical condition of Mrs. Whitehead and himself. On March 24, 1931, Mr. Davis, at the request of his wife, telegraphed to Mr. Whitehead as follows: "Your letter received. Sorry to hear Blanche not so well. Hope you are feeling better yourself. If you wish Caro to go to you can arrange for her to leave in about two weeks. Please wire me if you think it advisable for her to go." On March 30, 1931, Mr. Whitehead wrote a long letter to Mr. Davis, in which he explained in detail the condition of Mrs. Whitehead's health and also referred to his own health. He pointed out that he had lost a considerable portion of his cash assets but still owned considerable realty, that he needed someone to help him with his wife and some friend he could trust to help him with his business affairs and suggested that perhaps Mr. Davis might come to California. He then pointed out that all his property was community property; that under his will all the property was to go to Mrs. Whitehead; that he believed that under Mrs. Whitehead's will practically everything was to go to Caro. Mr. Whitehead again wrote to Mr. Davis under date of April 9, 1931, pointing out how badly he needed someone he could trust to assist him, and giving it as his belief that if properly handled he could still save about $150,000. He then stated: "Having you [Mr. Davis] here to depend on and to help me regain my mind and courage would be a big thing." Three days later, on April 12, 1931, Mr. Whitehead again wrote, addressing his letter to "Dear Frank and Caro", and in this letter made the definite offer, which offer it is claimed was accepted and is the basis of this action. In this letter he first pointed out that Blanche, his wife, was in a private hospital and that "she cannot last much longer ... my affairs are not as bad as I supposed at first. Cutting everything down I figure 150,000 can be saved from the wreck." He then enumerated the values placed upon his various properties and then [374] continued

        12

        My trouble was caused by my friends taking advantage of my illness and my position to skin me.

        Now if Frank could come out here and be with me, and look after my affairs, we could easily save the balance I mentioned, provided I dont get into another panic and do some more foolish things.

        The next attack will be my end, I am 65 and my health has been bad for years, so, the Drs. dont give me much longer to live. So if you can come, Caro will inherit everything and you will make our lives happier and see Blanche is provided for to the end.

        My eyesight has gone back on me, I cant read only for a few lines at a time. I am at the house alone with Stanley [the chauffeur] who does everything for me and is a fine fellow. Now, what I want is some one who will take charge of my affairs and see I dont lose any more. Frank can do it, if he will and cut out the booze.

        Will you let me hear from you as soon as possible, I know it will be a sacrifice but times are still bad and likely to be, so by settling down you can help me and Blanche and gain in the end. If I had you here my mind would get better and my courage return, and we could work things out.

        13

        This letter was received by Mr. Davis at his office in Windsor, Canada, about 9:30 A. M. April 14, 1931. After reading the letter to Mrs. Davis over the telephone, and after getting her belief that they must go to California, Mr. Davis immediately wrote Mr. Whitehead a letter, which, after reading it to his wife, he sent by air mail. This letter was lost, but there is no doubt that it was sent by Davis and received by Whitehead, in fact the trial court expressly so found. Mr. Davis testified in substance as to the contents of this letter. After acknowledging receipt of the letter of April 12, 1931, Mr. Davis unequivocally stated that he and Mrs. Davis accepted the proposition of Mr. Whitehead and both would leave Windsor to go to him on April 25th. This letter of acceptance also contained the information that the reason they could not leave prior to April 25th was that Mr. Davis had to appear in court on April 22d as one of the executors of his mother's estate. The testimony is uncontradicted and ample to support the trial court's finding that this letter was sent [375] by Davis and received by Whitehead. In fact under date of April 15, 1931, Mr. Whitehead again wrote to Mr. Davis and stated

        14

        Your letter by air mail received this a. m. Now, I am wondering if I have put you to unnecessary trouble and expense, if you are making any money dont leave it, as things are bad here. ... You know your business and I dont and I am half crazy in the bargain, but I dont want to hurt you or Caro.

        Then on the other hand if I could get some one to trust and keep me straight I can save a good deal, about what I told you in my former letter.

        15

        This letter was received by Mr. Davis on April 17, 1931, and the same day Mr. Davis telegraphed to Mr. Whitehead "Cheer up—we will soon be there, we will wire you from the train."

        16

        Between April 14, 1931, the date the letter of acceptance was sent by Mr. Davis, and April 22d, Mr. Davis was engaged in closing out his business affairs, and Mrs. Davis in closing up their home and in making other arrangements to leave. On April 22, 1931, Mr. Whitehead committed suicide. Mr. and Mrs. Davis were immediately notified and they at once came to California. From almost the moment of her arrival Mrs. Davis devoted herself to the care and comfort of her aunt, and gave her aunt constant attention and care until Mrs. Whitehead's death on May 30, 1931. On this point the trial court found:

        17

        From the time of their arrival in Piedmont, Caro M. Davis administered in every way to the comforts of Blanche Whitehead and saw that she was cared for and provided for down to the time of the death of Blanche Whitehead on May 30, 1931; during said time Caro M. Davis nursed Blanche Whitehead, cared for her and administered to her wants as a natural daughter would have done toward and for her mother.

        18

        This finding is supported by uncontradicted evidence and in fact is conceded by respondents to be correct. In fact the record shows that after their arrival in California Mr. and Mrs. Davis fully performed their side of the agreement.

        19

        After the death of Mrs. Whitehead, for the first time it was discovered that the information contained in Mr. Whitehead's letter of March 30, 1931, in reference to the contents of his and Mrs. Whitehead's wills was incorrect. By a duly witnessed will dated February 28, 1931, Mr. Whitehead, [376] after making several specific bequests, had bequeathed all of the balance of his estate to his wife for life, and upon her death to respondents Geoff Doubble and Rupert Ross Whitehead, his nephews. Neither appellant was mentioned in his will. It was also discovered that Mrs. Whitehead by a will dated December 17, 1927, had devised all of her estate to her husband. The evidence is clear and uncontradicted that the relationship existing between Whitehead and his two nephews, respondents herein, was not nearly as close and confidential as that existing between Whitehead and appellants.

        20

        After the discovery of the manner in which the property had been devised was made, this action was commenced upon the theory that Rupert Whitehead had assumed a contractual obligation to make a will whereby "Caro Davis would inherit everything"; that he had failed to do so; that plaintiffs had fully performed their part of the contract; that damages being insufficient, quasi specific performance should be granted in order to remedy the alleged wrong, upon the equitable principle that equity regards that done which ought to have been done. The requested relief is that the beneficiaries under the will of Rupert Whitehead, respondents herein, be declared to be involuntary trustees for plaintiffs of Whitehead's estate.

        21

        It should also be added that the evidence shows that as a result of Frank Davis leaving his business in Canada he forfeited not only all insurance business he might have written if he had remained, but also forfeited all renewal commissions earned on past business. According to his testimony this loss was over $8,000.

        22

        The trial court found that the relationship between Mr. and Mrs. Davis and the Whiteheads was substantially as above recounted and that the other facts above stated were true; that prior to April 12, 1931, Rupert Whitehead had suffered business reverses and was depressed in mind and ill in body; that his wife was very ill; that because of his mental condition he "was unable to properly care for or look after his property or affairs"; that on April 12, 1931, Rupert Whitehead in writing made an offer to plaintiffs that, if within a reasonable time thereafter plaintiffs would leave and abandon their said home in Windsor, and if Frank M. Davis would abandon or dispose of his said [377] business, and if both the plaintiffs would come to Piedmont in the said county of Alameda where Rupert Whitehead then resided and thereafter reside at said place and be with or near him, and, if Frank M. Davis would thereupon and thereafter look after the business and affairs of said Rupert Whitehead until his condition improved to such an extent as to permit him so to do, and if the plaintiffs would look after and administer to the comforts of Blanche Whitehead and see that she was properly cared for until the time of her death, that, in consideration thereof, Caro M. Davis would inherit everything that Rupert Whitehead possessed at the time of his death and that by last will and testament Rupert Whitehead would devise and bequeath to Caro M. Davis all property and estate owned by him at the time of his death, other than the property constituting the community interest of Blanche Whitehead; that shortly prior to April 12, 1931, Rupert Whitehead informed plaintiffs of the supposed terms of his will and the will of Mrs. Whitehead. The court then finds that the offer of April 12th was not accepted. As already stated, the court found that plaintiffs sent a letter to Rupert Whitehead on April 14th purporting to accept the offer of April 12th, and also found that this letter was received by the Whiteheads, but finds that in fact such letter was not a legal acceptance. The court also found that the offer of April 12th was "fair and just and reasonable, and the consideration therefor, namely, the performance by plaintiffs of the terms and conditions thereof, if the same had been performed, would have been an adequate consideration for said offer and for the agreement that would have resulted from such performance; said offer was not, and said agreement would not have been, either harsh or oppressive or unjust to the heirs at law, or devisees, or legatees, of Rupert Whitehead, or to each or any of them, or otherwise".

        23

        The court also found that plaintiffs did not know that the statements made by Whitehead in reference to the wills were not correct until after Mrs. Whitehead's death, that after plaintiffs arrived in Piedmont they cared for Mrs. Whitehead until her death and "Blanche Whitehead was greatly comforted by the presence, companionship and association of Caro M. Davis, and by her administering to her wants". [378]

        24

        The theory of the trial court and of respondents on this appeal is that the letter of April 12th was an offer to contract, but that such offer could only be accepted by performance and could not be accepted by a promise to perform, and that said offer was revoked by the death of Mr. Whitehead before performance. In other words, it is contended that the offer was an offer to enter into a unilateral contract, and that the purported acceptance of April 14th was of no legal effect.

        25

        [1] The distinction between unilateral and bilateral contracts is well settled in the law. It is well stated in section 12 of the American Institute's Restatement of the Law of Contracts as follows: "A unilateral contract is one in which no promisor receives a promise as consideration for his promise. A bilateral contract is one in which there are mutual promises between two parties to the contract; each party being both a promisor and a promisee." This definition is in accord with the law of California. (Christman v. Southern Cal. Edison Co., 83 Cal.App. 249 [256 P. 618].)

        26

        In the case of unilateral contracts no notice of acceptance by performance is required. Section 1584 of the Civil Code provides, "Performance of the conditions of a proposal, ... is an acceptance of the proposal." (See Cuthill v. Peabody, 19 Cal.App. 304 [125 P. 926]; Los Angeles Traction Co. v. Wilshire, 135 Cal. 654 [67 P. 1086].)

        27

        [2] Although the legal distinction between unilateral and bilateral contracts is thus well settled, the difficulty in any particular case is to determine whether the particular offer is one to enter into a bilateral or unilateral contract. Some cases are quite clear cut. Thus an offer to sell which is accepted is clearly a bilateral contract, while an offer of a reward is a clear-cut offer of a unilateral contract which cannot be accepted by a promise to perform, but only by performance. (Berthiaume v. Doe, 22 Cal.App. 78 [133 P. 515].) Between these two extremes is a vague field where the particular contract may be unilateral or bilateral depending upon the intent of the offerer and the facts and circumstances of each case. The offer to contract involved in this case falls within this [379] category. By the provisions of the Restatement of the Law of Contracts it is expressly provided that there is a presumption that the offer is to enter into a bilateral contract. Section 31 provides:

        28

        In case of doubt it is presumed that an offer invites the formation of a bilateral contract by an acceptance amounting in effect to a promise by the offeree to perform what the offer requests, rather than the formation of one or more unilateral contracts by actual performance on the part of the offeree.

        29

        Professor Williston in his Treatise on Contracts, volume 1, section 60, also takes the position that a presumption in favor of bilateral contracts exists.

        30

        In the comment following section 31 of the Restatement the reason for such presumption is stated as follows: "It is not always easy to determine whether an offerer requests an act or a promise to do the act. As a bilateral contract immediately and fully protects both parties, the interpretation is favored that a bilateral contract is proposed."

        31

        While the California cases have never expressly held that a presumption in favor of bilateral contracts exists, the cases clearly indicate a tendency to treat offers as offers of bilateral rather than of unilateral contracts. (Roth v. Moeller, 185 Cal. 415 [197 P. 62]; Boehm v. Spreckels, 183 Cal. 239 [191 P. 5]; see, also, Wood v. Lucy, Lady Duff- Gordon, 222 N.Y. 88 [118 N.E. 214].)

        32

        [3] Keeping these principles in mind we are of the opinion that the offer of April 12th was an offer to enter into a bilateral as distinguished from a unilateral contract. Respondents argue that Mr. Whitehead had the right as offerer to designate his offer as either unilateral or bilateral. That is undoubtedly the law. It is then argued that from all the facts and circumstances it must be implied that what Whitehead wanted was performance and not a mere promise to perform. We think this is a non sequitur, in fact the surrounding circumstances lead to just the opposite conclusion. These parties were not dealing at arm's length. Not only were they related, but a very close and intimate friendship existed between them. The record indisputably demonstrates that Mr. Whitehead had confidence in Mr. and Mrs. Davis, in fact that he had lost all confidence in [380] everyone else. The record amply shows that by an accumulation of occurrences Mr. Whitehead had become desperate, and that what he wanted was the promise of appellants that he could look to them for assistance. He knew from his past relationship with appellants that if they gave their promise to perform he could rely upon them. The correspondence between them indicates how desperately he desired this assurance. Under these circumstances he wrote his offer of April 12th, above quoted, in which he stated, after disclosing his desperate mental and physical condition, and after setting forth the terms of his offer: "Will you let me hear from you as soon as possible—I know it will be a sacrifice but times are still bad and likely to be, so by settling down you can help me and Blanche and gain in the end." By thus specifically requesting an immediate reply Whitehead expressly indicated the nature of the acceptance desired by him—namely, appellants' promise that they would come to California and do the things requested by him. This promise was immediately sent by appellants upon receipt of the offer, and was received by Whitehead. It is elementary that when an offer has indicated the mode and means of acceptance, an acceptance in accordance with that mode or means is binding on the offerer.

        33

        Another factor which indicates that Whitehead must have contemplated a bilateral rather than a unilateral contract, is that the contract required Mr. and Mrs. Davis to perform services until the death of both Mr. and Mrs. Whitehead. It is obvious that if Mr. Whitehead died first some of these services were to be performed after his death, so that he would have to rely on the promise of appellants to perform these services. It is also of some evidentiary force that Whitehead received the letter of acceptance and acquiesced in that means of acceptance.

        34

        Shaw v. King, 63 Cal.App. 18 [218 P. 50], relied on by respondents is clearly not in point. In that case there was no written acceptance, nor was there an acceptance by partial or total performance.

        35

        [4] For the foregoing reasons we are of the opinion that the offer of April 12, 1931, was an offer to enter into a bilateral contract which was accepted by the letter of April 14, 1931. Subsequently appellants fully performed [381] their part of the contract. Under such circumstances it is well settled that damages are insufficient and specific performance will be granted. (Wolf v. Donahue, 206 Cal. 213 [273 P. 547].) Since the consideration has been fully rendered by appellants the question as to mutuality of remedy becomes of no importance. (6 Cal.Jur., sec. 140.)

        36

        [5] Respondents also contend the complaint definitely binds appellants to the theory of a unilateral contract. This contention is without merit. The complaint expressly alleges the parties entered into a contract. It is true that the complaint also alleged that the contract became effective by performance. However, this is an action in equity. Respondents were not misled. No objection was made to the testimony offered to show the acceptance of April 14th. A fair reading of the record clearly indicates the case was tried by the parties on the theory that the sole question was whether there was a contract—unilateral or bilateral.

        37

        For the foregoing reasons the judgment appealed from is reversed.

    • 4.4 II. A. 4. d. Revocation

      • 4.4.1 Dickinson v. Dodds

        1

        2 Ch. Div. 463

        DICKINSON
        v.
        DODDS.

        [1874 D. 94.]

        2

        Vendor and Purchaser—Contract—Specific Performance—Offer to sellWithdrawal before Acceptance—Sale to another Person—Notice.

        3

        An offer to sell property may be withdrawn before acceptance without any formal notice to the person to whom the offer is made. It is sufficient if that person has actual knowledge that the person who made the offer has done some act inconsistent with the continuance of the offer, such as selling the property to a third person.

        4

        Semble, that the sale of the property to a third person would of itself amount to a withdrawal of the offer, even although the person to whom the offer was first made had no knowledge of the sale.

        5

        Semble, that the acceptance of an offer to sell constitutes a contract for sale only as from the time of the acceptance. The contract does not relate back to the time when the offer was made.

        6

        The owner of property signed a document which purported to be an agreement to sell it at a price fixed. But a post script was added, which he also signed—"This offer to be left over until Friday 9 A.M.":—

        7

        Held, that the document amounted only to an offer, which might be withdrawn at any time before acceptance, and that a sale to a third person which came to the knowledge of the person to whom the offer was made was an effectual withdrawal of the offer.

        8

        Decision of Bacon, V.C., reversed.

        9

        On Wednesday, the 10th of June, 1874, the Defendant John Dodds signed and delivered to the Plaintiff, George Dickinson, a memorandum, of which the material part was as follows:—

        10

        [464] I hereby agree to sell to Mr. George Dickinson the whole of the dwelling-houses, garden ground, stabling, and outbuildings thereto belonging, situate at Croft, belonging to me, for the sum of £800. As witness my hand this tenth day of June, 1874.

        £800. (Signed) John Dodds.

        P .S.—This offer to be left over until Friday, 9 o'clock, A.M. J. D. (the twelfth), 12th June, 1874.

        (Signed) J. Dodds.

        11

        The bill alleged that Dodds understood and intended that the Plaintiff should have until Friday 9 A.M within which to determine whether he would or would not purchase, and that he should absolutely have until that time the refusal of the property at the price of £800, and that the Plaintiff in fact determined to accept the offer on the morning of Thursday, the 11th of June, but did not at once signify his acceptance to Dodds, believing that he had the power to accept it until 9 A.M. on the Friday.

