Court Opinion

ID: 9607480
Source: CourtListenerOpinion
Date Created: 2023-08-22 02:59:08.802872+00
Date Added: 2024-06-11T13:27:36.478705
License: Public Domain

TRATNOR, C. J.
I dissent. In my opinion, the parties attempted to enter into a formal *411contract and erroneously believed that they had done so. Certain essential elements were left to future agreement, however, and an agreement was never reached.
The majority opinion applies the “essential element” test, long used exclusively to determine the enforceability of agreements to agree, not to determine the enforceability of such an agreement, but to hold that agreement on new terms was a condition precedent to plaintiff Coleman’s duty to continue performance under the contract. If there is no initial agreement on essential elements, however, there is no contract to which a condition precedent can attach.
The only enforceable contract between the parties was the one manifested by the five “go ahead” telegrams received and acted upon by Coleman on June 24, 1959. The telegrams contained new proposals and were therefore counteroffers to Coleman’s bid. (Civ. Code, § 1585; American Aeronautics Corp. v. Grand Central Aircraft Co., 155 Cal.App.2d 69, 80 [317 P.2d 694] ; Lawrence Block Co. v. Palston, 123 Cal.App.2d 300, 310 [266 P.2d 856]; 1 Corbin, Contracts (1963 ed.) § 89, pp. 378-382.) When new terms are proposed, no contract arises unless the original offeror accepts the counteroffer. (Lawrence Block Co. v. Palston, supra; Apablasa v. Merritt & Co., 176 Cal.App. 2d 719, 726 [1 Cal.Rptr. 500].) If, as here, the offer specifies no particular mode of acceptance and has as its object the beginning of performance, the offeree’s beginning of performance constitutes an acceptance. (Rest.2d Contracts (Tent. Draft No. 1) § 52, coms, b, c, pp. 216-218. See Logoluso v. Logoluso, 233 Cal.App.2d 523, 529 [43 Cal.Rptr. 678]; Standard Iron Works v. Globe Jewelry t& Loan, Inc., 164 Cal.App. 2d 108,117 [330 P.2d 271], Cf. Beatty v. Oakland Sheet Metal Supply Co., 111 Cal.App.2d 53, 62-63 [244 P.2d 25].)
The telegrams made clear that final arrangements were still to be made. Pending those arrangements, however, Coleman was to begin operations with the understanding that no more than $40,000 worth of performance was presently authorized. The terms of this agreement included the specifications which, according to the findings, Coleman reasonably interpreted as calling for a payload center of gravity at rail height.
The facts found by the trial court establish that no other contract ever came into being between Coleman and North American. On July 6, 1959, Coleman received from North American the purchase orders referred to in the telegrams. The purchase orders stated that they became a binding *412contract on the terms set forth therein when “accepted either by acknowledgment or delivery. ...” The trial court erred in construing this language to mean delivery of the purchase orders to Coleman and in finding that a contract therefore existed as of July 6.
It is a question of law whether the facts found gave rise to a contract. (Hunter v. Sparling, 87 Cal.App.2d 711, 721 [197 P.2d 807].) The purchase orders, like the telegrams, contained new and important terms and were therefore a new offer.1 In such a setting, the term “delivery” cannot reasonably be construed as delivery of the purchase orders to Coleman, for such a construction would have given North American the power to close an agreement to which Coleman never assented merely by delivering the terms to Coleman. (See Lawrence Block Co. v. Palston, supra, 123 Cal.App.2d at p. 310.) “Delivery” must therefore mean delivery of the specified items. Delivery of goods is a mode of acceptance commonly recognized in commercial dealings (see, e.g., Com. Code, § 2206), although in this case such a means of acceptance was probably not contemplated because of the length of time required for performance. The contract also provided for acceptance by “acknowledgment” of receipt of the purchase orders, and acknowledgment copies were provided.2
On July 15, the president of Coleman acknowledged the purchase orders by signing and sending them to North American. Ordinarily this action would be an acceptance by Coleman of all the terms of the contract. According to the findings of the trial court, however, “on July 7, 1959, at a conference between engineers of defendant [North American] *413and engineers of plaintiff [Coleman], defendant’s engineers for the first time informed plaintiff’s engineers that defendant desired the trailers to he designed with the payload center of gravity 35 inches above the rail top surfaces.” The court further found that “After the conference on July 7, 1959, defendant requested plaintiff to continue working on the project, the subject matter of the contract, and stated that changed specifications would be forthcoming from defendant to plaintiff” and that “At defendant’s request, pursuant to the contract between plaintiff and defendant, plaintiff had been performing work and rendering services for defendant for defendant’s use and benefit. ...”
