OFFER AND ACCEPTANCE

              In 2015 South State Bank domesticated a judgment against Kyle Tauch for $4,635,877 plus interest. Then, the Bank started settlement negotiations with Kyle, culminating in Kyle’s offer to purchase the judgment for $1 million.

            At that juncture the debt was over $6 million. The Bank’s vice president responded to Kyle by email on April 11, 2016, rejected the offer, countered with $2 million, and stated that the Bank was poised to “look at other collection alternatives.”

            Kyle did not reply.

            The Bank then discussed the possibility of selling the Judgment to The Gobsmack Gift Trust. On April 13, still without receiving a response from Kyle, the Bank assigned the Judgment to the Trust. As consideration, the Bank would receive the first $3 million collected on the Judgment. The Trust would receive all excess sums.

            The Trust’s attorney made Kyle aware of the transfer at 4.27 pm on April 13. Kyle’s lawyer requested documentation of the assignment, which was furnished the same day at 5.23 pm.

            Kyle replied to the Bank at 6.12 pm on April 13 purporting to accept the Bank’s $2 million offer of April 11. On April 15 the Bank responded to advise Kyle that the Bank made Kyle’s attorney aware that the Judgment had been assigned before Kyle attempted to accept the previous settlement offer. And that the Bank’s offer was no longer capable of acceptance, as it had been revoked through subsequent actions taken by the Bank to accept another offer.

            Kyle denied that the settlement offer had been effectively revoked, and insisted that a valid settlement agreement had been formed. So the Trust sued Kyle seeking a declaration that Kyle’s April 13 acceptance of the Bank’s $2 million settlement offer was too late and not binding.

            Kyle asserted a counterclaim contending that he had a valid contract with the Bank, through timely offer and acceptance, to resolve the $6+ million debt for $2 million.

            The trial court granted summary judgment for the Trust, determining that Kyle’s acceptance was too late. Then the appeals started.

            The court of appeals reversed the judgment of the trial court, finding that Kyle’s acceptance was timely and formed a binding $2 million contract. Another appeal followed.

            It was time for the Supreme Court to weigh the facts and apply the laws. The first fundamental analysis involves the right of the one who makes an offer to retract it before it is accepted. Timely revocation removes the ability to accept the offer that had been extended.

            Typical revocations involve direct communications such as “Your counteroffer is rejected,” “My initial offer is no longer outstanding,” or similar. However, offers and counteroffers may also be rescinded based on “definition action [that is] inconsistent with an intention to enter into the proposed contract.”

            I’ll spare you 40 pages of text by concluding that the Bank’s settlement offer as previously extended to Kyle was revoked by the Bank’s later inconsistent action. And that the later inconsistent action became known to Kyle’s attorney before Kyle attempted to accept the then no-longer-outstanding-Bank-offer.

             The court of appeals’ judgment is reversed; the trial court’s judgment is reinstated. The Trust wins and Kyle Tauch loses. See Virginia Angel, Trustee for the Gobsmack Gift Trust v. Tauch; Texas Supreme Court, Case No. 19-0793, January 14, 2022: https://www.casemine.com/judgement/us/61e561af714d5896333b1be7.

            Lessons / Questions / Observations:

1.      Lesson. Possibly I would not be writing about counter-offer acceptance, rejection, and initial offer revocation if the Bank’s first email to Kyle stated that the Bank’s offer could be rescinded at any time before acceptance, without advance notice.

2.      Observation. Possibly I would not be writing about counter-offer acceptance, rejection, and initial offer revocation if the Bank had sent to Kyle, at the time of the Bank’s acceptance of the Trust’s offer, an email stating that all offers and counteroffers were withdrawn and terminated.

3.      Question. Have you ever extended a settlement offer, and then become engaged in protracted discussions with multiple offers and counter-offers? You might consider ending each email with a provision that you reserve the right to end all discussions and withdraw all offers without advance notice.

                                                                                    Stuart A. Lautin, Esq.*

 

 

* Board Certified, Commercial (1989) and Residential (1988) Real Estate Law, Texas Board of Legal Specialization

Licensed in the States of Texas and New York

  

Reprinted with the permission of North Texas Commercial Association of REALTORS®, Inc.