        12

        In the afternoon of the Thursday the Plaintiff was informed by a Mr. Berry that Dodds had been offering or agreeing to sell the property to Thomas Allan, the other Defendant. Thereupon the Plaintiff, at about half-past seven in the evening, went to the house of Mrs. Burgess, the mother-in-law of Dodds, where he was then staying, and left with her a formal acceptance in writing of the offer to sell the property. According to the evidence of Mrs. Burgess this document never in fact reached Dodds, she having forgotten to give it to him.

        13

        On the following (Friday) morning, at about seven o'clock, Berry, who was acting as agent for Dickinson, found Dodds at the Darlington railway station, and handed to him a duplicate of the acceptance by Dickinson, and explained to Dodds its purport. He replied that it was too late, as he had sold the property. A few minutes later Dickinson himself found Dodds entering a railway carriage, and handed him another duplicate of the notice of acceptance, but Dodds declined to receive it, saying, "You are too late. I have sold the property."

        14

        It appeared that on the day before, Thursday, the 11th of June, Dodds had signed a formal contract for the sale of the property to the Defendant Allan for £800, and had received from him a deposit of £40.

        15

        [465] The bill in this suit prayed that 'the Defendant Dodds might be decreed specifically to perform the contract of the 10th of June, 1874; that he might be restrained from conveying the property to Allan; that Allan might be restrained from taking any such conveyance; that, if any such conveyance had been or should be made, Allan might be declared a trustee of the property for, and might be directed to convey the property to, the Plaintiff; and for damages.

        16

        The cause came on for hearing before Vice-Chancellor Bacon on the 25th of January, 1876.

        17

        Kay, Q.C., and Caldecott, for the Plaintiff:—

        18

        The memorandum of the 10th of June, 1874, being in writing, satisfies the Statute of Frauds. Though signed by the vendor only, it is effectual as an agreement to sell the property.

        19

        Supposing it to have been an offer only, an offer, if accepted before it is withdrawn, becomes, upon acceptance, a binding agreement. Even if signed by the person only who is sought to be charged, a proposal, if accepted by the other party, is within the statute: Reuss v. Picksley[1], following Warner v. Willington[2].

        20

        In Kennedy V. Lee[3] Lord Eldon states the law to be, that "if a person communicates his acceptance of an offer within a reasonable time after the offer being made, and if, within a reasonable time of the acceptance being communicated, no variation has been made by either party in the terms of the offer so made and accepted, the acceptance must be taken as simultaneous with the offer, and both together as constituting such an agreement as the Court will execute." So that, not only is a parol acceptance sufficient, but such an acceptance relates back to the date of the offer. This is further shewn by Adams v. Lindsell[4], where an offer of sale was made by letter to the Plaintiffs" on receiving their answer in course of post." The letter was misdirected, and did not reach the Plaintiffs until two days after it ought to have reached them. The Plaintiffs, immediately on receiving the letter, wrote an answer accepting; and it was held that they were entitled to the benefit of the contract.

        21

        [466] The ruling in Adams v. Lindsell[5] was approved by the House of Lords in Dunlop v. Higgins[6], as appears from the judgment of Sir G. Mellish, L.J., in Harris' Case[7]; and it is now settled that a contract which can be accepted by letter is complete when a letter containing such acceptance has been posted. The leaving by the Plaintiff of the notice at Dodds' residence was equivalent to the delivery of a letter by a postman.

        22

        That Allan is a necessary party appears from Potter v. Sanders[8]; and if Allan has had a conveyance of the legal estate, the Court will decree specific performance against him.

        23

        Swanston, Q.C., and Crossley, for the Defendant Dodds:

        24

        The bill puts the case no higher than that of an offer. Taking the memorandum of the 10th of June, 1874, as an offer only, it is well established that, until acceptance, either party may retract; Cooke v. Oxley[9]; Benjamin on Sales[10]. After Dodds had retracted by selling to Allan, the offer ,vas no longer open. Having an option to retract, he exercised that option: Humphries v. Carvalho[11]; Pollock on Contracts[12]; Routledge v. Grant[13].

        25

        In delivering judgment in Martin v. Mitchell[14], Sir T. Plumer, M.R., put the case of a contract signed by one party only. He asked[15], "What mutuality is there, if the one is at liberty to renounce the contract, and the other not?" and in Meynell v. Surtees[16], the distinctions between an offer and an agreement in respect of binding land were pointed out: Fry on Specific Performance[17].

        26

        The postscript being merely voluntary, without consideration, is nudum pactum; and the memorandum may be read as if it contained no postscript.

        27

        Jackson, Q.C., and Gazdar, for the Defendant Allan:—

        28

        Allan is an unnecessary party. If Dodds has not made a valid [467] contract with the Plaintiff, he is a trustee for Allan; if Dodds has made a binding contract, rights arise between Allan and Dodds which are not now in controversy.

        29

        We agree with the co-Defendant that, in order that the Plaintiff may have a locus standi, there must have been a contract. If the postscript is a modification of the offer, it is nudum pactum, and may be rejected.

        30

        It may be conceded that if there had been an acceptance, it would have related back in point of date to the offer. But there was no acceptance. Notice of acceptance served on Mrs. Burgess was not enough.

        31

        Even if it would have been otherwise sufficient, here it was too late. Dodds had no property left to contract for. The property had ceased to be his. He had retracted his offer; and the property had become vested in some one else: Hebb's Case[18]. The Plaintiff would not have delivered the notice if he had not heard of the negotiation between Dodds and Allan. What retraciation could be more effectual than a sale of the property to some one else?

        32

        The Defendant Allan was a bona fide purchaser without notice.

        33

        Kay, in reply:—

        34

        The true meaning of the document was a sale. The expression is not “open," but "over." The only liberty to be allowed by that was a liberty for the Plaintiff to retract.

        35

        But, taking it as an offer, the meaning was, that at any day or hour within the interval named, the Plaintiff had a right to indicate to the Defendant his acceptance, and from that moment the Defendant would have had no right of retractation. Then, was there a retractation before acceptance? To be a retractation, there must be a notification to the other party. A pure resolve within the recesses of the vendor's own mind is not sufficient. There was no communication to the Plaintiff. He accepted on two several occasions. There could have been no parting with the property without communication with him. He was told that the offer was to be left over.

        36

        The grounds of the decision in Cooke v. Oxley[19] have been [468] abundantly explained by Mr. Benjamin in his work on Sales. It was decided simply on a point of pleading.

        37

        BACON, V.C., after remarking that the case involved no question of unfairness or inequality, and after stating the terms of the document of the 10th of June, 1874, and the statement of the Defendant's case as given in his answer, continued:—

        38

        I consider that to be one agreement, and I think the terms of the agreement put an end to any question of nudum pactum. I think the inducement for the Plaintiff to enter into the contract was the Defendant's compliance with the Plaintiff's request that there should be some time allowed to him to determine whether he would accept it or not. But whether the letter is read with or without the postscript, it is, in my judgment, as plain and clear a contract for sale as can be expressed in words, one of the terms of that contract being that the Plaintiff shall not be called upon, to accept, or to testify his acceptance, until 9 o'clock on the morning of the 12th of June. I see, therefore, no reason why the Court should not enforce the specific performance of the contract, if it finds that all the conditions have been complied with.

        39

        Then what are the facts? It is clear that a plain, explicit acceptance of the contract was, on Thursday, the 11th of June, delivered by the Plaintiff at the place of abode of the Defendant, and ought to have come to his hands. Whether it came to his hands or not, the fact remains that, within the time limited, the Plaintiff did accept and testify his acceptance. From that moment the Plaintiff was bound, and the Defendant could at any time, notwithstanding Allan, have filed a bill against the Plaintiff for the specific performance of the contract which he had entered into, and which the Defendant had accepted.

        40

        I am at a loss to guess upon what ground it can be said that it is not a contract which the Court will enforce. It cannot be on the ground that the Defendant had entered into a contract with Allan, because, giving to the Defendant all the latitude which can be desired, admitting that he had the same time to change his mind as he, by the agreement, gave to the Plaintiff-the law, I take it, is clear on the authorities, that if a contract, unilateral in its [469] shape, is completed by the acceptance of the party on the other side, it becomes a perfectly valid and binding contract. It may be withdrawn from by one of the parties in the meantime, but, in order to be withdrawn from, information of that fact must be conveyed to the mind of the person who is to be affected by it. It will not do for the Defendant to say, "I made up my mind that I would withdraw, but I did not tell the Plaintiff; I did not say anything to the Plaintiff until after he had told me by a written notice and with a loud voice that he accepted the option which had been left to him by the agreement." In my opinion, after that hour on Friday, earlier than nine o'clock, when the Plaintiff and Defendant met, if not before, the contract was completed, and neither party could retire from it.

        41

        It is said that the authorities justify the Defendant's contention that he is not bound to perform this agreement, and the case of Cooke v. Oxley[20] was referred to. But I find that the judgment in Cooke v. Oxley went solely upon the pleadings. It was a rule to shew cause why judgment should not be arrested, therefore it must have been upon the pleadings. Now, the pleadings were that the vendor in that case proposed to sell to the Defendant. There was no suggestion of any agreement which could be enforced. The Defendant proposed to the Plaintiff to sell and deliver, if the Plaintiff would agree to purchase upon the terms offered, and give notice at an earlier hour than four of the afternoon of that day; and the Plaintiff says he agreed to purchase, but does not say the Defendant agreed to sell. He agreed to purchase, and gave notice before four o'clock in the afternoon. Although the case is not so clearly and satisfactorily reported as might· be desired, it is only necessary to read the judgment to see that it proceeds solely upon this allegation in the pleadings. Mr. Justice Buller says, "As to the subsequent time, the promise can only be supported upon the ground of a new contract made at four o'clock; but there was no pretence for that." Nor was there the slightest allegation in the pleadings for that; and judgment was given against the Plaintiff.

        42

        Routledge v. Grant[21] is plainly distinguishable from this case upon the grounds which have been mentioned. There the contract [470] was to sell on certain terms; possession to be given upon a particular day. Those terms were varied, and therefore no agreement was come to; and when the intended purchaser was willing to relinquish the condition which he imposed, the other said, "No, I withdraw; I have made up my mind not to sell to you;" and, the judgment of the Court was that he was perfectly right.

        43

        Then Warner v. Willington[22] seems to point out the law in the clearest and most distinct manner possible. An offer was made-call it an agreement or offer, it is quite indifferent. It was so far an offer, that it was not to be binding unless there was an acceptance; and before acceptance was made, the offer was retracted, the agreement was rescinded, and the person who had then the character of vendor declined to go further with the arrangement, which had been begun by what had passed between them. In the present case I read the agreement as a positive engagement on the part of the Defendant Dodds that he will sell for £800, and, not a promise, but, an agreement, part of the same instrument, that the Plaintiff shall not be called upon to express his acquiescence in that agreement until Friday at nine o'clock. Before Friday at nine o'clock the Defendant receives notice of acceptance. Upon what ground can the Defendant now be let off his contract? It is said that Allan can sustain his agreement with the Defendant, because at the time when they entered into the contract the Defendant was possessed of the property, and the Plaintiff had nothing to do with it. But it would be opening the door to fraud of the most flagrant description if it was permitted to a Defendant, the owner of property, to enter into a binding contract to sell, and then sell it to somebody else and say that by the fact of such second sale he has deprived himself of the property which he has agreed to sell by the first contract. That is what Allan says in substance, for he says that the sale to him was a retractation which deprived Dodds of the equitable interest he had in the property, although the legal estate remained in him. But by the fact of the agreement, and by the relation back of the acceptance (for such I must hold to be the law) to the date of the agreement, the property in equity was the property of the Plaintiff, and Dodds had nothing to sell to Allan. The property [471] remained intact, unaffected by any contract with Allan, and there is no ground, in my opinion, for the contention that the contract with Allan can be supported. It would be doing violence to principles perfectly well known and often acted upon in this Court; I think the Plaintiff has made out very satisfactorily his title to a decree for specific performance, both as having the equitable interest, which he asserts is vested in him, and as being a purchaser of the property for valuable consideration without notice against both Dodds, the vendor, and Allan, who has entered into the contract with him.

        44

        There will be a decree for specific performance, with a declaration that Allan has no interest in the property; and the Plaintiff will be at liberty to deduct his costs of the suit out of his purchase-money. From this decision both the Defendants appealed, and the appeals were heard on the 31st of March and the 1st of April, 1876.

        45

        Swanston, Q.C. (Crossley with him) for the Defendant Dodds.

        46

        Sir H. Jackson, Q.C. (Gazdar with him), for the Defendant Allan.

        47

        Kay, Q.C., and Caldecott, for the Plaintiff.

        48

        The arguments amounted to a repetition of those before the Vice-Chancellor. In addition to the authorities then cited the following cases were referred to: Thornbury v. Bevill[23]; Taylor v. Wakefield[24]; Head v. Diggon[25]; Palmer v. Soott[26].

        49

        JAMES, L. J. after referring to the document of the 10th of June, 1874, continued:—

        50

        The document, though beginning "I hereby agree to sell," was nothing but an offer, and was only intended to be an offer, for the Plaintiff himself tells us that he required time to consider whether he would enter into an agreement or not. Unless both parties had then agreed there was no concluded agreement then made; it was [472] in effect and substance only an offer to sell. The Plaintiff, being minded not to complete the bargain at that time, added this memorandum—"This offer to be left over until Friday, 9 o'clock A.M., 12th June, 1874." That shews it was only an offer. There was no consideration given for the undertaking or promise, to whatever extent it may be considered binding, to keep the property unsold until 9 o'clock on Friday morning; but apparently Dickinson was of opinion, and probably Dodds was of the same opinion, that he (Dodds) was bound by that promise, and could not in any way withdraw from it, or retract it, until 9 o'clock on Friday morning, and this probably explains a good deal of what afterwards took place. But it is clear settled law, on one of the clearest principles of law, that this promise, being a mere nudum pactum, was not binding, and that at any moment before a comp1ete acceptance by Dickinson of the offer, Dodds was as free as Dickinson himself. Well, that being the state of things, it is said that the only mode in which Dodds could assert that freedom was by actually and distinctly saying to Dickinson, "Now I withdraw my offer." It appears to me that there is neither principle nor authority for the proposition that there must be an express and actual withdrawal of the offer, or what is called a retractation. It must, to constitute a contract, appear that the two minds were at one, at the same moment of time, that is, that there was an offer continuing up to the time of the acceptance. If there was not such a continuing offer, then the acceptance comes to nothing. Of course it may well be that the one man is bound in some way or other to let the other man know that his mind with regard to the offer has been changed; but in this case, beyond all question, the Plaintiff knew that Dodds was no longer minded to sell the property to him as plainly and clearly as if Dodds had told him in so many words, "I withdraw the offer." This is evident from the Plaintiff's own statements in the bill.

        51

        The Plaintiff says in effect that, having heard and knowing that Dodds was no longer minded to sell to him, and that he was selling or had sold to some one else, thinking that he could not in point of law withdraw his offer, meaning to fix him to it, and endeavouring to bind him, "I went to the house where he was lodging, and saw his mother-in-law, and left with her an acceptance of the [473] offer, knowing all the while that he had entirely changed his mind. I got an agent to watch for him at 7 o'clock the next morning, and I went to the train just before 9 o'clock, in order that I might catch him and give him my notice of acceptance just before 9 o'clock, and when that occurred he told my agent, and he told me, you are too late, and he then threw back the paper." It is to my mind quite Clear that before there was any attempt at acceptance by the Plaintiff, he was perfectly well aware that Dodds had changed his mind, and that he had in fact agreed to sell the property to Allan. It is impossible, therefore, to say there was ever that existence of the same mind between the two parties which is essential in point of law to the making of an agreement. I am of opinion, therefore, that the Plaintiff has failed to prove that there was any binding contract between Dodds and himself.

        52

        MELLISH, L.J.:—

        53

        I am of the same: opinion. The first question is, whether this document of the 10th of June, 1874, which was signed by Dodds, was an agreement to sell, or only an offer to sell, the property therein mentioned to Dickinson; and I am clearly of opinion that it was only an offer, although it is in the first part of it, independently of the postscript, worded as an agreement. I apprehend that, until acceptance, so that both parties are bound, even though an instrument is so worded as to express that both parties agree, it is in point of law only an offer, and, until both parties are bound, neither party is bound. It is not necessary that both parties should be bound within the Statute of Frauds, for, if one party makes an offer in writing, and the other accepts it verbally, that will be sufficient to bind the person who has signed the written document. But, if there be no agreement, either verbally or in writing, then, until acceptance, it is in point of law an offer only, although worded as if it were an agreement. But it is hardly necessary to resort to that doctrine in the present case, because the postscript calls it an offer, and says, "This offer to be left over until Friday, 9 o'clock A.M." Well, then, this being only an offer, the law says—and it is a perfectly clear rule of law-that, although it is said that the offer is to be left open until Friday morning at [474] 9 o'clock, that did not bind Dodds. He was not in point of law bound to hold the offer overuntil 9 o'clock on Friday morning. He was not so bound either in law or ill equity. Well, that being so, when on the next day he made an agreement with Allan to sell the property to him, I am not aware of any ground on which it can be said that that contract with Allan was not as good and binding a contract as ever was made. Assuming Allan to have known (there is some dispute about it, and Allan does not admit that he knew of it, but I will assume that he did) that Dodds had made the offer to Dickinson, and had given him till Friday morning at 9 o'clock to accept it, still in point of law that could not prevent Allan from making a more favourable offer than Dickinson, and entering at once into a binding agreement with Dodds.