These findings and the testimony in the record are ambiguous as to whether, after the meeting of July 7, the parties had agreed that the 35-inch figure was to be followed, or had only decided that the rail height figure was not the proper one. For example, Mr. Nolan, Coleman’s project engineer in this case, testified on direct examination:
“Q. Mr. Nolan, so far as the engineering department, you were the project engineer, is it or is it not true that there was no final decision between North American and Coleman as to the location of the center of gravity of the payload so far as you know? A. That’s right.”
The witness further testified on direct examination:
“A. We said this is the way we’re going to design it and North American people said they wanted the CG, the load factors applied to the CG with the height above the rail, the center of gravity which was a number that we didn’t know exactly how high the CG was.
“Q. Did North American say they knew? A. No, they didn’t know how high it was exactly but they knew it was in the neighborhood of 36 inches and so it was arranged ... to be phoned back.”
On cross-examination, Mr. Nolan testified further regarding the meeting:
“Q. And then, that same afternoon, Mr. Burcombe telephoned you and gave you 35.25 inches CG height above the rails? A. Yes. . . .
“Q. You knew on July 7th, didn’t you, that the Coleman design placing the CG of the pay load at rail height and applying the load factors at that point, would not meet the side loads if the pay load CG were placed 35 inches above the rails? . . . The Witness: Yes.”
*414Mr. Burcombe, a North American project engineer, testified on direct examination that at the July 7 conference Mr. Nolan ‘ ‘brought up the matter of CG. He said their stress people had been figuring that the CG was located at rail height and having seen the missile, he knew intuitively that it was not at rail height—that it was some distance above this, and he requested us to determine or give him the figure of what it should be. I knew it was somewhere in the neighborhood of 36 or 37 or 38 inches, but to be sure, I told him we would find out for sure upon our return and call him back and give him an exact figure and it was later confirmed in writing and upon return to the North American plant we determined that it was 35.52 inches above the rails, which I phoned to him, and told him that we had confirmed this. We eventually rounded it off at 35 inches. ’ ’
Whether or not a new center of gravity figure had been finally agreed upon at this point, there would be no contract. On the one hand it may be that the parties simply did not know precisely where the center of gravity was to be located, in which case there would be no agreement. On the other hand, if the understanding was that the 35-inch figure was the proper one, still there would be no agreement. Specifications had not yet been supplied, time of performance had not been agreed upon, and the very important price term remained to be settled. The record makes clear that both parties were of the opinion, even before July 15, that the precise location of the payload center of gravity was to be an essential element of their contract.3
Nothing in the record suggests that the parties agreed to go ahead on the basis of the original rail-height specification until *415some formal change was made. In the interoffice memorandum of July 8, Coleman instructed its contract administrator to call North American’s buyer "and ask him to send us a letter or a change to the specifications defining where they want the center of gravity, if not at the top of the load rails. ’ ’ (Italics added.) Such an inquiry would have been meaningless had Coleman actually intended to proceed with building a trailer with the payload center of gravity at rail height.
Coleman’s pleadings are also instructive. They indicate, not that Coleman intended to proceed on a rail-height basis until further notice, but that it planned to build the trailers according to some other specification—somewhere in the area of 35 inches above rail height—which was still to be supplied. In its complaint Coleman alleged that "defendant orally informed plaintiff that a change in specifications would be furnished so that a trailer unit would be produced that would do the job contemplated.” Coleman further alleged that "Plaintiff, relying on the advice the defendant had previously given it, as above alleged, had been proceeding on the contract for some time on the basis of the changed specifications even before the written changed specifications were received. ’ ’ And in its pretrial statement, Coleman stated that "plaintiff, based on the request of North American to proceed with the design and engineering work, did proceed with this engineering and design work to design a positioning trailer with the center of gravity 35 inches above rail height. ’ ’
The understanding of North American in this regard is also clear. The following testimony was elicited from Mr. Burcombe on cross-examination by Coleman:
"Q. Sir, would you have expected Coleman Engineering after July 8th, 1959, to have made a drawing of the parts of the positioning trailer with the CG at rail height, after the conferences you had? A. We wouldn’t expect them to, no.
