Opinion ID: 810054
Heading Depth: 3
Heading Rank: 3

Heading: Mutuality of Obligation &

Text: RJR’s Right to Terminate RJR argues that the plaintiffs’ contract claim must be dismissed for lack of mutuality of obligation because RJR had an unrestricted right to terminate the Camel Cash program at will, and without notice. The complaint discusses RJR’s right to terminate the Camel Cash program in three paragraphs: 6. Plaintiffs do not dispute that defendant had the right to terminate the Camel Cash program. However, defendant made a deliberate and calcu- 7 RJR argues that the internal documents are irrelevant because the existence of a contract turns on the objective intentions of the parties, not their unexpressed subjective understandings. RJR is correct that questions of mutual assent and interpretation turn in large part, though not always, on the parties’ objective manifestations. See 1 Witkin, Summary of Cal. Law, Contracts § 116 (10th ed. 2008); 1 Williston § 3:5. We are not aware of any authority, however, extending that principle to an assessment of whether, for the purposes of applying the definiteness requirement, the parties in fact intended to contract. SATERIALE v. R.J. REYNOLDS TOBACCO CO. 12305 lated choice to waive any right to terminate the program “without notice” and instead provided six months prior notice. Thus, during that six-month period, from approximately October 2006 through March 2007, defendant was obligated to comply with the terms of its contract with plaintiffs. . . . 32. Also, the breach of contract alleged is not that Reynolds was prohibited from terminating the program but that, during the program’s duration, Reynolds had the obligation to perform through the program’s termination date. Certain (but not all) of the Camel Cash catalogs state that Reynolds could terminate the Camel Cash program without notice. Defendant, however, waived any right to terminate without notice when, on or about October 1, 2006, it announced by mailing a notice to program mem- bers, that the program would terminate as of March 31, 2007. Namely, defendant gave notice of termination and represented that plaintiffs could redeem their Camel Cash certificates for six months. . . . 54. In or about October 2006, defendant announced that it was terminating the Camel Cash program as of March 31, 2007. Thus, the contract was in effect until March 31, 2007 when defendant terminated the program. Compl. ¶¶ 6, 32, 54. [12] Given our conclusion that the plaintiffs have alleged an offer to enter into a unilateral rather than a bilateral contract, RJR’s reliance on mutuality of obligation necessarily fails: that doctrine does not apply to unilateral contracts. See, e.g., Asmus v. Pac. Bell, 999 P.2d 71, 78 (Cal. 2000) (“In the unilateral contract context, there is no mutuality of obligation.”). RJR’s argument nonetheless raises important questions about the viability of the plaintiffs’ contract claim. If, in 12306 SATERIALE v. R.J. REYNOLDS TOBACCO CO. fact, RJR reserved an unrestricted right to terminate the Camel Cash program, without notice, then the plaintiffs’ contract claim may well be untenable. First, a reservation of an unrestricted right to terminate could have precluded RJR’s communications from constituting an offer. As Corbin explains, if an offeror expressly reserves not only the right to revoke the offer at will and without notice, but also the unrestricted right not to perform, then the offer is not legally effective as an offer at all: “A purported offer that reserves the power to withdraw at will even after an acceptance should not be described as an offer at all, but as an invitation to submit an offer.” Corbin § 2.19.8 Second, if RJR reserved an unrestricted right to terminate the Camel Cash program at any time and without notice, then RJR’s promise to perform could be deemed illusory, and hence unenforceable. As Farnsworth explains, when a promise “appears on its face to be so insubstantial as to impose no obligation at all on the promisor — who says, in effect, ‘I will if I want to’ ” — the promise is not enforceable. Farnsworth § 2.13, at 75. Accordingly, an enforceable termination clause that gives a promisor an unrestricted power to terminate a contract at any time, without notice, renders the promise illusory and unenforceable, at least so long as the purported contract remains wholly executory. Either of the foregoing principles could possibly serve to defeat the plaintiffs’ contract claim here. The complaint, however, does not definitively allege that RJR reserved an unre- 8 It does not appear that the plaintiffs’ beginning of performance (by purchasing Camel cigarettes and saving C-Notes) would alter that result. It is true as a general matter that an offeree’s part performance may render an offer to enter into a unilateral contract irrevocable. See Steiner v. Thexton, 226 P.3d 359, 368 (Cal. 2010); Restatement § 45(1). That default principle, however, does not apply when the offer expressly reserves the right to revoke notwithstanding the offeror’s beginning of performance. See Restatement § 45 cmt. b. SATERIALE v. R.J. REYNOLDS TOBACCO CO. 12307 stricted right to terminate its duty to perform. The complaint alleges only that “[c]ertain (but not all) of the Camel Cash catalogs state that Reynolds could terminate the Camel Cash program without notice.” Compl. ¶ 32 (emphasis added). The complaint, moreover, alleges that RJR “waived any right to terminate without notice when, on or about October 1, 2006, it announced by mailing a notice to program members, that the program would terminate as of March 31, 2007.” Id. Dismissal is therefore unwarranted on the current record.