        54

        Then Dickinson is informed by Berry that the property has been sold by Dodds to Allan. Berry does not tell us from whom he heard it, but he says that he did hear it, that he knew it, and that he informed Dickinson of it. Now, stopping there, the question which arises is this—If an offer has been made for the sale of property, and before that offer is accepted, the person who has made the offer enters into a binding agreement to sell the property to somebody else, and the person to whom the offer was first made receives notice in some way that the property has been sold to another person, can he after that make a binding contract by the acceptance of the offer? I am of opinion that he cannot. The law may be right or wrong in saying that a person who has given to another a certain time within which to accept an offer is not bound by his promise to give that time; but, if he is not bound by that promise, and may still sell the property to some one else, and if it be the law that, in order to make a contract, the two minds must be in agreement at some one time, that is, at the time of the acceptance, how is it possible that when the person to whom the offer has been made knows that the person who has made the offer has sold the property to someone else, and that, in fact, he has not remained in the same mind to sell it to him, he can be at liberty to accept the offer and thereby make a binding contract? It seems to me that would be simply absurd. If a man makes an offer to sell a particular horse in his stable, and says, "I will give you until the day after to-morrow to [475] accept the offer," and the next day goes and sells the horse to somebody else, and receives the purchase-money from him, can the person to whom the offer was originally made then come and say, "I accept," so as to make a binding contract, and so as to be entitled to recover damages for the non-delivery of the horse? If the rule of law is that a mere offer to sell property, which can be withdrawn at any time, and which is made dependent on the acceptance of the person to whom it is made, is a mere nandum pactum, how is it possible that the person to whom the offer has been made can by acceptance make a binding contract after he knows that the person who bas made the offer has sold the property to some one else? It is admitted law that, if a man who makes an offer dies, the offer cannot be accepted after he is dead, and parting with the property has very much the same effect as the death of the owner, for it makes the performance of the offer impossible. I am clearly of opinion that, just as when a man who has made an offer dies before it is accepted it is impossible that it can then be accepted, so when once the person to whom the offer was made knows that the property has been sold to some one else, it is too late for him to accept the offer, and on that ground I am clearly of opinion that there was no binding contract for the sale of this property by Dodds to Dickinson, and evenif there had been, it seems to me that the sale of the property to Allan was first in point of time. However, it is not necessary to consider, if there had been two binding contracts, which of them would be entitled to priority in equity, because there is no binding contract between Dodds and Dickinson.

        55

        Baggallay, J.A.:—

        56

        I entirely concur in the judgments which have been pronounced.

        57

        James, L.J.:—

        58

        The bill will be dismissed with costs.

        59

        Swanston, Q.C.:—

        60

        We shall have the costs of the appeal.

        61

        Kay, Q.C.:—

        62

        There should only be the costs of one appeal.

        63

        Sir H. Jackson, Q.C.:-The Defendant Allan was obliged to protect himself.

        64

        [476]Mellish, L.J.:—

        65

        He had a separate case. There might, if two contracts had been proved, have been a question of priority.

        66

        James, L.J.:—

        67

        I think the Plaintiff must pay the costs of both appeals.

        68

        Solicitor for Appellants; O. B. Wooler.

        69

        Solicitor for Plaintiff: R. T. Jarvis, agent for Hutchinson & Lucas, Darlington.

        70

        [1] Law Rep. 1 Ex. 342.

        71

        [2] 3 Drew. 523.

        72

        [3] 3 Mer. 441, 454.

        73

        [4] 1 B. & A. 68l.

        74

        [5] 1 B. & A. 681.

        75

        [6] 1 H. L. C. 381.

        76

        [7] Law Rep. 7 Ch. 587, 595.

        77

        [8] 6 Hare, 1.

        78

        [9] 3 T. R. 653.

        79

        [10] 2nd Ed. p. 52.

        80

        [11] 16 East, 45.

        81

        [12] Page 8.

        82

        [13] 4 Bing. 653.

        83

        [14] 2 Jac. & W. 413.

        84

        [15] Page 428.

        85

        [16] 1 Jur. (N.S.) 737.

        86

        [17] Page 80.

        87

        [18] Law Rep. 4, Eq. 9, 12.

        88

        [19] 3 T. R. 653.

        89

        [20] 3 T. R. 653.

        90

        [21] 4 Bing. 653.

        91

        [22] 3 Drew. 523.

        92

        [23] 1 Y. & C. Ch. 554.

        93

        [24] 6 E. & B. 765.

        94

        [25] 3 Man. & Ry. 97.

        95

        [26] 1 Russ. & My. 391.

      • 4.4.2 Restatement of Contacts, Second, §25

      • 4.4.3 Petterson v. Pattberg

        1

        248 N.Y. 86

        2
        JENNIE PETTERSON, as Executrix of JOHN PETTERSON, Deceased, Respondent,
        v.
        GEORGE PATTBERG, Appellant.
        3

        Petterson v. Pattberg, 222 App. Div. 693, reversed.

        4

        (Decided February 20, 1928; decided May 1, 1928.)

        5

        APPEAL from a judgment of the Appellate Division of the Supreme Court in the second judicial department, entered November 18,1927, affirming a judgment in favor of plaintiff entered upon a verdict directed by the court.

        6

        Harry G. Anderson and Louis J. Merrell for appellant. Inasmuch as the mortgage had been sold and plaintiff's testator had been apprised thereof before the tender of performance, the offer must be deemed to have been withdrawn; therefore, no contract resulted from such tender. (Butchers Advocate Co., Inc., v. Berkof, 94 Misc. Rep. 299; Lacelles v. Clark, 204 Mass. 362; Stensgaard v. Smith, 43 Minn. 11; Biggers v. Owen, 79 Ga. 658; Smith v. [87] Caughen, 98 Misc. Rep. 746; Levin v. Dietz, 194 N.Y. 376; Detlinfass v. Horsley, 177 App. Div. 143; 224 N.Y. 560; Dickinson v. Dodds, 2 Ch. Div. 463.)

        7

        Saul Levine for respondent. The plaintiff established a good cause of action against the defendant. (Lord v. Cronin, 154 N. Y. 172; Mason v. Decker, 72 N.Y. 595; Justice v. Lang, 42 N.Y. 493; Fox v. Hawkins, 135 N.Y. Supp. 245; Jones v. Barnes, 105 App. Div. 287; Willetts v. Sun Mutual Ins. Co., 45 N.Y. 45; White v. Baxter, 71 N.Y. 254; Marie v. Garrison, 83 N.Y. 14; Strong v. Sheffield, 144 N.Y. 395; Beck v. Bonwit, 153 N.Y. Supp. 888; Corn v. Bergmann, 123 N.Y. Supp. 160.)

        8

        KELLOGG, J. The evidence given upon the trial sanctions the following statement of facts: John Petterson, of whose last will and testament the plaintiff is the executrix, was the owner of a parcel of real estate in Brooklyn, known as 5301 Sixth avenue. The defendant was the owner of a bond executed by Petterson, which was secured by a third mortgage upon the parcel. On April 4th, 1924, there remained unpaid upon the principal the sum of $5,450. This amount was payable in installments of $250 on April 25th, 1924, and upon a like monthly date every three months thereafter Thus the bond and mortgage had more than five years to run before the entire sum became due. Under date of the 4th of April, 1924, the defendant wrote Petterson as follows:

        9

        "I hereby agree to accept cash for the mortgage which I hold against premises 5301 6th Ave., Brooklyn, N.Y. It is understood and agreed as a consideration I will allow you $780 providing said mortgage is paid on or before May 31, 1924, and the regular quarterly payment due April 25, 1924, is paid when due."

        10

        On April 25, 1924, Petterson paid the defendant the installment of principal due on that date. Subsequently, on a day in the latter part of May, 1924, Petterson presented himself at the defendant's home, and knocked at the door. The defendant [88] demanded the name of his caller. Petterson replied: "It is Mr. Petterson. I have come to pay off the mortgage." The defendant answered that he had sold the mortgage. Petterson stated that he would like to talk with the defendant, so the defendant partly opened the door. Thereupon Petterson exhibited the cash and said he was ready to pay off the mortgage according to the agreement. The defendant refused to take the money. Prior to this conversation Petterson had made a contract to sell the land to a third person free and clear of the mortgage to the defendant. Meanwhile, also, the defendant had sold the bond and mortgage to a third party. It, therefore, became necessary for Petterson to pay to such person the full amount of the bond and mortgage. It is claimed that he thereby sustained a loss of $780, the sum which the defendant agreed to allow upon the bond and mortgage if payment in full of principal, less that sum, was made on or before May 31st, 1924. The plaintiff has had a recovery for the sum thus claimed, with interest.

        11

        Clearly the defendant's letter proposed to Petterson the making of a unilateral contract, the gift of a promise in exchange for the performance of an act. The thing conditionally promised by the defendant was the reduction of the mortgage debt. The act requested to be done, in consideration of the offered promise, was payment in full of the reduced principal of the debt prior to the due date thereof. "If an act is requested, that very act and no other must be given." (Williston on Contracts, sec. 73.) "In case of offers for a consideration, the performance of the consideration is always deemed a condition." (Langdell's Summary of the Law of Contracts, sec. 4.) It is elementary that any offer to enter into a unilateral contract may be withdrawn before the act requested to be done has been performed. (Williston on Contracts, sec. 60: Langdell's Summary, sec. 4; Offord v. Davies, 12 C. B. [N. S.] 748.) A bidder at a sheriff's sale may revoke his bid at any time before the property [86] is struck down to him. (Fisher v. Seltzer, 23 Penn. St. 308.) The offer of a reward in consideration of an act to be performed is revocable before the very act requested has been done. (Shuey v. United States, 92 U.S. 73; Biggers v. Owen, 79 Ga. 658; Fitch v. Snedaker, 38 N.Y. 248.) So, also, an offer to pay a broker commissions, upon a sale of land for the offeror, is revocable at any time before the land is sold, although prior to revocation the broker performs services in an effort to effectuate a sale. (Stensgaard v. Smith, 43 Minn. 11; Smith v. Cauthen, 98 Miss. 746.)

        12

        An interesting question arises when, as here, the offeree approaches the offeror with the intention of proffering performance and, before actual tender is made, the offer is withdrawn. Of such a case Williston says: "The offeror may see the approach of the offeree and know that an acceptance is contemplated. If the offeror can say 'I revoke' before the offeree accepts, however brief the interval of time between the two acts, there is no escape from the conclusion that the offer is terminated." Williston on Contracts, sec. 60-b. In this instance Petterson, standing at the door of the defendant's house, stated to the defendant that he had come to pay off the mortgage. Before a tender of the necessary moneys had been made the defendant informed Petterson that he had sold the mortgage. That was a definite notice to Petterson that the defendant could not perform his offered promise and that a tender to the defendant, who was no longer the creditor, would be ineffective to satisfy the debt.

        13

        "An offer to sell property may be withdrawn before acceptance without any formal notice to the person to whom the offer is made. It is sufficient if that person has actual knowledge that the person who made the offer has done some act inconsistent with the continuance of the offer, such as selling the property to a third person."

        14

        (Dickinson v. Dodds, 2 Ch. Div. 463, headnote.) To the same effect is Coleman v. Applegarth (68 Md. 21). Thus, it clearly appears that the defendant's offer was [86] withdrawn before its acceptance had been tendered. It is unnecessary to determine, therefore, what the legal situation might have been had tender been made before withdrawal. It is the individual view of the writer that the same result would follow. This would be so, for the act requested to be performed was the completed act of payment, a thing incapable of performance unless assented to by the person to be paid. (Williston on Contracts, sec. 60-b.) Clearly an offering party has the right to name the precise act performance of which would convert his offer into a binding promise. Whatever the act may be until it is performed the offer must be revocable. However, the supposed case is not before us for decision. We think that in this particular instance the offer of the defendant was withdrawn before it became a binding promise, and, therefore, that no contract was ever made for the breach of which the plaintiff may claim damages. The judgment of the Appellate Division and that of the Trial Term should be reversed and the complaint dismissed, with costs in all courts.

        15

        LEHMAN, J. (dissenting). The defendant's letter to Petterson constituted a promise on his part to accept payment at a discount of the mortgage he held, provided the mortgage is paid on or before May 31st, 1924. Doubtless by the terms of the promise itself, the defendant made payment of the mortgage by the plaintiff, before the stipulated time, a condition precedent to performance by the defendant of his promise to accept payment at a discount. If the condition precedent has not been performed, it is because the defendant made performance impossible by refusing to accept payment, when the plaintiff came with an offer of immediate performance. "It is a principle of fundamental justice that if a promisor is himself the cause of the failure of performance either of an obligation due him or of a condition upon which his own liability depends, he cannot take advantage of the failure." (Williston on Contracts, [86] section 677.) The question in this case is not whether payment of the mortgage is a condition precedent to the performance of a promise made by the defendant, but, rather, whether at the time the defendant refused the offer of payment, he had assumed any binding obligation, even though subject to condition.

        16

        The promise made by the defendant lacked consideration at the time it was made. Nevertheless the promise was not made as a gift or mere gratuity to the plaintiff. It was made for the purpose of obtaining from the defendant something which the plaintiff desired. It constituted an offer which was to become binding whenever the plaintiff should give, in return for the defendant's promise, exactly the consideration which the defendant requested. Here the defendant requested no counter promise from the plaintiff. The consideration requested by the defendant for his promise to accept payment was, I agree, some act to be performed by the plaintiff. Until the act requested was performed, the defendant might undoubtedly revoke his offer. Our problem is to determine from the words of the letter read in the light of surrounding circumstances what act the defendant requested as consideration for his promise.

        17

        The defendant undoubtedly made his offer as an inducement to the plaintiff to "pay" the mortgage before it was due. Therefore, it is said, that "the act requested to be performed was the completed act of payment, a thing incapable of performance unless assented to by the person to be paid." In unmistakable terms the defendant agreed to accept payment, yet we are told that the defendant intended, and the plaintiff should have understood, that the act requested by the defendant, as consideration for his promise to accept payment, included performance by the defendant himself of the very promise for which the act was to be consideration. The defendant's promise was to become binding only when fully performed; and part of the consideration to be furnished [92] by the plaintiff for the defendant's promise was to be the performance of that promise by the defendant. So construed, the defendant's promise or offer, though intended to induce action by the plaintiff, is but a snare and delusion. The plaintiff could not reasonably suppose that the defendant was asking him to procure the performance by the defendant of the very act which the defendant promised to do, yet we are told that even after the plaintiff had done all else which the defendant requested, the defendant's promise was still not binding because the defendant chose not to perform.

        18

        I cannot believe that a result so extraordinary could have been intended when the defendant wrote the letter. "The thought behind the phrase proclaims itself misread when the outcome of the reading is injustice or absurdity." (See opinion of CARDOZO, Ch. J., in Surace v. Danna, 248 N.Y. 18.) If the defendant intended to induce payment by the plaintiff arid yet reserve the right to refuse payment when offered he should have used a phrase better calculated to express his meaning than the words: "I agree to accept." A promise to accept payment, by its very terms, must necessarily become binding, if at all, not later than when a present offer to pay is made.

        19

        I recognize that in this case only an offer of payment, and not a formal tender of payment, was made before the defendant withdrew his offer to accept payment. Even the plaintiff's part in the act of payment was then not technically complete. Even so, under a fair construction of the words of the letter I think the plaintiff had done the act which the defendant requested as consideration for his promise. The plaintiff offered to pay with present intention and ability to make that payment. A formal tender is seldom made in business transactions, except to lay the foundation for subsequent assertion in a court of justice of rights which spring from refusal of the tender. If the defendant acted in good faith in making his offer to accept payment, he could not well [93] have intended to draw a distinction in the act requested of the plaintiff in return, between an offer which unless refused would ripen into completed payment, and a formal tender. Certainly the defendant could not have expected or intended that the plaintiff would make a formal tender of payment without first stating that he had come to make payment. We should not read into the language of the defendant's offer a meaning which would prevent enforcement of the defendant's promise after it had been accepted by the plaintiff in the very way which the defendant must have intended it should be accepted, if he acted in good faith.

        20

        The judgment should be affirmed.

        21

        CARDOZO, Ch. J., POUND, CRANE and O'BRIEN, JJ., concur with KELLOGG, JJ., LEHMAN, J., dissents in opinion, in which ANDREWS, J., concurs.

        22

        Judgments reversed, etc.

      • 4.4.4 Restatement of Contacts, Second, §45

      • 4.4.5 Brackenbury. v. Hodgkin.

        1
        102 A. 106
        116 Me. 399
        2
        BRACKENBURY et al.
        v.
        HODGKIN et al.
        3
        Supreme Judicial Court of Maine.
        4
        Oct. 27, 1917.
        6

        [107]

        7

        Appeal from Supreme Judicial Court, Androscoggin County, in Equity.

        8

        Suit by Joseph A. Brackenbury and another against Sarah D. P. Hodgkin and Walter C. Hodgkin. From a decree for plaintiffs, defendants appeal. Appeal dismissed, and decree affirmed as to Walter C. Hodgkin.

        9

        Argued before CORNISH, C. J., and SPEAR, KING, BIRD, HANSON, and MADIGAN, JJ.

        10

        Benjamin L. Berman, of Lewiston, and Jacob H. Berman, of Portland, for appellants.

        11

        McGillicuddy & Morey, of Lewiston, for appellees.

        12
        CORNISH, C. J.
        13

        The defendant Mrs. Sarah D. P. Hodgkin on the 8th day of February, 1915, was the owner of certain real estate—her home farm, situated in the outskirts of Lewiston. She was a widow and was living alone. She was the mother of six adult children, five sons, one of whom, Walter, is the codefendant, and one daughter, who is the coplaintiff. The plaintiffs were then residing in Independence, Mo. Many letters had passed between mother and daughter concerning the daughter and her husband returning to the old home and taking care of the mother, and finally on February 8, 1915, the mother sent a letter to the daughter and her husband which is the foundation of this bill in equity. In this letter she made a definite proposal, the substance of which was that if the Brackenburys would move to Lewiston, and maintain and care for Mrs. Hodgkin on the home place during her life, and pay the moving expenses, they were to have the use and income of the premises, together with the use of the household goods, with certain exceptions, Mrs. Hodgkin to have what rooms she might need. The letter closed, by way of postscript, with the words, "you to have the place when I have passed away."