"Q. You would have expected them to have been drafting along the lines you suggested and requested, isn’t that right? A. Designing to our interpretation of the specifications, placing CG at 35 inches above the top of the rail.
"Q. You certainly wouldn’t expect them after that confer*416ence to go ahead on the other interpretation, would you, sir? A. I wouldn’t expect them to, no.
‘‘Q. It would have been a waste of time, isn’t that right? A. That’s right.”
In these circumstances I cannot conclude that on July 15 Coleman intended to enter into a contract to build a trailer according to its own design despite its knowledge that, in the words of Coleman’s own engineer, ‘‘it was not what they [North American] wanted, that they wanted the design load applied at a high CG, some distance above the rails.” This knowledge gained by the Coleman engineers at the July 7 meeting is, of course, imputed to the corporation (Sanfran Co. v. Rees Blow Pipe Mfg. Co., 168 Cal.App.2d 191, 204-205 [335 P.2d 995]; cf. Civ. Code § 2332).
Thus, when the purchase orders were signed on July 15, Coleman knew that the specification intended by North American was not for a payload center of gravity at rail height. In signing the purchase orders with this knowledge, it could not purport to accept an offer describing a center of gravity at rail height. (17 Am.Jur.2d, Contracts, § 146, pp. 493-494; 3 Corbin, Contracts (1960 ed.) § 609; Ex parte Perusini Const. Co., 242 Ala. 632, 636 [7 So.2d. 576], Cf. Lemoge Electric v. County of San Mateo, 46 Cal.2d 659, 662-663 [297 P.2d 638] ; Brunzell Constr. Co. v. G. J. Weisbrod, Inc., 134 Cal.App.2d 278, 286 [285 P.2d 989].) For the same reasons, North American could not maintain that Coleman had agreed to perform according to new specifications but at the original bid price. North American was fully aware, before July 15, that Coleman had bid on the basis of a payload center of gravity at rail height and that Coleman’s position was that changes would be required in cost and price terms and in the time schedule.
The actions of both parties after July 15 demonstrated that the price, time of performance, and specifications for the center of gravity were not regarded as settled from the outset. Both parties treated the contract as an agreement to agree,4 relying on the change clause of the purchase orders as a basis for adjustment in specifications, price, and time of performance through future negotiations. After July 15 there were numerous negotiations concerning these open terms.
*417Agreements to agree are valid and enforceable if unessential elements only are reserved for the future agreement. “The general rule is that if an ‘essential element’ of a promise is reserved for the future agreement of both parties, the promise gives rise to no legal obligation until such future agreement is made.” (City of Los Angeles v. Superior Court, 51 Cal.2d 423, 433 [333 P.2d 745], See Wong v. Di Grazia, 60 Cal.2d 525, 539 [35 Cal.Rptr. 241, 386 P.2d 817]; Apablasa v. Merritt & Co., supra, 176 Cal.App.2d 719, 730; Putman v. Cameron, 129 Cal.App.2d 89, 95 [276 P.2d 102]; Avalon Products, Inc. v. Lentini, 98 Cal.App.2d 177, 179 [219 P.2d 485]; 1 Corbin, Contracts (1963 ed.) § 29, pp. 84-85.)
Whether a term is “essential” “depends upon the relative importance and the severability of the matter left to the future; it is a question of degree. ...” (City of Los Angeles v. Superior Court, 51 Cal.2d 423, 433 [333 P.2d 745].) The relative importance of a term may turn in part upon the intentions of the parties. (See 1 Corbin, Contracts (1963 ed.) § 29, pp. 89-90.) When, however, “a contract is so uncertain and indefinite that the intention of the parties in material particulars cannot be ascertained, the contract is void and unenforceable.” (California Lettuce Growers, Inc. v. Union Sugar Co., 45 Cal.2d 474, 481 [289 P.2d 785, 49 A.L.R.2d 496]. See also Ellis v. Klaff, 96 Cal.App.2d 471, 478 [216 P.2d 15].) At times, subsequent conduct of the parties may establish the contours of an agreement that appeared uncertain at its inception and thus render it enforceable. (Bohman v. Berg, 54 Cal.2d 787, 794-795 [8 Cal.Rptr. 441, 356 P.2d 185].) The history of the Coleman-North American negotiations, however, establishes just the contrary; the course of events magnified and made clearer the original uncertainty of their agreement and intentions concerning many essential details. Neither design specifications, price, nor time of performance had been agreed upon, nor were they ever finally agreed upon, and the parties’ extended negotiations demonstrate that they deemed both the specifications5 and price6 to be essential. Since both *418of these terms as well as the time of performance7 were left to future agreement, there can be no question that essential elements were left to be agreed upon. The open terms were the very substance of the contemplated contract.
Under these circumstances, the change clause of the purchase orders cannot give rise to a contract, for without an initial agreement on the essential terms there are no standards to govern the meaning of the change clause. The change clause itself is then affected by the basic uncertainty that precludes the existence of a contract. The parties may not invoke the change clause, designed to meet unforeseen contingencies, to make a contract when there has been no agreement from the outset on essential matters.
