Parties in negotiations sometimes make offers and counter-offers, but do not specify by when their offers must be accepted by the other party. When that happens, one party might accept an outstanding offer and then be told by the other party that the acceptance was too late to be effective. If the party who accepted the offer files a breach of contract lawsuit, how will a court in Tennessee determine how long the offer remained open for acceptance?
In Tennessee breach of contract cases involving offers that did not specify how long they were open for acceptance, Tennessee courts will apply the rule of reasonableness. Under that rule, an offer that did not specify for how long it remained open will be deemed to have remained open for a reasonable period of time. That guideline begs the question that is so often begged in legal matters: What is reasonable?
Under Tennessee law, to determine the reasonable period of time that the offer should be deemed to have stayed open, a court must look at the situation and circumstances involved in the case. Since every breach of contract case filed in a Tennessee court has unique facts and circumstances, what was a reasonable period of time for acceptance will vary from case to case. Here are three Tennessee cases which provide some insight into what facts and circumstances a court might consider in determining the period of time for which an offer remained open.
Reeves v. Pederson-Kronseder (Tenn. Ct. App. 2014): A former employee claimed he was terminated in violation of age discrimination laws. His agreement with his former employer required him to arbitrate his claim. On June 29, the former employer offered the former employee $42,000 to settle. The former employee did not give notice of his acceptance until August 12 and just a couple of days before the arbitration was scheduled to start. The court held that the acceptance was not valid because it was not made within a reasonable period of time under the facts of the case. The court found that the former employee was aware that, during the time that he did not respond to the offer, the former employer was incurring substantial expenses associated with preparing for the upcoming arbitration. Those expenses included a $9,000 payment to the American Arbitration Association, non-refundable airline tickets for a witness, as well as attorney’s fees for arbitration preparation.
Birkholz v. Hardy (Tenn. Ct. App. 2004): In this breach of contract case, the sellers of a home in Memphis took a promissory note from the buyers for the purchase price of the home. The note provided that it was not due until the buyers sold their home in Mississippi. The problem with the note was that it did not specify how much time the buyers had to sell their home. The trial court, whose ruling was upheld by the Court of Appeals of Tennessee, held that the buyers had five years to sell their Mississippi home. Although this is not a case where the dispute centered on the issue of acceptance, its analysis is still relevant to cases involving the question of what is a reasonable period of time for acceptance.
Shearer v. McArthur (Tenn. Ct. App. 2012): A developer agreed to buy back a home and lot which he sold to the buyers/plaintiffs “at any time.” The buyers/plaintiffs took the developer up on his offer about three years after they purchased the property. The court held that the developer’s offer was still open when the buyers/plaintiffs accepted it.