        14

        Relying upon this offer, which was neither withdrawn nor modified, and in acceptance (hereof, the plaintiffs moved from Missouri to Maine late in April, 1915, went upon the premises described and entered upon the performance of the contract. Trouble developed after a few weeks, and the relations between the parties grew most disagreeable. The mother brought two suits against her son-in-law on trifling matters, and finally ordered the plaintiffs from the place, but they refused to leave. Then on November 7, 1916, she executed and delivered to her son, Walter C. Hodgkin, a deed of the premises, reserving a life estate in herself. Walter, however, was not a bona fide purchaser for value without notice, but took the deed with full knowledge of the agreement between the parties and for the sole purpose of evicting the plaintiffs. On the very day the deed was executed he served a notice to quit upon Mr. Brackenbury, as preliminary to an action of forcible entry and detainer which was brought on November 13, 1916. This bill in equity was brought by the plaintiffs to secure a reconveyance of the farm from Walter to his mother, to restrain and enjoin Walter from further prosecuting his action of forcible entry and detainer, and to obtain an adjudication that the mother holds the legal title impressed with a trust in favor of the plaintiffs in accordance with their contract.

        15

        The sitting justice made an elaborate and carefully considered finding of facts and signed a decree, sustaining the bill with costs against Walter C. Hodgkin, and granting the relief prayed for. The case is before the law court on the defendants' appeal from this decree.

        16

        Four main issues are raised.

        17
        1. As to the completion and existence of a valid contract.
        18

        A legal and binding contract is clearly proven. The offer on the part of the mother was in writing, and its terms cannot successfully be disputed. There was no need that it be accepted in words, nor that a counter promise on the part of the plaintiffs be made. The offer was the basis, not of a bilateral contract, requiring a reciprocal promise, a promise for a promise, but of a unilateral contract requiring an act for a promise. "In the latter case the only acceptance of the offer that is necessary is the performance of the act. In other words, the promise becomes binding when the act is performed." 6 R. C. L. 607. This is elementary law.

        19

        The plaintiffs here accepted the offer by moving from Missouri to the mother's farm in Lewiston and entering upon the performance of the specified acts, and they have continued performance since that time so far as they have been permitted by the mother to do so. The existence of a completed and valid contract is clear.

        20
        [108] 2. The creation of an equitable interest.
        21

        This contract between the parties, the performance of which was entered upon by the plaintiffs, created an equitable interest in the land described in the bill in favor of the plaintiffs. The letter of February 8, 1915, signed by the mother, answered the statutory requirement that "there can be no trust concerning lands, except trusts arising or resulting by implication of law, unless created or declared by some writing signed by the party or his attorney." R. S. 1903, c. 75, § 14. No particular formality need be observed; a letter or other memorandum is sufficient to establish a trust provided its terms and the relations of the parties to it appear with reasonable certainty. Bates v. Hurd, 65 Me. 181; McCleUan v. MeClellan, 65 Me. 500. The equitable interest of the plaintiffs in these premises is obvious, and they are entitled to have that interest protected.

        22
        3. Alleged breach of duty on the part of the plaintiffs.
        23

        The defendants contend that, granting an equitable estate has been established, the plaintiffs have failed of performance because of their improper and unkind treatment of Mrs. Hodgkin, and therefore have forfeited the right to equitable relief which they might otherwise be entitled to. The sitting justice decided this question of fact in favor of the plaintiffs, and his finding is fully warranted by the evidence. Mrs Hodgkin's temperament and disposition, not only as described in the testimony of others, but as revealed in her own attitude, conduct, and testimony as a witness, as they stand out on the printed record, mark her as the provoking cause in the various family difficulties. She was "the one primarily at fault."

        24
        4. Adequate relief at law.
        25

        The defendants finally invoke the familiar rule that the plaintiffs have a plain and adequate remedy at law, and therefore cannot ask relief in equity.

        26

        The answer to this proposition is that this rule does not apply when the court has been given full equity jurisdiction, or has been given special statutory jurisdiction covering the case. Brown v. Kimball Co., 84 Me. 492, 24 Atl. 847; Farnsworth v. Whiting, 104 Me. 488, 72 Atl. 314; Trask v. Chase, 107 Me. 137, 77 Atl. 698. The court in equity in this state is given special statutory jurisdiction to grant relief in cases of trusts (R. S. 1903, c. 79, § 6, par. 4), and therefore the exception and not the rule must govern here.

        27

        The plaintiffs are entitled to the remedy here sought, and the entry must be:

        28

        Appeal dismissed.

        29

        Decree of sitting justice affirmed, with costs against Walter C. Hodgkin.

      • 4.4.6 U.C.C. §2-204(1)-(2)

      • 4.4.7 U.C.C. §2-206(1)

      • 4.4.8 James Baird Co. v. Gimbel Bros.

        1

         

        2

        64 F. 2d 344
        JAMES BAIRD CO.
        v.
        GIMBEL BROS., INC.
        Circuit Court of Appeals, Second Circuit.
        No. 330.
        April 10, 1933

        3

         

        4


        Campbell, Harding, Goodwin & Danforth, of New York City (Garrard Glenn and William L. Glenn, both of New York City, of counsel), for appellant.

        Chadbourne, Stanchfield & Levy, of New York City (Leonard P. Moore and David S. Hecht, both of New York City, of counsel), for appellee.

        Before MANTON L. HAND, and SWAN, Circuit Judges.

        5

        L. HAND, Circuit Judge. The plaintiff sued the defendant for breach of a contract to deliver linoleum under a contract of sale; the defendant denied the making of the contract; the parties tried the case to the judge under a written stipulation and he directed judgment for the defendant. The facts as found, bearing on the making of the contract, the only issue necessary to discuss, were as follows: The defendant, a New York merchant, knew that the Department of Highways in Pennsylvania had asked for bids for the construction of a public building. It sent an employee to the office of a contractor in Philadelphia, who had possession of the specifications, and the employee there computed the amount of the linoleum which would be required on the job, underestimating the total yardage by about one-half the proper amount. In ignorance of this mistake, on December twenty-fourth the defendant sent to some twenty or thirty contractors, likely to bid on the job, an offer to supply all the linoleum required by the specifications at two different lump sums, depending upon the quality used. These offers concluded as follows: "If successful in being awarded this contract, it will be absolutely guaranteed, . . . and  . . . we are offering these prices for reasonable" (sic), "prompt acceptance after the general contract has been awarded." The plaintiff, a contractor in Washington, got one of these on the twenty-eighth, and on the same day the defendant learned its mistake and telegraphed all the contractors to whom it had sent the offer, that it withdrew it and would substitute a new one at about double the amount of the old. This withdrawal reached the plaintiff at Washington on the afternoon of the same day, but not until after it had put in a bid at Harrisburg at a lump sum, based as to linoleum upon the prices quoted by the defendant. The public authorities accepted the plaintiff's bid on December thirtieth, the defendant having meanwhile written a letter of confirmation of its withdrawal, received on the thirty-first. The plaintiff formally accepted the offer on January second, and, as the defendant persisted in declining to recognize the existence of a contract, sued it for damages on a breach.

        6

        Unless there are circumstances to take it out of the ordinary doctrine, since the offer was withdrawn before it was accepted, the acceptance was too late. Restatement of Contracts, §35. To meet this the plaintiff argues as follows: It was a reasonable implication from the defendant's offer that it should be irrevocable in case the plaintiff acted upon it, that is to say, used the prices quoted in making its bid, thus putting itself in a position from which it could not withdraw without great loss. While it might have withdrawn its bid after receiving the revocation, the time had passed to submit another, and as the item of linoleum was a very trifling part of the cost of the whole building, it would have been an unreasonable hardship to expect it to lose the contract on that account, and probably forfeit its deposit. While it is true that the plaintiff might in advance have secured a contract conditional upon the success of its bid, this was not what the defendant suggested. It understood that the contractors would use its offer in their bids, and would thus in fact commit themselves to supplying the linoleum at the proposed prices. The inevitable implication from all this was that when the contractors acted upon it, they accepted the offer and promised to pay for the linoleum, in case their bid were accepted. 

        7

        It was of course possible for the parties to make such a contract, and the question is merely as to what they meant; that is, what is to be imputed to the words they used. Whatever plausibility there is in the argument, is in the fact that the defendant must have known the predicament in which the contractors would be put if it withdrew its offer after the bids went in. However, it seems entirely clear that the contractors did not suppose that they accepted the offer merely by putting in their bids. If, for example, the successful one had repudiated the contract with the public authorities after it had been awarded to him, certainly the defendant could not have sued him for a breach. If he had become bankrupt, the defendant could not prove against his estate. It seems plain therefore that there was no contract between them. And if there be any doubt as to this, the language of the offer sets it at rest. The phrase, "if successful in being awarded this contract," is scarcely met by the mere use of the prices in the bids. Surely such a use was not an "award" of the contract to the defendant. Again, the phrase, "we are offering these prices for . . . prompt acceptance after the general contract has been awarded," looks to the usual communication of an acceptance, and precludes the idea that the use of the offer in the bidding shall be the equivalent. It may indeed be argued that this last language contemplated no more than an early notice that the offer had been accepted, the actual acceptance being the bid, but that would wrench its natural meaning too far, especially in the light of the preceding phrase. The contractors had a ready escape from their difficulty by insisting upon a contract before they used the figures; and in commercial transactions it does not in the end promote justice to seek strained interpretations in aid of those who do not protect themselves.

        8

        But the plaintiff says that even though no bilateral contract was made, the defendant should be held under the doctrine of "promissory estoppel." This is to be chiefly found in those cases where persons subscribe to a venture, usually charitable, and are held to their promises after it has been completed. It has been applied much more broadly, however, and has now been generalized in section 90, of the Restatement of Contracts. We may arguendo accept it as it there reads, for it does not apply to the case at bar. Offers are ordinarily made in exchange for a consideration, either a counter-promise or some other act which the promisor wishes to secure. In such cases they propose bargains; they presuppose that each promise or performance is an inducement to the other. Wisconsin, etc., Ry. v. Powers, 191 U. S. 379, 386, 387, 24 S. Ct. 107, 48 L. Ed. 229; Banning Co. v. California, 240 U. S. 142, 152, 153, 36 S. Ct. 338, 60 L. Ed. 569. But a man may make a promise without expecting an equivalent; a donative promise, conditional or absolute. The common law provided for such by sealed instruments, and it is unfortunate that these are no longer generally available. The doctrine of "promissory estoppel" is to avoid the harsh results of allowing the promisor in such a case to repudiate, when the promisee has acted in reliance upon the promise. Siegel v. Spear & Co., 234 N.Y. 479, 138 N.E. 414, 26 A. L.R. 1205. Cf. Allegheny College v. National Bank, 246 N.Y. 369, 159 N.E. 173, 57 L.R.A. 980. But an offer for an exchange is not meant to become a promise until a consideration has been received, either a counter-promise or whatever else is stipulated. To extend it would be to hold the offeror regardless of the stipulated condition of his offer. In the case at bar the defendant offered to deliver the linoleum in exchange for the plaintiff's acceptance, not for its bid, which was a matter of indifference to it. That offer could become a promise to deliver only when the equivalent was received; that is, when the plaintiff promised to take and pay for it. There is no room in such a situation for the doctrine of "promissory estoppel."

        9

        Nor can the offer be regarded as of an option, giving the plaintiff the right seasonably to accept the linoleum at the quoted prices if its bid was accepted, but not binding it to take and pay, if it could get a better bargain elsewhere. There is not the least reason to suppose that the defendant meant to subject itself to such a one-sided obligation. True, if so construed, the doctrine of "promissory estoppel" might apply, the plaintiff having acted in reliance upon it, though, so far as we have found, the decisions are otherwise. Ganss v. Guffey Petroleum Co., 125 App. Div. 760, 110 N.Y.S. 176; Comstock v. North, 88 Miss. 754, 41 So. 374. As to that, however, we need not declare ourselves.

        10

        Judgment affirmed.

      • 4.4.9 Drennan v. Star Paving Co.

        1

        51 Cal. 2d 409 (1958)

        2
        WILLIAM A. DRENNAN, Respondent,
        v.
        STAR PAVING COMPANY (a Corporation), Appellant.
        3

        L. A. No. 25024.
        Supreme Court of California. In Bank.
        Dec. 31, 1958.

        4

        Atus P. Reuther, Norman Soibelman, Obegi & High and Earl J. McDowell for Appellant.

        5

        S. B. Gill for Respondent.

        6

        TRAYNOR, J.

        7

        Defendant appeals from a judgment for plaintiff in an action to recover damages caused by defendant's refusal to perform certain paving work according to a bid it submitted to plaintiff.

        8

        On July 28, 1955, plaintiff, a licensed general contractor, was preparing a bid on the "Monte Vista School Job" in the Lancaster school district. Bids had to be submitted before 8 p.m. Plaintiff testified that it was customary in that area for general contractors to receive the bids of subcontractors by telephone on the day set for bidding and to rely on them in computing their own bids. Thus on that day plaintiff's secretary, Mrs. Johnson, received by telephone between 50 and 75 subcontractors' bids for various parts of the school job. As each bid came in, she wrote it on a special form, which she [412] brought into plaintiff's office. He then posted it on a master cost sheet setting forth the names and bids of all subcontractors. His own bid had to include the names of subcontractors who were to perform one-half of one per cent or more of the construction work, and he had also to provide a bidder's bond of 10 per cent of his total bid of $317,385 as a guarantee that he would enter the contract if awarded the work.

        9

        Late in the afternoon, Mrs. Johnson had a telephone conversation with Kenneth R. Hoon, an estimator for defendant. He gave his name and telephone number and stated that he was bidding for defendant for the paving work at the Monte Vista School according to plans and specifications and that his bid was $7,131.60. At Mrs. Johnson's request he repeated his bid. Plaintiff listened to the bid over an extension telephone in his office and posted it on the master sheet after receiving the bid form from Mrs. Johnson. Defendant's was the lowest bid for the paving. Plaintiff computed his own bid accordingly and submitted it with the name of defendant as the subcontractor for the paving. When the bids were opened on July 28th, plaintiff's proved to be the lowest, and he was awarded the contract.

        10

        On his way to Los Angeles the next morning plaintiff stopped at defendant's office. The first person he met was defendant's construction engineer, Mr. Oppenheimer. Plaintiff testified: 

        11
        I introduced myself and he immediately told me that they had made a mistake in their bid to me the night before, they couldn't do it for the price they had bid, and I told him I would expect him to carry through with their original bid because I had used it in compiling my bid and the job was being awarded them. And I would have to go and do the job according to my bid and I would expect them to do the same.
        12

        Defendant refused to do the paving work for less than $15,000. Plaintiff testified that he "got figures from other people" and after trying for several months to get as low a bid as possible engaged L & H Paving Company, a firm in Lancaster, to do the work for $10,948.60.

        13

        The trial court found on substantial evidence that defendant made a definite offer to do the paving on the Monte Vista job according to the plans and specifications for $7,131.60, and that plaintiff relied on defendant's bid in computing his own bid for the school job and naming defendant therein as the subcontractor for the paving work. Accordingly, it entered judgment for plaintiff in the amount of $3,817 (the difference [413] between defendant's bid and the cost of the paving to plaintiff) plus costs.

        14

        Defendant contends that there was no enforceable contract between the parties on the ground that it made a revocable offer and revoked it before plaintiff communicated his acceptance to defendant.

        15

        There is no evidence that defendant offered to make its bid irrevocable in exchange for plaintiff's use of its figures in computing his bid. Nor is there evidence that would warrant interpreting plaintiff's use of defendant's bid as the acceptance thereof, binding plaintiff, on condition he received the main contract, to award the subcontract to defendant. In sum, there was neither an option supported by consideration nor a bilateral contract binding on both parties.

        16

        Plaintiff contends, however, that he relied to his detriment on defendant's offer and that defendant must therefore answer in damages for its refusal to perform. Thus the question is squarely presented: Did plaintiff's reliance make defendant's offer irrevocable?

        17

        Section 90 of the Restatement of Contracts states: "A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise." This rule applies in this state. (Edmonds v. County of Los Angeles, 40 Cal.2d 642 [255 P.2d 772]; Frebank Co. v. White, 152 Cal.App.2d 522 [313 P.2d 633]; Wade v. Markwell & Co., 118 Cal.App.2d 410 [258 P.2d 497, 37 A.L.R.2d 1363]; West v. Hunt Foods, Inc., 101 Cal.App.2d 597 [225 P.2d 978]; Hunter v. Sparling, 87 Cal.App.2d 711 [197 P.2d 807]; see 18 Cal.Jur.2d 407-408; 5 Stan. L. Rev. 783.)

        18

        Defendant's offer constituted a promise to perform on such conditions as were stated expressly or by implication therein or annexed thereto by operation of law. (See 1 Williston, Contracts [3d ed.], §24A, p. 56, §61, p. 196.) Defendant had reason to expect that if its bid proved the lowest it would be used by plaintiff. It induced "action . . . of a definite and substantial character on the part of the promisee."

        19

        Had defendant's bid expressly stated or clearly implied that it was revocable at any time before acceptance we would treat it accordingly. It was silent on revocation, however, and we must therefore determine whether there are [414] conditions to the right of revocation imposed by law or reasonably inferable in fact. In the analogous problem of an offer for a unilateral contract, the theory is now obsolete that the offer is revocable at any time before complete performance. Thus section 45 of the Restatement of Contracts provides:

        20
        If an offer for a unilateral contract is made, and part of the consideration requested in the offer is given or tendered by the offeree in response thereto, the offeror is bound by a contract, the duty of immediate performance of which is conditional on the full consideration being given or tendered within the time stated in the offer, or, if no time is stated therein, within a reasonable time.
        21

        In explanation, comment b states that the

        22
        main offer includes as a subsidiary promise, necessarily implied, that if part of the requested performance is given, the offeror will not revoke his offer, and that if tender is made it will be accepted. Part performance or tender may thus furnish consideration for the subsidiary promise. Moreover, merely acting in justifiable reliance on an offer may in some cases serve as sufficient reason for making a promise binding (see §90).
        23

        Whether implied in fact or law, the subsidiary promise serves to preclude the injustice that would result if the offer could be revoked after the offeree had acted in detrimental reliance thereon. Reasonable reliance resulting in a foreseeable prejudicial change in position affords a compelling basis also for implying a subsidiary promise not to revoke an offer for a bilateral contract.