Since no contract arose when Coleman acknowledged the purchase orders, the trial court erred in awarding damages pursuant to the termination clause in those orders. When performance is rendered by one party in the mistaken belief that an enforceable contract exists, his remedy is in quantum meruit. (See 3 Corbin, Contracts (1960 ed.) § 599, pp. 593-595, fn. 22, citing Peerless Glass Co. v. Pacific etc. Co., 121 Cal. 641, 647 [54 P. 101].) Ordinarily, the measure of recovery is the reasonable value of benefits conferred upon the other party. (Challenge Cream & Butter Assn. v. Royal Dutch Dairies, 212 Cal.App.2d 901, 908 [28 Cal.Rptr. 448] ; Townsend Pierson, Inc. v. Holly-Coleman Co., 178 Cal.App.2d 373, 378 [2 Cal.Rptr. 812]; Major-Blakeney Corp. v. Jenkins, 121 Cal.App.2d 325, 340 [263 P.2d 655].) If the other party received no benefit, there is ordinarily no obligation to make restitution. (Ibid.)
In the present case it does not appear that North American benefited by Coleman’s performance. Nevertheless, after the *419misunderstanding as to the center of gravity was discovered at the July 7 conference, Coleman continued to perform at North American’s express request. Had the contemplated contract envisaged the performance of services instead of the production of trailers, there would be no doubt that Coleman could recover the reasonable value of its work whether or not it benefited North American. When one person performs services at the request of another, the law raises an obligation to pay the reasonable value of the services. (Williams v. Dougan, 175 Cal.App.2d 414, 418 [346 P.2d 241].) The Restatement of Restitution rationalizes this rule with the requirement that a benefit can be conferred as a prerequisite to restitution by stating that a benefit is conferred upon another if a person "performs services beneficial to or at the request of the other, . . .” (See Rest., Restitution, §1, com. b, p. 12. Italics added.) Although this rule has usually been applied when services or work and labor were requested in their own right, rather than as incidental to the construction of a specified item to be sold to the defendant (see Williams v. Dougan, supra, 175 Cal.App.2d 414; Bodmer v. Turnage, 105 Cal.App.2d 475, 477-478 [233 P.2d 157]), there is no basis for limiting the rule to the performance of services. If in fact the performance of services has conferred no benefit on the person requesting them, it is pure fiction to base restitution on a benefit conferred. "[I]t is submitted that allowing a recovery in these eases on a theory of benefit conferred is purely fictional, and that the real basis is a moral obligation to restore to his original position a party who has acted to his detriment in reliance on a representation, technically unenforceable, by another that he will give value for the detriment suffered.” (Note (1928) 26 Mich.L.Rev. 942, 943.)
In Kearns v. Andree, 107 Conn. 181 [139 A. 695, 59 A.L.R. 599], the court allowed the plaintiff recovery for services performed at the request of the defendant, explicitly recognizing that no benefit was conferred upon the defendant. The defendant had agreed to buy the plaintiff’s building and at the defendant’s request the plaintiff made alterations in the building in preparation for its transfer to the defendant. The defendant refused to buy the building and the agreement was held to be too indefinite for enforcement. The plaintiff was nevertheless allowed to recover the reasonable value of his services, without regard to the fact that no benefit was conferred upon the defendant. The court held that recovery of the *420reasonable value of services performed, without regard to actual benefit, should be allowed “where the parties have attempted to make a contract which is void because its terms are too indefinite, but where one party has, in good faith, and believing that a valid contract existed, performed part of the services which he had promised in reliance upon it.” (Id. at pp. 187-188.)
Kearns v. Andree has been cited approvingly8 and has been recently followed in another jurisdiction. (See Abrams v. Financial Service Co., 13 Utah 2d 343, 346 [374 P.2d 309].) In my opinion, it should be followed here. When two parties mistakenly believe that a contract exists between them, but the agreement is too uncertain and indefinite to be enforced, the one rendering performance and incurring expenses at the request of the other should receive reasonable compensation therefor without regard to benefit conferred upon the other. Such a rule places the loss where it belongs—on the party whose requests induced performance in justifiable reliance on the belief that the requested performance would be paid for.
I would reverse the judgment and remand the case to the trial court to determine the damages pursuant to the foregoing rule.
Mosk, J., concurred.
Appellant’s petition for a rehearing was denied January 25, 1967. White, J.,* sat in place of Tobriner, J., who deemed himself disqualified. Traynor, C. J., and Mosk, J., were of the opinion that the petition should be granted.

