Business Law and the Regulation of Business 11th Edition by Richard Mann, Barry Roberts

Exercise 23

FACTS David and Elizabeth Kidd's dog bit Mikaila Sherrod. Mikaila through her guardian ad litem (GAL) made a claim for damages against the Kidds (defendants). On June 14, 2005, the Kidds offered to settle the claim for $31,837. On July 12, Mikaila through her GAL sued the Kidds. On July 20, the Kidds raised their settlement offer to $32,843.The suit was subject to mandatory arbitration. The parties proceeded to arbitration on April 28, 2006. On May 5, the arbitrator awarded Mikaila $25,069.47. On May 9, the GAL wrote to the Kidds and purported to accept their last offer of $32,843, made the year before. The GAL on Mikaila's behalf moved to enforce the settlement agreement. The court concluded the offer was properly accepted because it had not been withdrawn and it entered judgment in the amount of the first written offer.
DECISION The decision of the trial judge is reversed.
OPINION Sweeney, C. J. An offer to form a contract is open only for a reasonable time, unless the offer specifically states how long it is open for acceptance. [Citations.] ''[I]n the absence of an acceptance of an offer … within a reasonable time (where no time limit is specified), there is no contract.'' [Citation.]
How much time is reasonable is usually a question of fact. [Citation.] But we can decide the limits of a reasonable time if the facts are undisputed. [Citation.] And here the essential facts are not disputed.
A reasonable time ''is the time that a reasonable person in the exact position of the offeree would believe to be satisfactory to the offeror.'' [Citation.]
The purpose of the offeror, to be attained by the making and performance of the contract, will affect the time allowed for acceptance, if it is or should be known to the offeree. In such case there is no power to accept after it is too late to attain that purpose. [Citation.]
A reasonable time for an offeree to accept an offer depends on the ''nature of the contract and the character of the business in which the parties were engaged.'' [Citation.]
Implicit in an offer (and an acceptance) to settle a personal injury suit is the party's intent to avoid a less favorable result at the hands of a jury, a judge or, in this case, an arbitrator. The defendant runs the risk that the award might be more than the offer. The plaintiff, of course, runs the risk that the award might be less than the offer. Both want to avoid that risk. And it is those risks that settlements avoid. ***
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Here, the value of this claim was set after arbitration. It was certainly subject to appeal but nonetheless set by a fact finder.
This offer expired when the arbitrator announced the award and was not subject to being accepted.
INTERPRETATION An offer is open for a reasonable period of time.
CRITICAL THINKING QUESTION Should the courts consider the social and public policy in a case such as this? Explain.