        24

        The absence of consideration is not fatal to the enforcement of such a promise. It is true that in the case of unilateral contracts the Restatement finds consideration for the implied subsidiary promise in the part performance of the bargained-for exchange, but its reference to section 90 makes clear that consideration for such a promise is not always necessary. The very purpose of section 90 is to make a promise binding even though there was no consideration "in the sense of something that is bargained for and given in exchange." (See 1 Corbin, Contracts 634 et seq.) Reasonable reliance serves to hold the offeror in lieu of the consideration ordinarily required to make the offer binding. In a case involving similar facts the Supreme Court of South Dakota stated that 

        25
        we believe that reason and justice demand that the doctrine [of section 90] be applied to the present facts. We cannot believe that by accepting this doctrine as controlling in the state of facts before us we will abolish the requirement of a consideration in contract [415] cases, in any different sense than an ordinary estoppel abolishes some legal requirement in its application. We are of the opinion, therefore, that the defendants in executing the agreement [which was not supported by consideration] made a promise which they should have reasonably expected would induce the plaintiff to submit a bid based thereon to the Government, that such promise did induce this action, and that injustice can be avoided only by enforcement of the promise.
        26

        (Northwestern Engineering Co. v. Ellerman, 69 S.D. 397, 408 [10 N.W.2d 879]; see also Robert Gordon, Inc. v. Ingersoll-Rand Co., 117 F.2d 654, 661; cf. James Baird Co. v. Gimbel Bros., 64 F.2d 344.)

        27

        When plaintiff used defendant's offer in computing his own bid, he bound himself to perform in reliance on defendant's terms. Though defendant did not bargain for this use of its bid neither did defendant make it idly, indifferent to whether it would be used or not. On the contrary it is reasonable to suppose that defendant submitted its bid to obtain the subcontract. It was bound to realize the substantial possibility that its bid would be the lowest, and that it would be included by plaintiff in his bid. It was to its own interest that the contractor be awarded the general contract; the lower the subcontract bid, the lower the general contractor's bid was likely to be and the greater its chance of acceptance and hence the greater defendant's chance of getting the paving subcontract. Defendant had reason not only to expect plaintiff to rely on its bid but to want him to. Clearly defendant had a stake in plaintiff's reliance on its bid. Given this interest and the fact that plaintiff is bound by his own bid, it is only fair that plaintiff should have at least an opportunity to accept defendant's bid after the general contract has been awarded to him.

        28

        It bears noting that a general contractor is not free to delay acceptance after he has been awarded the general contract in the hope of getting a better price. Nor can he reopen bargaining with the subcontractor and at the same time claim a continuing right to accept the original offer. (See R. J. Daum Const. Co. v. Child, 122 Utah 194 [247 P.2d 817, 823].) In the present case plaintiff promptly informed defendant that plaintiff was being awarded the job and that the subcontract was being awarded to defendant.

        Defendant contends, however, that its bid was the result of mistake and that it was therefore entitled to revoke it. It [416] relies on the rescission cases of M. F. Kemper Const. Co. v. City of Los Angeles, 37 Cal.2d 696 [235 P.2d 7], and Brunzell Const. Co. v. G. J. Weisbrod, Inc., 134 Cal.App.2d 278 [285 P.2d 989]. (See also Lemoge Electric v. San Mateo County, 46 Cal.2d 659, 662 [297 P.2d 638].) In those cases, however, the bidder's mistake was known or should have been to the offeree, and the offeree could be placed in status quo. [7] Of course, if plaintiff had reason to believe that defendant's bid was in error, he could not justifiably rely on it, and section 90 would afford no basis for enforcing it. (Robert Gordon, Inc. v. Ingersoll-Rand Co., 117 F.2d 654, 660.) Plaintiff, however, had no reason to know that defendant had made a mistake in submitting its bid, since there was usually a variance of 160 per cent between the highest and lowest bids for paving in the desert around Lancaster. He committed himself to performing the main contract in reliance on defendant's figures. Under these circumstances defendant's mistake, far from relieving it of its obligation, constitutes an additional reason for enforcing it, for it misled plaintiff as to the cost of doing the paving. Even had it been clearly understood that defendant's offer was revocable until accepted, it would not necessarily follow that defendant had no duty to exercise reasonable care in preparing its bid. It presented its bid with knowledge of the substantial possibility that it would be used by plaintiff; it could foresee the harm that would ensue from an erroneous underestimate of the cost. Moreover, it was motivated by its own business interest. Whether or not these considerations alone would justify recovery for negligence had the case been tried on that theory (see Biakanja v. Irving, 49 Cal.2d 647, 650 [320 P.2d 16]), they are persuasive that defendant's mistake should not defeat recovery under the rule of section 90 of the Restatement of Contracts.

        29

        As between the subcontractor who made the bid and the general contractor who reasonably relied on it, the loss resulting from the mistake should fall on the party who caused it.

        30

        Leo F. Piazza Paving Co. v. Bebek & Brkich, 141 Cal.App.2d 226 [296 P.2d 368], and Bard v. Kent, 19 Cal.2d 449 [122 P.2d 8, 139], are not to the contrary. In the Piazza case the court sustained a finding that defendants intended, not to make a firm bid, but only to give the plaintiff "some kind of an idea to use" in making its bid; there was evidence that the defendants had told plaintiff they were unsure of the significance of the specifications. There was thus no offer, promise, [417] or representation on which the defendants should reasonably have expected the plaintiff to rely. The Bard case held that an option not supported by consideration was revoked by the death of the optioner. The issue of recovery under the rule of section 90 was not pleaded at the trial, and it does not appear that the offeree's reliance was "of a definite and substantial character" so that injustice could be avoided "only by the enforcement of the promise."

        31

        There is no merit in defendant's contention that plaintiff failed to state a cause of action, on the ground that the complaint failed to allege that plaintiff attempted to mitigate the damages or that they could not have been mitigated. Plaintiff alleged that after defendant's default, "plaintiff had to procure the services of the L & H Co. to perform said asphaltic paving for the sum of $10,948.60." Plaintiff's uncontradicted evidence showed that he spent several months trying to get bids from other subcontractors and that he took the lowest bid. Clearly he acted reasonably to mitigate damages. [10] In any event any uncertainty in plaintiff's allegation as to damages could have been raised by special demurrer. (Code Civ. Proc., §430, subd. 9.) It was not so raised and was therefore waived. (Code Civ. Proc., §434.)

        32

        The judgment is affirmed.

        33

        Gibson, C.J., Shenk, J., Schauer, J., Spence, J., and McComb, J., concurred.

      • 4.4.10 EA Coronis Assocs. v. M. Gordon Constr. Co.

        1
        90 N.J. Super. 69 (1966)
        2
        216 A.2d 246
        3
        E.A. CORONIS ASSOCIATES, A CORPORATION OF THE STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT,
        v.
        M. GORDON CONSTRUCTION CO., A CORPORATION OF THE STATE OF NEW JERSEY, DEFENDANT-APPELLANT.
        4

        Superior Court of New Jersey, Appellate Division.

        5
        Argued November 15, 1965.
        6
        Decided January 12, 1966.
        7

        [71] Before Judges GOLDMANN, FOLEY and COLLESTER.

        8

        Mr. Sam J. Abraham argued the cause for appellant (Messrs. Magner, Abraham & Kahn, attorneys).

        9

        Mr. Peter A. Adams argued the cause for respondent.

        10
        The opinion of the court was delivered by COLLESTER, J.A.D.
        11

        Summary judgment on cross-motions therefor was entered in favor of plaintiff E.A. Coronis Associates (Coronis) on defendant M. Gordon Construction Company's (Gordon) counterclaim in the Superior Court, Law Division.

        12

        This litigation began when plaintiff brought suit on three contracts not here pertinent. Defendant admitted liability thereon, but counterclaimed for breach of a contract to supply and erect structural steel on one of its projects. Gordon is a general contractor. In anticipation of making a bid to construct two buildings at the Port of New York Authority's Elizabeth Piers it sought bids from subcontractors. Coronis designs, fabricates, supplies and erects structural steel. On April 22, 1963 it sent the following letter to Gordon:

        13

        [72] "April 22, 1963 Mr. David BenZvi Gordon Construction Co. Elizabeth Avenue Linden, N.J. Subject: Bldgs. 131 & 132 Elizabeth Port Authority Piers Structural Steel

        14

        Dear Mr. BenZvi:

        15

        We regret very much that this estimate was so delayed. Be assured that the time consumed was due to routing of the plans through our regular sources of fabrication.

        16

        We are pleased to offer:

        17

        All structural steel including steel girts and purlins Both Buildings delivered and erected ................... $155,413.50 All structural steel equipped with clips for wood girts & purlins Both Buildings delivered and erected ................... 98,937.50

        18

        NOTE: This price is predicated on an erected price of .1175 per Lb. of steel and we would expect to adjust the price on this basis to conform to actual tonnage of steel used in the project.

        19

        Thank you very much for this opportunity to quote.

        20

        Very truly yours, E.A. CORONIS ASSOCIATES /s/ Arthur C. Pease Arthur C. Pease"

        21

        Gordon contends that at some date prior to April 22 the parties reached an oral agreement and that the above letter was sent in confirmation.

        22

        Bids were opened by the Port Authority on April 19, 1963, and Gordon's bid was the lowest. He alleges that Coronis was informed the same day. The Port Authority contract was officially awarded to Gordon on May 27, 1963 and executed about two weeks later. During this period Gordon never accepted the alleged offer of Coronis. Meanwhile, on June 1, 1963, Coronis sent a telegram, in pertinent part reading:

        23

        "Due to conditions beyond our control, we must withdraw our proposal of April 22nd 1963 for structural steel Dor Buildings 131 and 132 at the Elizabeth-Port Piers at the earliest possible we will resubmit our proposal."

        24

        [73] Two days later, on June 3, 1963, Gordon replied by telegram as follows:

        25

        "Ref your tel. 6-3 and for the record be advised that we are holding you to your bid of April 22, 1963 for the structural steel of carge bldgs 131 and 132."

        26

        Coronis never performed. Gordon employed the Elizabeth Iron Works to perform the work and claims as damages the difference between Coronis' proposal of $155,413.50 and Elizabeth Iron Works' charge of $208,000.

        27

        Gordon contends that the April 22 letter was an offer and that Coronis had no right to withdraw it. Two grounds are advanced in support. First, Gordon contends that the Uniform Commercial Code firm offer section, N.J.S. 12A:2-205, precludes withdrawal and, second, it contends that withdrawal is prevented by the doctrine of promissory estoppel.

        28
        I.
        29

        Prior to the enactment of the Uniform Commercial Code an offer not supported by consideration could be revoked at any time prior to acceptance. American Handkerchief Corp. v. Frannat Realty Co., 17 N.J. 12 (1954). The drafters of the Code recognized that the common law rule was contrary to modern business practice and possessed the capability to produce unjust results. See Corbin, "The Uniform Commercial Code — Sales, Should it be Enacted," 59 Yale L.J. 821, 827 (1950). The response was section 2-205 (N.J.S. 12A:2-205) which reverses the common law rule and states:

        30

        "An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if no time it stated for a reasonable time. * * *" (Emphasis added)

        31

        Coronis' letter contains no terms giving assurance it will be held open. We recognize that just as an offeree runs a risk in acting on an offer before accepting it, the offeror runs a risk [74] if his offer in considered irrevocable. Cf., James Baird Co. v. Gimbel Bros. Inc., 64 F.2d 344 (2 Cir. 1933). In their comments to section 2-205 of the Code the drafters anticipated these risks and stated:

        32

        "However, despite settled courses of dealing or usages of the trade whereby firm offers are made by oral communication and relied upon without more evidence, such offers remain revocable under this Article since authentication by a writing is the essence of this section." Uniform Commercial Code (N.J.S. 12A:2-205), comment, par. 2.

        33

        We think it clear that plaintiff's writing does not come within the provision of section 2-205 of a "signed writing which by its terms gives assurance that it will be held open." See Wilmington Trust Company v. Coulter, 200 A.2d 441 (Del. Sup. Ct. 1964).

        34

        Having so concluded, we need not consider the question of whether the Coronis letter was an offer or whether the letter dealt with "goods." We note in this connection that Coronis quoted the price for structural steel delivered and erected.

        35
        II.
        36

        Defendant also argues that even if plaintiff's writing of April 22 is not a firm offer within the meaning of section 2-205, justice requires that we apply the doctrine of promissory estoppel to preclude its revocation. Restatement, Contracts, § 90 provides:

        37

        "A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise."[1]

        38

        [75] Defendant argues that it relied on plaintiff's bid in making its own bid and that injustice would result if plaintiff could now revoke. Thus, defendant contends that plaintiff's bid is made irrevocable by application of the doctrine of promissory estoppel.

        39

        No New Jersey case has applied the rule in our State. But our highest court has twice implied that in appropriate circumstances it would. Friedman v. Tappan Development Corp., 22 N.J. 523 (1956); American Handkerchief Corp. v. Frannat Realty Co., supra. The general rule is that estoppel only applies to representations of facts past or present. Berman v. One Forty-Five Belmont Ave. Corp., 109 N.J. Eq. 256, 261 (Ch. 1931). The significant function of promissory estoppel is to apply an estoppel to representations or promises as to future events. 31 C.J.S. Estoppel § 80, pp. 466, 467 (1964). Writing for the court in Friedman, Justice Heher recognized that the doctrine was not truly an estoppel in the historical sense. He described the doctrine by stating:

        40

        "The term `promissory estoppel' is of comparatively recent origin in our jurisprudence, not altogether clear in its quality and import. It is not a true estoppel, but a departure from the classic doctrine of consideration that the promise and the consideration must purport to be the motive each for the other, in whole or at least in part, and it is not enough that the promise induces the detriment or that the detriment induces the promise if the other half is wanting, Wisconsin & Michigan R. Co. v. Powers, 191 U.S. 379, 386, 24 S.Ct. 107, 48 L.Ed. 229 (1903), Holmes, C.J.; Coast National Bank v. Bloom, supra [113 N.J.L. 597, 602 (E. & A. 1934)], a professed adaptation of the principle of estoppel to the formation of contracts where, relying on a gratuitous promise, the promisee has suffered detriment. Martin v. Meles, 179 Mass. 114, 60 N.E. 397 (Sup. Jud. Ct. 1901), Holmes, C.J. There is in such circumstances no representation of an existing fact, but merely that the promisor at the time of making the promise intends to fulfill it. The reliance is on a promise, and not on a misstatement of fact, and so the estoppel is termed `promissory' to mark the distinction. Williston on Contracts (rev. ed.), section 139." (22 N.J., at pp. 535, 536)

        41

        The evolving nature of the doctrine under examination is illustrated by the variation in the expressions of the authorities in its characterization. Thus it has been called a "species [76] of consideration," Porter v. Commissioner of Internal Revenue, 60 F.2d 673, 675 (2 Cir. 1932), affirmed 288 U.S. 436, 53 S.Ct. 451, 77 L.Ed. 880 (1933); and the "equivalent of" or a "substitute for" consideration. Allegheny College v. National Chautauqua County Bank of Jamestown, 246 N.Y. 369, 159 N.E. 173, 175, 57 A.L.R. 980 (Ct. App. 1927). The doctrine has found basic acceptance throughout the country. However, the courts have not agreed on where the doctrine is to be applied. They frequently state that in this country promissory estoppel "has been generally confined to charitable subscriptions, where difficulty has been encountered in sustaining the promise under the conventional theories of consideration, and to certain promises between individuals for the payment of money, enforced as informal contracts." Friedman v. Tappan Development Corp., supra, at p. 536; 1 Williston, Contracts (3d ed. 1957), § 140, pp. 611, 612. While the doctrine is now recognized "almost universally" in the charitable subscription cases, 1A Corbin, op. cit., § 198, p. 204; 1 Williston, op. cit., p. 609, § 140, it also enjoys a much wider application. Annotation 48 A.L.R.2d 1069, 1079-1087 (1950); Annotation 115 A.L.R. 152, 156 (1938); 1A Corbin, op. cit., §§ 193-209. For example, promissory estoppel has been applied to preclude reliance on the statute of limitations, Waugh v. Lennard, 69 Ariz. 214, 211 P.2d 806 (Sup. Ct. 1949); to avoid the statute of frauds, Alaska Airlines v. Stephenson, 217 F.2d 295, 15 Alaska 272 (9 Cir. 1954); to prevent foreclosure of a mortgage, Bank of Fairbanks v. Kaye, 227 F.2d 566, 16 Alaska 23 (9 Cir. 1955); to enforce a pension plan, West v. Hunt Foods, 101 Cal. App.2d 597, 225 P.2d 978 (D. Ct. App. 1951); to require the granting of a franchise, Chrysler Corporation v. Quimby, 1 Storey 264, 51 Del. 264, 144 A.2d 123, 885 (Sup. Ct. 1958); to protect creditors by requiring directors of a corporation to convey land to it, Berman v. Griggs, 145 Me. 258, 75 A.2d 365 (Sup. Jud. Ct. 1950); to enforce a release given without consideration, Fried v. Fisher, 328 Pa. 497, 196 A. 39, 115 A.L.R. 147 (Sup. Ct. 1938); and to enforce an easement [77] granted without consideration or a writing, Miller v. Lawlor, 245 Iowa 1144, 66 N.W.2d 267, 48 A.L.R.2d 1058 (Sup. Ct. 1954).

        42

        We see no reason why, given an appropriate factual situation, the doctrine would not apply in this State. Our view is reinforced by the ever expanding scope of liability designed to compensate those injured by wrongful conduct. See, e.g., Ekalo v. Constructive Service Corporation of America, 46 N.J. 82 (1965); Falzone v. Busch, 45 N.J. 559 (1965); Schipper v. Levitt & Sons, Inc., 44 N.J. 70 (1965). As Justice Jacobs said in Schipper:

        43

        "The law should be based on current concepts of what is right and just and the judiciary should be alert to the never-ending need for keeping its common law principles abreast of the times. Ancient distinctions which make no sense in today's society and tend to discredit the law should be readily rejected. * * *" (at p. 90)

        44

        We see no difference between substantial reliance on a representation or promise as to current or past facts and as to future facts. It is only right and just that a promise a promisor knows will induce action of a substantial character be enforced if it is in fact relied on.

        45

        The authorities are not uniform in applying the doctrine of promissory estoppel to situations comparable to that before us. We believe the better line of authority applies the doctrine. N. Litterio & Co. v. Glassman Constr. Co., 115 U.S. App. D.C. 335, 319 F.2d 736 (D.C. Cir. 1963); Air Conditioning Co. of Hawaii v. Richards Constr. Co., 200 F. Supp. 167 (D. Hawaii 1963), affirmed on other grounds 318 F.2d 410 (9 Cir. 1963); Reynolds v. Texarkana Construction Company, 237 Ark. 583, 374 S.W.2d 818 (Sup. Ct. 1964); Drennan v. Star Paving Co., 51 Cal.2d 409, 333 P.2d 757 (Sup. Ct. 1958); Norcross v. Winters, 209 Cal. App.2d 207, 25 Cal. Rptr. 821 (D. Ct. App. 1962); Northwestern Engineering Co. v. Ellerman, 69 S.D. 397, 10 N.W.2d 879 (Sup. Ct. 1943); Union Tank Car Company v. Wheat Brothers, 15 Utah 2d 101, 387 P.2d 1000 (Sup. Ct. 1964). Cf., R.P. [78] Farnsworth & Co. v. Albert, 79 F. Supp. 27 (E.D. La. 1948), reversed 176 F.2d 198 (5 Cir. 1949); Harris v. Lillis, 24 So.2d 689 (La. Ct. App. 1946). Contra, James Baird Co. v. Gimbel Bros., Inc., 64 F.2d 344 (2 Cir. 1933); Southeastern Sales & Service Co. v. T.T. Watson, Inc., 172 So.2d 239 (Fla. D. Ct. App. 1965).

        46

        The Drennan case involved an oral bid by a subcontractor for paving work at a school project on which plaintiff general contractor was about to bid. Defendant's paving bid was the lowest, and the general contractor computed his own bid accordingly. Plaintiff was the successful bidder but the following day was informed by defendant it would not do the work at its bid price. The California Supreme Court, per Justice Traynor, applied the doctrine of promissory estoppel to prevent defendant's revocation of its bid, stating:

        47

        "When plaintiff used defendant's offer in computing his own bid, he bound himself to perform in reliance on defendant's terms. Though defendant did not bargain for this use of its bid neither did defendant make it idly, indifferent to whether it would be used or not. On the contrary it is reasonable to suppose that defendant submitted its bid to obtain the subcontract. It was bound to realize the substantial possibility that its bid would be the lowest, and that it would be included by plaintiff in his bid. It was to its own interest that the contractor be awarded the general contract; the lower the subcontract bid, the lower the general contractor's bid was likely to be and the greater its chance of acceptance and hence the greater defendant's chance of getting the paving subcontract. Defendant had reason not only to expect plaintiff to rely on his bid but to want him to. Clearly defendant had a stake in plaintiff's reliance on its bid. Given this interest and the fact that plaintiff is bound by his own bid, it is only fair that plaintiff should have at least an opportunity to accept defendant's bid after the general contract has been awarded to him." (333 P.2d, at p. 760)

        48

        The South Dakota Supreme Court was confronted with a virtually identical set of facts in the Northwestern Engineering case. In applying promissory estoppel it stated,

        49

        "Obviously it would seem unjust and unfair, after appellant was declared the successful bidder and imposed with all the obligations of such, to allow respondents to then retract their promise and permit the effect of such retraction to fall upon the appellant." (10 N.W.2d, at p. 883)

        50

        [79] Similarly, in the Reynolds case a subcontractor submitted a bid for the electrical work for a school project on which the general contractor was about to bid. The general contractor relied on the subcontractor's bid. In applying promissory estoppel to prevent revocation the court held that,

        51

        "Justice demands that the loss resulting from the subcontractor's carelessness should fall upon him who was guilty of the error rather than upon the principal contractor who relied in good faith upon the offer that he received." (374 S.W.2d, at p. 820)

        52

        We agree.

        53
        III.
        54

        To successfully establish a cause of action based on promissory estoppel Gordon must prove that (1) it received a clear and definite offer from Coronis; (2) Coronis could expect reliance of a substantial nature; (3) actual reasonable reliance on Gordon's part, and (4) detriment. Restatement, Contracts, § 90; N. Litterio & Co. v. Glassman Constr. Co., supra, 319 F.2d, at p. 739.

        55

        The Law Division did not think promissory estoppel would apply in the situation sub judice. Therefore we reverse. We also remand since it is necessary to determine if the elements of a promissory estoppel case are present. They are essentially factual and inappropriate to a summary judgment. R.R. 4:58-3; Robbins v. Jersey City, 23 N.J. 229 (1957). Gordon must show the existence of an offer. The April 22 letter is subsequent in time to Gordon's bid to the Port Authority. It cannot furnish the basis for this suit since it would have been impossible for Gordon to have relied on it when making its bid. However, it is alleged that the letter merely confirmed prior oral agreements. The true facts must await a full hearing.

        56

        Similarly, Gordon must show that Coronis could reasonably expect Gordon to rely on the bid. This will depend on Coronis' actual knowledge or the custom and usage in the trade. N. Litterio & Co. v. Glassman Constr. Co., supra; [80] Hedden v. Lupinsky, 405 Pa. 609, 176 A.2d 406 (Sup. Ct. 1962). Gordon must also show actual reliance.[2] Norcross v. Winters, supra. And we note that if Coronis' bid was so low as to put Gordon on notice that it was erroneous it cannot claim reliance. Drennan v. Star Paving Co., supra; MacIsaac & Menke Co. v. Freeman, 194 Cal. App.2d 327, 15 Cal. Rptr. 48 (D. Ct. App. 1961); cf., Feldman v. Urban Commercial, Inc., 70 N.J. Super. 463 (Ch. Div. 1961). Finally, of course, detriment must be shown.

        57

        Reversed and remanded.

        58

        [1] The Restatement does not use the term "promissory estoppel." It has been criticized as too broad. Professor Corbin approves of the Restatement's stating of the rule "in terms of action or forbearance in reliance on a promise." 1A Corbin, Contracts, § 204 (1963), cited with approval in Friedman v. Tappan Development Corp., 22 N.J. 523, 538 (1956). We use the term "promissory estoppel" for convenience.

        59

        [2] We do not consider whether the existence of section 2-205 of the Uniform Commercial Code precludes reliance on an offer not conforming to its provisions.

      • 4.4.11 Restatement of Contacts, Second, §87

  • 5 II .A. 5. Valid Means of Acceptance

    • 5.1 II. A. 5. a. General Concepts

      • 5.1.1 Livingstone v. Evans

        1
        Livingstone
        2
        v.
        3
        Evans et al
        4

        Alberta Supreme Court, Trial

        5

        Walsh, J.

        6

        October 30, 1925

        7

        Contract I D—Offer and acceptance—Intervening negotiations—Effect.

        8

        Where one man offers to sell land toanother and the latter does not accept but makes a counter-offer, which the former refuses, and the latter then accepts the original offer it is a question of fact whether the intervening counter-offer and refusal have put an end to the original offer, so that the acceptance does conclude a contract. So where the refusal of a counter-offer consisted of a “Cannot reduce price,” this constituted a reaffirmation of the original offer and a subsequent acceptance of the original offer was good.

        9

        [Re Cowan & Boyd (1921), 61 D.L.R. 497, 49 O.L.R. 335, applied].

        10

        ACTION for specific performance.

        11

        C.H. Grant, K.C., for plaintiff.

        12

        F.C. Casselman, for defendants.

        13
        Walsh, J.:
        14

        The defendant, Thomas J. Evans, through his agent, wrote to the plaintiff offering to sell him the land in question for $1,800 on terms. On the day that he received this offer the plaintiff wired this agent as follows: “Send lowest cash price. Will give $1,600 cash. Wire.” The agent replied to this by telegram as follows: “Cannot reduce price.” Immediately upon the receipt of this telegram the plaintiff wrote accepting the offer. It is admitted by the defendants that this offer and [770] the plaintiff’s acceptance of it constitute a contract for the sale of this land to the plaintiff by which he is bound unless the intervening telegrams above set out put an end to his offer so that the plaintiff could not thereafter bind him to it by his acceptance of it.

        15

        It is quite clear that when an offer has been rejected it is thereby ended and it cannot be afterwards accepted without the consent of him who made it. The simple question and the only one argued before me is whether the plaintiff’s counter offer was in law a rejection of the defendant’s offer which freed him from it.

        16

        Hyde v. Wrench (1840)  3 Beav. 334, 49 E.R. 132 a judgment of Lord Langdale, M.R. pronounced in 1840 is the authority for the contention that it was. The defendant offered to sell for £1,000. The plaintiff met that with an offer to pay £950 and (to quote from the judgment) “he thereby rejected the offer previously made by the Defendant. I think that it was not afterwards competent for him to revive the proposal of the Defendant, by tendering an acceptance of it.”

        17

        Stevenson v. McLean, (1880) 5 Q.B.D. 346, a later case relied upon by Mr. Grant is easily distinguishable from Hyde v. Wrench as it is in fact distinguished by Lush, J. who decided it. He held that the letter there relied upon as constituting a rejection of the offer was not a new proposal but a mere enquiry which should have been answered and not treated as a rejection but the learned Judge said that if it had contained an offer it would have likened the case to Hyde v. Wrench.

        18

        Hyde v. Wrench has stood without question for 85 years. It is adopted by the text writers as a correct exposition of the law and is generally accepted and recognized as such. I think it not too much to say that it has firmly established it as a part of the law of contracts that the making of a counter-offer is a rejection of the original offer.

        19

        The plaintiff’s telegram was undoubtedly a counter-offer. True, it contained an inquiry as well but that clearly was one which called for an answer only if the counter-offer was rejected. In substance it said, “I will give you $1,600 cash. If you won’t take that wire your lowest cash price.” In my opinion it put an end to the defendant’s liability under his offer unless it was revived by his telegram in reply to it.

        20

        The real difficulty in the case, to my mind, arises out of the defendant’s telegram “cannot reduce price.” If this was simply a rejection of the plaintiff’s counter-offer it amounts to nothing. If, however, it was a renewal of the original offer it [771] gave the plaintiff the right to bind the defendant to it by his subsequent acceptance of it.

        21

        With some doubt I think that it was a renewal of the original offer or at any rate an intimation to the plaintiff that he was still willing to treat on the basis of it. It was, of course, a reply to the counter-offer and to the enquiry in the plaintiff’s telegram. But it was more than that. The price referred to in it was unquestionably that mentioned in his letter. His statement that he could not reduce that price  strikes me as having but one meaning, namely, that he was still standing by it and, therefore, still open to accept it.

        22

        There is support for this view in a judgment of the Ontario Appellate Division which I have found, In re Cowan and Boyd (1921), 61 D.L.R. 497,  49 O.L.R. 335. That was a landlord and tenant matter. The landlord wrote the tenant offering a renewal lease at an increased rent. The tenant replied that he was paying as high a rent as he should and if the landlord would not renew at the present rental he would like an early reply as he purposed buying a house. To this the landlord replied simply saying that he would call on the tenant between two certain named dates. Before he called and without any further communication between them the tenant wrote accepting the landlord’s original offer. The County Court Judge before whom the matter first came held that the tenant’s reply to the landlord’s offer was not a counter-offer but a mere request to modify its terms. The Appellate Division did not decide that question though from the ground on which it put its judgment it must have disagreed with the Judge below. It sustained his judgment, however, on the ground that the landlord’s letter promising to call on the tenant left open the original offer for further discussion so that the tenant had the right thereafter to accept it as he did.

        23

        The landlord’s letter in that case was, to my mind, much more unconvincing evidence of his willingness to stand by his original offer in the face of the tenant’s rejection of it than is the telegram of the defendant in this case. That is the judgment of a very strong Court, the reasons for which were written by the late Chief Justice Meredith. If it is sound, and it is not for me to question it, a fortiori must I be right in the conclusion to which I have come.

        24

        I am, therefore, of the opinion that there was a binding contract for the sale of this land to the plaintiff of which he is entitled to specific performance. It was admitted by his counsel that if I reached this conclusion his subsequent agreement [772] to sell the land to the defendant Williams would be of no avail as against the plaintiff’s contract.

        25

        There will, therefore, be judgment for specific performance with a declaration that the plaintiff’s rights under his contract have priority over those of the defendant Williams under his. The plaintiff will have his costs as agreed by the case. It is silent as to the scale but unless otherwise agreed they should be under C.R., Sch. C, c.3.

        26

        Judgement for the plaintiff.

    • 5.2 II. A. 5. b. Silence as Acceptance

      • 5.2.1 Day v. Caton

        1

         

        2
        JOHN G. DAY
        3
        v.
        4
        ASA H. CATON.
        5

         

        6

        Suffolk. Nov. 19, 1875.— Feb. 29, 1876.

        7

        COLT & LORD, JJ., absent

        8

        In an action to recover the value of one half of a party wall erected by the plaintiff partly on his estate and partly on that of the defendant, the jury may, in the absence of an express agreement as to payment on the defendant’s part, infer promise to pay, if the plaintiff undertook and completed the wall with the ex-

        9

        [514]

        10

        pectation that the defendant would pay him for it, and the defendant had reason to know that the plaintiff was so acting with that expectation, and allowed him so to act without objection.

        11

        CONTRACT to recover the value of one half of a brick party wall built by the plaintiff upon and between the adjoining estates, 27 and 29 Greenwich Park, Boston.

        12

        At the trial in the Superior Court, before Allen, J., it appeared that, in 1871, the plaintiff, having an equitable interest in lot 29, built the wall in question, placing one half of it on the vacant lot 27, in which the defendant then had an equitable interest. The plaintiff testified that there was an express agreement on the defendant’s part to pay him one half the value of the wall when the defendant should use it in building upon lot 27. The defendant denied this, and testified that he never had any conversation with the plaintiff about the wall; and there was no other direct testimony on this point.

        13

        The defendant requested the judge to rule that, “ 1. The plaintiff can recover in this case only upon an express agreement.”

        14

        “ 2 . If the jury find there was no express agreement about the wall, but the defendant knew that the plaintiff was building upon land in which the defendant had an equitable interest, the defendant’s rights would” not be affected by such knowledge, and his silence and subsequent use of the wall would raise no implied promise to pay anything for the wall.”

        15

        The judge refused so to rule, but instructed the jury as follows : “ A promise would not be implied from the fact that the plaintiff, with the defendant’s knowledge, built the wall and the defendant used it, but it might be implied from the conduct of the parties. If the jury find that the plaintiff undertook and completed the building of the wall with the expectation that the defendant would pay him for it, and the defendant had reason to know that the plaintiff was so acting with that expectation and allowed him so to act without objection, then the jury might infer a promise on the part of the defendant to pay the plaintiff.”

        16

        The jury found for the plaintiff; and the defendant alleged exceptions.

        17

        H. D. Hyde & M. F. Dickinson, Jr., for the defendant.

        18

        F. W. Kiitredge, for the plaintiff.

        19

        [515]

        20

        DEVENS, J. The ruling that a promise to pay for the wall would not be implied from the fact that the plaintiff, with the defendant’s knowledge, built the wall, and that the defendant used it, was substantially in accordance with the request of the defendant, and is conceded to have been correct. Chit. Con. (11th Am. ed.) 86. Wells v. Banister, 4 Mass. 514. Knowlton v. Plantation No. 4, 14 Maine, 20. Davis v. School District in Bradford, 24 Maine, 349.

        21

        The defendant, however, contends that the presiding judge incorrectly ruled that such promise might be inferred from the fact that the plaintiff undertook and completed the building of the wall with the expectation that the defendant would pay him for it, the defendant having reason to know that the plaintiff was acting with that expectation, and allowed him thus to act without objection.

        22

        The fact that the plaintiff expected to be paid for the work would certainly not be sufficient of itself to establish the existence of a contract, when the question between the parties was whether one was made. Taft v. Dickinson, 6 Allen, 553. It must be shown that, in some manner, the party sought to be charged assented to it. If a party, however, voluntarily accepts and avails himself of valuable services rendered for his benefit, when he has the option whether to accept or reject them, even if there is no distinct proof that they were rendered by his authority or request, a promise to pay for them may be inferred. His knowledge that they were valuable, and his exercise of the option to avail himself of them, justify this inference. Abbot v. Hermon, 7 Greenl. 118. Hayden v. Madison, 7 Greenl. 76. And when one stands by in silence and sees valuable services rendered upon his real estate by the erection of a structure, (of which he must necessarily avail himself afterwards in his proper use thereof,) such silence, accompanied with the knowledge on his part that the party rendering the services expects payment therefor, may fairly be treated as evidence of an acceptance of it, and as tending to show an agreement to pay for it.

        23

        The maxim, Qui tacet consentire videtur, is to be construed indeed as applying only to those cases where the circumstances are such that a party is fairly called upon either to deny or admit his liability. But if silence may be interpreted as assent where a

        24

        [516]

        25

        proposition is made to one which he is bound to deny or admit, so also it may be if he is silent in the face of facts which fairly call upon him to speak. Lamb v. Bunce, 4 M. & S. 275. Conner v. Hackley, 2 Met. CIS. Preston v. American Linen Co. 119 Mass. 400.

        26

        If a person saw day after day a laborer at work in his field doing services, which must of necessity ensure to his benefit, knowing that the laborer expected pay for his work, when it was perfectly easy to notify him if his services were not wanted, even if a request were not expressly proved, such a request, either previous to or contemporaneous with the performance of the services, might fairly be inferred. But if the fact was merely brought to his attention upon a single occasion and casually, if he had little opportunity to notify the other that he did not desire the work and should not pay for it, or could only do so at the expense of much time and trouble, the same inference might not be made. The circumstances of each case would necessarily determine whether silence with a knowledge that another was doing valuable work for his benefit, and with the expectation of payment, indicated that consent which would give rise to the inference of a contract. The question would be one for the jury, and to them it was properly submitted in the case before us by the presiding judge.

        27

        Exceptions overruled.

        28

         

        29

         

      • 5.2.2 Restatement of Contracts, Second, §69(1)

      • 5.2.3 HOBBS v. MASSASOIT WHIP CO.

        1
        CHARLES A. HOBBS
        2
        VS.
        3
        MASSASOIT WHIP COMPANY.
        4

        Essex. January 12, 1893. —March 1, 1893.


        5

        Present: FIELD, C. J., ALLEN, HOLMES, KNOWLTON, & BARKER, JJ.

        6

        Contract Retention of Merchandise Acceptance.

        7

        A. brought an action against B. for the price of eelskins. A. had sent eelskins in the same way four or five times before, which skins had been accepted and paid for by B. On B.’s testimony, it was to be assumed that if he had admitted the eelskins to be over a certain length, and fit for his business, as A. testified, and the jury found that they were, he would have accepted them; that this was understood by A.; and that there was a standing offer to A. for such skins. Held, that A. was warranted in sending B. skins conforming to the requirements, and even if the offer was not such that the contract was made as soon as skins corresponding to its terms were sent, sending them did not impose on B. a duty to act about them; and silence on his part, coupled with a retention of the skins for a reasonable time, might be found by the jury to warrant A. in assuming that they were accepted, and thus to amount to an acceptance.

        8

        CONTRACT, upon an account annexed for one hundred and eight 50100  dollars, for 2,850 eelskins sold by the plaintiff to the defendant. At the trial in the Superior Court, before Hammond, J., it appeared in evidence that the plaintiff lived in Saugus, and the defendant had its usual place of business in Westfield, and was engaged in the manufacture of whips.

        9

        The plaintiff testified that he delivered the skins in question to one Harding of Lynn, on February 18, 1890, who upon the same or the following day forwarded them to the defendant; that the skins were in good condition when received by Harding, 2,050 of them being over twenty-seven inches in length each, and the balance over twenty-two inches in length each; that he had forwarded eelskins to the defendant through said Harding several different times in 1888 and 1889, and received payment therefor from the defendant; that he knew the defendant used such skins in its business in the manufacture of whips; that the skins sent on February 18, 1890, were for such use; that he understood that all skins sent by him were to be in good condition and over twenty-two inches in length, and that the defendant had never ordered of him skins less than twenty-two inches in length; and that Harding took charge of the skins for him and

        10

        [195]

        11

        that he received orders through Harding, but that Harding was not his agent.

        12

        Harding, who was called as a witness, testified that he had some correspondence for the plaintiff with the defendant in reference to skins; that he acted for the plaintiff in forwarding skins to the defendant, and in receiving pay therefor, and acted for the plaintiff in giving him any information, order, or notice which he received from the defendant in reference to skins sent or to be sent.

        13

        The defendant contended that Harding acted as the plaintiff’s agent. The plaintiff contended that Harding acted as the agent of the defendant, and not as his agent. On this point the evidence was conflicting, and the question was submitted to the jury, upon instructions not excepted to.

        14

        Four letters were offered in evidence, three of which, dated in 1889, showed transactions between the plaintiff and the defendant, and the fourth of which, dated Lynn, February 18, 1890, signed by Harding and addressed to the defendant, was as follows : “ We send you to-day, for Mr. Hobbs, 2,050 eelskins at .05 and 300 at .02.”

        15

        One Pirnie, president of the defendant corporation, called by the defendant, testified that before February 18,1890, the plaintiff had sent eelskins four or five times by Harding to the defendant, which were received and paid for by the defendant; that the defendant agreed to pay five cents each for eelskins over twenty-seven inches in length, and two cents each for eelskins over twenty-two inches in length and less than twenty-seven inches, suitable for use in the defendant’s business; that Harding was not acting for the defendant, but for the plaintiff; that the defendant never ordered the skins in question, and did not purchase them in any manner, and that no officer or employee of the corporation except himself had authority to order or purchase skins, and that he never ordered or purchased those in question; that skins came from Hobbs through Harding on February 19 or 20, 1890, and were at once examined by him, and found to be less than twenty-two inches in length, and found to be unfit for use, and that he notified Harding at once, in writing, that the skins were unfit for use, and that they were held subject to the plaintiff’s order; that the skins remained some months at the defendant’s place of

        16

        [196]

        17

        business in Westfield, and were then destroyed; and that the defendant received no other skins in the month of February from the plaintiff or from any other person.

        18

        One Case, the defendant’s shipping clerk, and one Gowdy, the defendant’s treasurer, testified that the skins sent on February 18, 1890, and received February 19 or 20, 1890, were examined by them, and were very short, in very bad shape, not fit for use, and worthless.

        19

        The judge instructed the jury that the plaintiff could not recover for eelskins less than twenty-two inches in length, nor for any of the eelskins if they were in the condition described by the witnesses for the defendant.

        20

        The plaintiff denied that he received any notice from the defendant that the skins were not suitable for use, or that they were held subject to his order.

        21

        The judge, among other instructions, also gave the following : “ Whether there was any prior contract or not, if skins are sent to them (the defendants) and they see fit, whether they have agreed to take them or not, to lie back and say nothing, having reason to suppose that the man who has sent them believes that they are taking them, since they say nothing about it, then, if they fail to notify, you would be warranted in finding for the plaintiff, on that state of things.”

        22

        The jury returned a verdict for the plaintiff; and the defendant alleged exceptions.

        23

        F. L. Evans, for the defendant.

        24

        J. E. Hanly & J. F. Libby, for the plaintiff.


        25
        HOLMES, J.
        26

        This is an action for the price of eel skins sent by the plaintiff to the defendant, and kept by the defendant some months, until they were destroyed. It must be taken that the plaintiff received no notice that the defendants declined to accept the skins. The case comes before us on exceptions to an instruction to the jury that, whether there was any prior contract or not, if skins are sent to the defendant, and it sees fit, whether it has agreed to take them or not, to lie back, and to say nothing, having reason to suppose that the man who has sent them believes that it is taking them, since it says nothing about it, then, if it fails to notify, the jury would be warranted in finding for the plaintiff.

        27

        [197]

        28

        Standing alone, and unexplained, this proposition might seem to imply that one stranger may impose a duty upon another, and make him a purchaser, in spite of himself, by sending goods to him, unless he will take the trouble, and be at the expense, of notifying the sender that he will not buy. The case was argued for the defendant on that interpretation. But, in view of the evidence, we do not understand that to have been the meaning of the judge, and we do not think that the jury can have understood that to have been his meaning. The plaintiff was not a stranger to the defendant, even if there was no contract between them. He had sent eelskins in the same way four or five times before, and they had been accepted and paid for. On the defendant’s testimony, it is fair to assume that, if it had admitted the eelskins to be over twenty-two inches in length, and fit for its business, as the plaintiff testified, and the jury found that they were, it would have accepted them; that this was understood by the plaintiff; and, indeed, that there was a standing offer to him for such skins.

        29

        In such a condition of things, the plaintiff was warranted in sending the defendant skins conforming to the requirements, and even if the offer was not such that the contract was made as soon as skins corresponding to its terms were sent, sending them did impose on the defendant a duty to act about them; and silence on its part, coupled with a retention of the skins for an unreasonable time, might be found by the jury to warrant the plaintiff in assuming that they were accepted, and thus to amount to an acceptance. See Bushel v. Wheeler, 15 Q. B. 442; Benjamin on Sales, §§ 162-164; Taylor v. Dexter Engine Co. 146 Mass. 613, 615. The proposition stands on the general principle that conduct which imports acceptance or assent is acceptance or assent in the view of the law, whatever may have been the actual state of mind of the party, — a principle sometimes lost sight of in the cases. O’Donnell v. Clinton, 145 Mass. 461, 463. McCarthy v. Boston & Lowell Railroad, 148 Mass. 550, 552.

        30

        Exceptions overruled.

      • 5.2.4 Austin v. Burge

        1

        137 S.W. 618
        156 Mo. App. 286

        AUSTIN
        v.
        BURGE.

        Kansas City Court of Appeals. Missouri.
        May 15, 1911.

        4

        CONTRACTS (§ 27)—SUBSCRIPTION FOR NEWSPAPERS—LIABILITY.

        5

        Defendant's father-in-law subscribed and paid for a newspaper for a specified time, to be sent to defendant, who received it during that time. The publisher continued to send the paper to the defendant, who received it, and on two occasions paid a bill for subscription price, and directed the paper to be stopped. Notwithstanding the order to stop, the publisher continued to send the paper, and the defendant received it. Held, that he was liable for the subscription price; a contract to pay the same arising by necessary implication.

        6

        Appeal from Circuit Court, Bates County; C. A. Denton, Judge.

        7

        Action by O. D. Austin against Charles Burge. From a judgment for defendant, plaintiff appeals. Reversed and remanded.

        8

        W. O. Jackson and Silvers & Silvers, for appellant. Thos. J. Smith, for respondent.

        9

        ELLISON, J.

        10

        This action was brought on an account for the subscription price of a newspaper. The judgment in the trial court was for the defendant. It appears that plaintiff was publisher of a newspaper in Butler, Mo., and that defendant's father-in-law subscribed for the paper, to be sent to defendant for two years, and that the father-in-law paid for it for that time. It was then continued to be sent to defendant, through the mail, for several years more. On two occasions defendant paid a bill presented for the subscription price, but each time directed it to be stopped. Plaintiff denies the order to stop, but for the purpose of the case we shall assume that defendant is correct. He testified that, notwithstanding the order to stop it, it was continued to be sent to him, and he continued to receive and read it, until finally he removed to another state.

        11

        We have not been cited to a case in this state involving the liability of a person who, though not having subscribed for a newspaper, continues to accept it by receiving it through the mail. There are, however, certain well-understood principles in the law of contracts that ought to solve the question. It is certain that one cannot be forced into contractual relations with another and that therefore he cannot, against his will, be made the debtor of a newspaper publisher. But it is equally certain that he may cause contractual relations to arise by necessary implication from his conduct. The law in respect to contractual indebtedness for a newspaper is not different from that relating to other things which have not been made the subject of an express agreement. Thus one may not have ordered supplies for his table, or other household necessities, yet if he continue to receive and use them, under circumstances where he had no right to suppose they were a gratuity, he will be held to have agreed, by implication, to pay their value. In this case defendant admits that, notwithstanding he ordered the paper discontinued at the time when he paid a bill for it, yet plaintiff continued to send it, and he continued to take it from the post office to his home. This was an acceptance and use of the property, and, there being no pretense that a gratuity was intended, an obligation arose to pay for it.

        12

        A case quite applicable to the facts here involved arose in Fogg v. Atheneum, 44 N. H. 115, 82 Am. Dec. 191. There the Independent Democrat newspaper was forwarded weekly by mail to the defendant from May 1, 1847, to May 1, 1849, when a bill was presented, which defendant objected to paying on the ground of not having subscribed. Payment was, however, finally made, and directions given to discontinue. The paper changed ownership, and the order to stop it was not known to the new proprietors for a year; but, after being notified of the order, [137 S.W. 619] they nevertheless continued to send it to defendant until 1860, a period of 11 years, and defendant continued to receive it through the post office. Payment was several times demanded during this time, but refused on the ground that there was no subscription. The court said that:

        13

        "During this period of time the defendants were occasionally requested, by the plaintiff's agent, to pay their bill. The answer was, by the defendants, `We are not subscribers to your newspaper.' But the evidence is the defendants used or kept the plaintiff's * * * newspapers, and never offered to return a number, as they reasonably might have done, if they would have avoided the liability to pay for them. Nor did they ever decline to take the newspapers from the post office."

        14

        The defendant was held to have accepted the papers, and to have become liable for the subscription price by implication of law.

        15

        In Ward v. Powell, 3 Har. (Del.) 379, it was decided that an implied agreement to pay for a newspaper or periodical arose by the continued taking and accepting the paper from the post office, and that "if a party, without subscribing to a paper, declines taking it out of the post office, he cannot become liable to pay for it; and a subscriber may cease to be such at the end of the year, by refusing to take the papers from the post office, and returning them to the editor as notice of such determination." In Goodland v. Le Clair, 78 Wis. 176, 47 N. W. 268, it was held that if a person receives a paper from the post office for a year, without refusing or returning it, he was liable for the year's subscription. And a like obligation was held to arise in the case of Weatherby v. Bonham, 5 C. & P. 228.

        16

        The preparation and publication of a newspaper involves much mental and physical labor, as well as an outlay of money. One who accepts the paper, by continuously taking it from the post office, receives a benefit and pleasure arising from such labor and expenditure as fully as if he had appropriated any other product of another's labor, and by such act he must be held liable for the subscription price. On the defendant's own evidence, plaintiff should have recovered.

        17

        The judgment will therefore be reversed, and the cause remanded. All concur.

      • 5.2.5 Morone v. Morone

        1
        50 N.Y.2d 481 (1980)
        2
        Frances Morone, Also Known as Frances Cross, Appellant,
        v.
        Frank Morone, Respondent.
        3

        Court of Appeals of the State of New York.

        4
        Argued March 28, 1980.
        5
        Decided June 6, 1980.
        6

         

        7

        Joel R. Brandes, Robert W. Kahn, P. C., Andrew F. Capoccia, P. C., and Peter K. Levine for appellant.

        8

        James H. Doran for respondent.

        9

        Chief Judge COOKE and Judges GABRIELLI, WACHTLER and FUCHSBERG concur with Judge MEYER; Judge JONES dissents in part and votes to affirm in a separate opinion in which Judge JASEN concurs.

        10
        [484] MEYER, J.
        11

        Presented by this appeal are the questions whether a contract as to earnings and assets may be implied in fact from the relationship of an unmarried couple living together and whether an express contract of such a couple on those subjects is enforceable. Finding an implied contract such as was recognized in Marvin v Marvin (18 Cal 3d 660) to be conceptually so amorphous as practically to defy equitable enforcement, and inconsistent with the legislative policy enunciated in 1933 when common-law marriages were abolished in New York, we decline to follow the Marvin lead. Consistent with our decision in Matter of Gorden (8 N.Y.2d 71), however, we conclude that the express contract of such a couple is enforceable. Accordingly, the order of the Appellate Division dismissing the complaint should be modified to dismiss only the first (implied contract) cause of action and as so modified should be affirmed, with costs to plaintiff.

        12

        On a motion to dismiss a complaint we accept the facts alleged as true (219 Broadway Corp. v Alexander's Inc., 46 N.Y.2d 506, 509) and determine simply whether the facts alleged fit within any cognizable legal theory (see Rovello v Orofino Realty, 40 N.Y.2d 633).

        13

        Plaintiff alleges that she and defendant have lived together and held themselves out to the community as husband and wife since 1952 and that defendant acknowledges that the two children born of the relationship are his. Her first cause of action alleges the existence of this long-continued relationship and that since its inception she has performed domestic duties and business services at the request of defendant with the expectation that she would receive full compensation for them, and that defendant has always accepted her services [485] knowing that she expected compensation for them. Plaintiff suggests that defendant has recognized that their economic fortunes are united, for she alleges that they have filed joint tax returns "over the past several years." She seeks judgment in the amount of $250,000.

        14

        The second cause of action begins with the repetition and reallegation of all of the allegations of the first cause of action. Plaintiff then alleges that in 1952 she and the defendant entered into a partnership agreement by which they orally agreed that she would furnish domestic services[1] and defendant was to have full charge of business transactions, that defendant "would support, maintain and provide for plaintiff in accordance with his earning capacity and that defendant further agreed on his part to take care of the plaintiff and do right by her," and that the net profits from the partnership were to be used for and applied to the equal benefit of plaintiff and defendant. Plaintiff avers that defendant commanded that she not obtain employment or he would leave her, and that since 1952 the defendant has collected large sums of money "from various companies and business dealings." Finally, plaintiff states that since December of 1975 defendant has dishonored the agreement, has failed to provide support or maintenance, and has refused her demands for an accounting. She asks that defendant be directed to account for moneys received by him during the partnership.

        15

        Special Term dismissed the complaint, concluding that no matter how liberally it was construed it sought recovery for "housewifely" duties within a marital-type arrangement for which no recovery could be had. The Appellate Division affirmed because the first cause of action did not assert an express agreement and the second cause of action, though asserting an express partnership agreement, was based upon the same arrangement which was alleged in the first cause of action and was therefore "contextually inadequate". The dissenting Justice was of the view that while the first cause of action was legally insufficient as premised upon an implied contract, the second, expressing as it does an explicit agreement, should have been sustained.

        16

        Development of legal rules governing unmarried couples has quickened in recent years with the relaxation of social customs [486] (Douthwaite, Unmarried Couples and the Law, ch 4, passim). It has not, however, been a development free of difficult problems: Is the length of time the relationship has continued a factor? Do the principles apply only to accumulated personal property or do they encompass earnings as well? If earnings are to be included how are the services of the homemaker to be valued? Should services which are generally regarded as amenities of cohabitation be included? Is there unfairness in compensating an unmarried renderer of domestic services but failing to accord the same rights to the legally married homemaker? Are the varying types of remedies allowed mutually exclusive or cumulative? (See, generally, Douthwaite, supra; and CLARK, J., concurring and dissenting in Marvin v Marvin, supra.)

        17

        New York courts have long accepted the concept that an express agreement between unmarried persons living together[2] is as enforceable as though they were not living together (Rhodes v Stone, 63 Hun 624, opn in 17 NYS 561; Vincent v Moriarty, 31 App Div 484), provided only that illicit sexual relations were not "part of the consideration of the contract" (Rhodes v Stone, supra, at 17 NYS, p 562, quoted in Matter of Gorden, 8 N.Y.2d 71, 75, supra). The theory of these cases is that while cohabitation without marriage does not give rise to the property and financial rights which normally attend the marital relation, neither does cohabitation disable the parties from making an agreement within the normal rules of contract law (Matter of Gorden, supra, at p 75; see Ann., 94 ALR3d 552, 559).

        18

        Even an express contract presents problems of proof, however, as Matter of Gorden illustrates. There Ann Clark and Oliver Gorden moved from Brooklyn to West Fulton, in Schoharie County, where Gorden acquired a tavern in his own name. For seven years Clark and Gorden operated the tavern without other employees, she performing both the work required by her duties in the tavern and by their home life. They lived together and were known in the community as husband and wife until he died. Clark then filed a claim against the estate predicated upon an oral contract pursuant [487] to which Gorden agreed to compensate her for the value of her services, to marry her, to grant her the same rights as she would have as his wife, and to make a will to compensate her. The Surrogate denied the claim because of the "meretricious" relationship. The Appellate Division, finding no proof that there was any relationship between the duties performed in the operation of the inn and the fact that the parties lived together, reversed and awarded claimant $9,000. We reversed, because the evidence was not of the clear and convincing character required to establish a claim against a decedent's estate, but expressly adopted the rationale of Rhodes v Stone that the unmarried state of the couple did not bar an express contract between them. Ironically, part of the basis for holding the evidence less than clear and convincing was that "If she had been working as an employee instead of a de facto wife, she would not have labored from 8 o'clock in the morning until after midnight without demanding pay or without being paid" (8 NY2d, at p 75).

        19

        While accepting Gorden's concept that an unmarried couple living together are free to contract with each other in relation to personal services, including domestic or "housewifely" services, we reject the suggestion, implicit in the sentence quoted above, that there is any presumption that services of any type are more likely the result of a personal, rather than a contractual, bond, or that it is reasonable to infer simply because the compensation contracted for may not be payable in periodic installments that there was no such contract.

        20

        Changing social custom has increased greatly the number of persons living together without solemnized ceremony and consequently without benefit of the rules of law that govern property and financial matters between married couples. The difficulties attendant upon establishing property and financial rights between unmarried couples under available theories of law other than contract (see Douthwaite, loc. cit.) warrant application of Gorden's recognition of express contract even though the services rendered be limited to those generally characterized as "housewifely" (Matter of Adams, 1 AD2d 259, affd 2 N.Y.2d 796; cf. Dombrowski v Somers, 41 N.Y.2d 858). There is, moreover, no statutory requirement that such a contract as plaintiff here alleges be in writing (cf. General [488] Obligations Law, § 5-701, subd a, pars 1, 3). The second cause of action is, therefore, sustained.[3]

        21

        The first cause of action was, however, properly dismissed. Historically, we have required the explicit and structured understanding of an express contract and have declined to recognize a contract which is implied from the rendition and acceptance of services (Rhodes v Stone, supra; Vincent v Moriarty, 31 App Div 484, supra; see, also, Matter of Adams, supra). The major difficulty with implying a contract from the rendition of services for one another by persons living together is that it is not reasonable to infer an agreement to pay for the services rendered when the relationship of the parties makes it natural that the services were rendered gratuitously (Matter of Adams, supra, at p 262; Robinson v Munn, 238 N.Y. 40, 43). As a matter of human experience personal services will frequently be rendered by two people living together because they value each other's company or because they find it a convenient or rewarding thing to do (see Marvin v Marvin, 18 Cal 3d, 660, 675-676, n 11, supra). For courts to attempt through hindsight to sort out the intentions of the parties and affix jural significance to conduct carried out within an essentially private and generally noncontractual relationship runs too great a risk of error. Absent an express agreement, there is no frame of reference against which to compare the testimony presented and the character of the evidence that can be presented becomes more evanescent. There is, therefore, substantially greater risk of emotion-laden afterthought, not to mention fraud, in attempting to ascertain by implication what services, if any, were rendered gratuitously and what compensation, if any, the parties intended to be paid.

        22

        Similar considerations were involved in the Legislature's abolition by chapter 606 of the Laws of 1933 of common-law marriages in our State. Writing in support of that bill, Surrogate [489] FOLEY informed Governor Lehman that it was the unanimous opinion of the members of the Commission to Investigate Defects in the Law of Estates that the concept of common-law marriage should be abolished because attempts to collect funds from decedents' estates were a fruitful source of litigation. Senate Minority Leader Fearon, who had introduced the bill, also informed the Governor that its purpose was to prevent fraudulent claims against estates and recommended its approval. The consensus was that while the doctrine of common-law marriage could work substantial justice in certain cases, there was no built-in method for distinguishing between valid and specious claims and, thus, that the doctrine served the State poorly.

        23

        The notion of an implied contract between an unmarried couple living together is, thus, contrary to both New York decisional law and the implication arising from our Legislature's abolition of common-law marriage. The same conclusion has been reached by a significant number of States other than our own which have refused to allow recovery in implied contract (see Ann., 94 ALR3d 552, 559). Until the Legislature determines otherwise, therefore, we decline to recognize an action based upon an implied contract for personal services between unmarried persons living together.

        24

        For the foregoing reasons, the order of the Appellate Division should be modified in accordance with this opinion and, as so modified, should be affirmed, with costs to plaintiff.

        25
        JONES, J. (dissenting).
        26

        I am in agreement with the majority that the first cause of action, seeking recovery of money damages predicated on an implied agreement between cohabiting persons not married to each other, fails to state a ground for relief under the law of this jurisdiction and that dismissal is appropriate. I would go further, however, and make similar disposition of the second cause of action, on the ground that the express agreement alleged is too vague and indefinite to be enforced.

        27

        The terms of the contract in the second cause of action are set forth in paragraph 15 of the complaint where it is alleged that "it was orally agreed and understood by and between the parties hereto that plaintiff would perform the work, services and labor of a domestic nature on her part as requested by the defendant, and that the defendant would support, maintain and provide for plaintiff in accordance with his earning capacity [490] and that defendant further agreed on his part to take care of the plaintiff and do right by her". Thus, defendant's obligation is alleged first as one to support, maintain and provide for plaintiff in accordance with his earning capacity and, additionally, to take care of and do right by plaintiff. The latter segment of the purported undertaking is on its face patently indefinite and unenforceable; as we recently held in Dombrowski v Somers (41 N.Y.2d 858, 859) the words "to take care of" are "too vague to spell out a meaningful promise" — nothing of substance is added by the words "to do right by plaintiff". The former segment — imposing an apparent obligation to support, maintain and provide for in accordance with (defendant's) earning capacity — is similarly nebulous and indeterminate. A reference of more substance is required than simply one to the provider's earning capacity to describe what it is to which the parties are agreeing. What is notably lacking is any statement of the standard of support and maintenance to be provided or of what relationship is to furnish the measure of the allegedly agreed-on life-style. Assuming a provider whose earning capacity places ample funds at his disposal, the level of support and maintenance he will provide for his wife and children will of course vary substantially from the level he will provide for a household retainer living within his residence. Is it the former style of maintenance or the latter — or some other, such as might be extended to a favorite, impoverished aunt living outside the family establishment — to which the defendant binds himself by the alleged agreement?[*] By its terms the promise is indefinite and uncertain and it runs afoul of the basic premise of contract law — viz., "It is a necessary requirement in the nature of things that an agreement in order to be binding must be sufficiently definite to enable a court to give it an exact meaning" (1 Williston, Contracts [3d ed], § 37).

        28

        The majority dismisses the problem of vagueness by reliance on the allegation included in the second pleaded cause of [491] action that "the net profits from the agreement and partnership of the plaintiff and defendant were to be used for and applied to the equal benefit of plaintiff and defendant", apparently accepting this as a sufficiently definite statement of the obligation now sought to be enforced. But, rather than clarifying the ambiguity, this allegation only confounds the confusion. What are "net profits from the agreement and partnership" is wholly unelucidated and, when the agreement as described in paragraph 15 of the complaint is examined, the term seems strange indeed, for the compact is only that plaintiff will perform domestic services and defendant will support her to the undefined extent previously discussed. Although there is an allegation in paragraph 16 that defendant "was to have full charge of the business", no reference to any business appears elsewhere in the pleading and nowhere is it alleged that defendant bound himself to operate or carry on any profit-making activity. Surely it cannot be said that the domestic work for which plaintiff engaged would produce profits. How the "profits" — not to mention the "net profits" — from such an agreement are to be determined is a conundrum; as a consequence any provision for their application to the equal benefit of the parties is fatally vague and indefinite. Plaintiff invites our attention to no case in which courts have undertaken to enforce an agreement approaching the indefiniteness of that allegedly made by the parties to this litigation.

        29

        Because the second cause of action seeks recovery on the basis of an agreement the terms of which are too uncertain to admit of its enforcement, this action, like the first cause of action, should be dismissed.

        30

        Order modified, etc.

        31

        [1] Paragraph 9, one of the realleged allegations, avers that "plaintiff performed work, labor and services for the defendant in the nature of domestic duties and business services at the request of the defendant" (emphasis supplied).

        32

        [2] Much of the case law speaks of such a relationship as "meretricious". Defined as "Of or pertaining to a prostitute; having a harlot's traits" (Webster's Third New International Dictionary Unabridged, p 1413), that word's pejorative sense makes it no longer, if it ever was, descriptive of the relationship under consideration, and we, therefore, decline to use it.

        33

        [3] We have not overlooked the holding of Dombrowski v Somers (41 N.Y.2d 858, 859) that the words "take care of" are too vague to spell out a meaningful promise. In the instant complaint we regard those words as surplusage in light of the further allegation that the profits of the partnership were to be used and applied for the equal benefit of both plaintiff and defendant. Nor can we accept the dissent's concept that there need necessarily be "profits" from the domestic services. Plaintiff alleges an express agreement of partnership under which she was to contribute services in return for which she was to share in the profits from the business conducted by defendant; more is not required to make defendant accountable for profits of the partnership.

        34

        [*] If the agreement alleged were to be interpreted as committing defendant to support plaintiff, within his earning capacity, in the style of a wife, and were to be so enforced, the result would be largely to vitiate the statutory ban on common-law marriages at least with respect to the parties to the arrangement themselves (L 1933, ch 606, amdg Domestic Relations Law, § 11). Nevertheless, the infirmity of the alleged agreement lies not in its potential for impairment of the statute but in its inherent vagueness. Respect for the legislative determination manifested in the statute, however, precludes resort to marital standards of support to supply the definiteness which the agreement of the parties otherwise lacks.

    • 5.3 II. A. 5. c. The Mailbox Rule

  • 6 II. A. 6. d. The "battle of the forms"

    • 6.1 U.C.C. §2-207

    • 6.2 Idaho Power Co. v. Westinghouse Elec. Corp.

      1
      596 F.2d 924 (1979)
      2
      IDAHO POWER COMPANY, Plaintiff-Appellant,
      v.
      WESTINGHOUSE ELECTRIC CORPORATION, Defendant-Appellee.
      3
      No. 77-2752.
      4

      United States Court of Appeals, Ninth Circuit.

      5
      May 14, 1979.
      6

      Thomas N. Ambrose, Boise, Idaho, for plaintiff-appellant.

      7

      R. B. Kading, Jr., Michael E. Johnson, Boise, Idaho, for defendant-appellee.

      8

      [925] Before WRIGHT and GOODWIN, Circuit Judges, and BRUCE R. THOMPSON, Senior District Judge.[1]

      9
      EUGENE A. WRIGHT, Circuit Judge:
      10

      We affirm the dismissal by summary judgment of Idaho Power Company's damage suit against Westinghouse Electric. The action alleged that Westinghouse was liable on theories of warranty, negligence, and strict liability for damages caused by a defective voltage regulator which it manufactured and sold to Idaho Power.

      11

      On appeal, Idaho Power argues that (1) the district court erred in concluding that limitations of liability in the Westinghouse sales form were part of the contract between the parties, and that (2) even if they were part of the contract, Westinghouse could not disclaim strict liability.

      12
      FACTS
      13

      On January 12, 1973, Idaho Power sent an inquiry to Westinghouse asking its price for a three-phase voltage regulator. Westinghouse responded on January 25 with a price quotation which provided that it was subject to the terms and conditions on the back of the form.

      14

      The terms limited Westinghouse's liability, providing that it would not be liable "for special, indirect, incidental, or consequential damages," and that its liability, "whether in contract, in tort, under any warranty, or otherwise, . . . shall not exceed the price of the product or part on which such liability is based."

      15

      The form also limited the contract by this language:

      16
      The above terms, together with those set forth or referred to on the face of this quotation and such others as may be accepted by Westinghouse in writing, constitute the entire agreement for the sale of the product.
      17

      Idaho Power responded with a purchase order describing the regulator and referring to Westinghouse's price quotation. Idaho Power's order form provided, "acceptance of this order shall be deemed to constitute an agreement upon the part of the seller to the conditions named hereon and supersedes all previous agreements." Although it contained additional terms regarding shipping charges, it did not limit Westinghouse's liability.

      18

      Idaho Power received and installed the regulator in June, 1974. The equipment allegedly failed on July 31, causing a fire which damaged it and other machinery.

      19

      Westinghouse repaired the regulator at its expense, but Idaho Power sought $21,241.52 for other damages on theories of negligence, breach of implied and express warranty, and strict liability in tort. The summary judgment of dismissal was based on the liability limitations in Westinghouse's sales form.

      20
      DISCUSSION
      21

      Idaho Power concedes that Westinghouse's price quotation and sales form was an offer. It argues, however, that its purchase order was not an effective acceptance.[2] It contends, alternatively, that if the order constituted acceptance, the liability limitations were not a part of the resulting contract. Finally, it argues that the disclaimer, if a part of the contract, was not an effective defense to its strict liability action.

      22
      Acceptance.
      23

      This issue is controlled by U.C.C. § 2-207(1), Idaho Code § 28-2-207(1), which provides:

      24
      [926] 28-2-207. Additional terms in acceptance or confirmation.—(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.
      25

      Idaho Power contends first that this provision is inapplicable because its purchase order was not a "seasonable expression of acceptance or a written confirmation." It points to the printed language in its order form, which purported to restrict the agreement to its terms.

      26

      Under common law, its purchase order would have failed as an acceptance since it varied from the offer's terms. 1 Williston, The Law of Contracts § 73 (3d ed. 1957). Section 207, however, rejects the "mirror image" rule, and converts a common law counteroffer into an acceptance even though it states additional or different terms. C. Itoh & Co. (American), Inc. v. Jordan International Co., 552 F.2d 1228, 1232-35 (7th Cir. 1977); Hohenberg Bros. Co. v. Killebrew, 505 F.2d 643, 645-46 (5th Cir. 1974); Dorton v. Collins & Aikman Corp., 453 F.2d 1161, 1168 (6th Cir. 1972); Steiner v. Mobil Oil Corp., 20 Cal.3d 90, 99-100, 141 Cal.Rptr. 157, 163-64, 569 P.2d 751, 757 (1977).

      27

      The Official Comments to § 207 state:

      28
      2. Under this Article [Chapter] a proposed deal which in commercial understanding has in fact been closed is recognized as a contract. Therefore, any additional matter contained . . . in the writing intended to close the deal . . falls within subsection (2) and must be regarded as a proposal for an added term . . ..
      29

      5A Idaho Code 34 (1967).

      30

      Here, Idaho Power's order referred to and accepted the price quoted in Westinghouse's offer. It requested shipment within the time limits specified by Westinghouse. No other correspondence ensued and the regulator was shipped and installed accordingly. In commercial transactions such an order, especially when followed by performance, would normally be understood to have closed the deal between the parties. Consequently, it was a "seasonable expression of acceptance," even though it contained the additional terms.[3]

      31

      Idaho Power next attempts to invoke the proviso to § 207(1), arguing that, if its purchase order constituted acceptance, it was "expressly made conditional on assent" to additional terms. We disagree.

      32

      The proviso has been construed narrowly. The court in Dorton v. Collins & Aikman Corp., 453 F.2d 1161, 1168 (6th Cir. 1972), held that it was intended to apply "only to an acceptance which clearly reveals that the offeree is unwilling to proceed with the transaction unless he is assured of the offeror's assent to the additional or different terms therein." It concluded that an acceptance "`subject to all of the terms and conditions on the face and reverse side hereof, . . . all of which are accepted by the [offeror],'" was not "expressly made conditional on assent" within the meaning of § 207. Id. at 1167-68. See also C. Itoh & Co., 552 F.2d at 1234-35.

      33

      Idaho Power relies upon similar language to demonstrate that acceptance, if any, was conditional on asset. Its purchase order [927] form states: "Acceptance of this order shall be deemed to constitute an agreement to the conditions named hereon and supersedes all previous agreements."

      34

      By this language, Idaho Power attempted to alter the terms of the offer. As in Dorton, however, the language used does not clearly reveal that Idaho Power was "unwilling to proceed with the transaction unless . . . assured of [Westinghouse's] assent to the additional or different terms." Consequently, the proviso in § 207(1) does not apply.

      35
      The Terms of the Contract.
      36

      Idaho Power also contends that even if the purchase order was an effective acceptance under § 207(1), the disclaimer in Westinghouse's form is not part of the contract. It relies on Southern Idaho Pipe & Steel v. Cal-Cut Pipe & Supply, Inc., 98 Idaho 495, 567 P.2d 1246 (1977), dismissed, 434 U.S. 1056, 98 S.Ct. 1225, 55 L.Ed.2d 757 (1978).

      37

      In Southern Idaho Pipe, the court held that when a contract is formed under § 207 by documents with conflicting terms, those terms cancel out, leaving the court to supply the contested term. It reasoned that under such circumstances the offeror's terms should not be conclusive simply because its document was sent first. Id., 567 P.2d at 1253-55. The court then omitted from the contract terms which provided different delivery dates.

      38

      Here, Idaho Power's form did not contest Westinghouse's disclaimer. It merely purported to "supersede all previous agreements." At best, the term conflicted with Westinghouse's integration clause. We conclude that it did not nullify the disclaimer.

      39

      Because the disclaimer in the Westinghouse offer was part of the contract, the district court did not err in granting summary judgment of Idaho Power's actions based on negligence or warranty.[4] Idaho Power argues, however, that the disclaimer is not a defense to its strict liability action.

      40
      Disclaimer of Strict Liability.
      41

      The Idaho Supreme Court has adopted § 402A of the Restatement (Second) of Torts, dealing with strict liability. Shields v. Morton Chemical Co., 95 Idaho 674, 518 P.2d 857 (1974). Comment m of that section suggests that strict liability cannot be disclaimed:

      42
      The rule stated in this Section is not governed by the provisio