The original invitation to bid sent to Coleman by North American stated "If you are the successful bidder, you will be offered a purchase order. ...” (Italics added.)

Although each purchase order sent to Coleman contained in small print the recital that it would become a binding contract when accepted ‘ ‘ either by acknowledgment or delivery, ’ ’ it advised in much larger print, "Please Sign Acknowledgment op This Purchase Order and Beturn Immediately Attention: Purchasing Department.” Accompanying each purchase order was a separate sheet entitled "Acknowledgment op Purchase Order,” providing space for the offeree-seller’s signature over the repeated designation, "Acknowledgment—Beturn Immediately to Purchasing Department.” Even more significantly, each of the five "go ahead” telegrams received by Coleman on July 24 declared that North American’s contractual liability would be limited to a specified figure "pending formal execution of confirming purchase order amd your acknowledgment thereof” (italics added). In ascertaining the intent of parties to a contract the written portions, e.g., the telegrams in the case at bar, control its printed portions, e.g., the mention of "delivery” in the purchase order form. (Civ. Code, § 1651.)

A Coleman interoffice memorandum dated July 8 states that placing the payload center of gravity at 35 inches above the rails “will practically double the loads on most of the members and cause most of the stress work performed to date to be recalculated. A lot of redesign will have to be performed as a result of the increased member sizes, the fabrication costs will increase due to material sizes increases, and the schedule will suffer a delay.
“A cost estimate is being prepared for these changes and little work can be performed that will not be affected by the above changes. '’
Coleman's project engineer, Mr. Nolan, testified that his opinion as of July 8 was that if the payload center of gravity were to be placed at 35 inches above the rails it would “cause most of the stress work performed to date to be recalculated, ” “ a lot of redesign would have to be performed,” “the fabrication cost will increase,” “the schedule will suffer a delay,” and “little work [could] be performed that would not be affected by the changes on this project.” Mr. Nolan further testified that the engineering necessary to place the payload center of gravity at the point specified in the telephone call of July 8 “would be entirely *415different” from that required to build a trailer with a payload center of gravity at rail height.
North American’s project engineer, Mr. Burcombe, testified on cross-examination that the missing specification of a vertical payload center of gravity was an “important” and “very significant” dimension in this case.

In his opening statement to the trial court, Coleman’s attorney stated: “Now, have in mind, I know the cases are legend that holds [sic] that an agreement to hold in the future is no agreement at all ... I wonder if that is where we are. An agreement to agree. Assuming that’s where we are, then, of course, we will be left with a quantum meruit. ...”

Lack of agreement concerning specifications, especially where, as here, they deal with the design of a major element constituting the object of the contract, may vitiate any attempt upon the part of the parties to have an enforceable agreement. (See Colorado Corp. v. Smith, 121 Cal. App.2d 374, 376-377 [263 P.2d 79]; 1 Williston, Contracts (3d ed.) § 42, pp. 135-136; cf. Putman v. Cameron, supra, 129 Cal.App.2d 89, 95-96.)

It has been held that when the price term is expressly left to be agreed *418upon, there is no contract until agreement is reached. (California Lettuce Growers, Inc. v. Union Sugar Co., supra, 45 Cal.2d 474, 481-482; Avalon Products, Inc. v. Lentini, supra, 98 Cal.App.2d 177, 179-180; Noel v. Dumont Builders, Inc., 178 Cal.App.2d 691, 696 [3 Cal.Rptr. 220]; Beech Aircraft Corp. v. Ross (10th Cir. 1946) 155 F.2d 615, 618.)
Although this rule has been abrogated in the area of contracts for the sale of goods (Com. Code, § 2305), the comments to that section point out that, at least in part, the change relies on other unique features of the Uniform Commercial Code. (See Com. Code, §2305; Uniform Commercial Code, com. 1.)

Although in the absence of a specified date, courts will imply a reasonable time for performance (Wong v. Di Grazia, supra, 60 Cal.2d 525, 536), the absence of a specified time contributes to the uncertainty as to whether there was an agreement. (Compare Hancock Oil Co. V. McClellan, 135 Cal.App.2d 667, 670 [288 P.2d 39].)

See 3 Corbin, Contracts (1960 ed.) § 599, p. 595, fn. 22; Fuller & Perdue, The Reliance Interest in Contract Damages: 2, 46 Yale L.J. (1937) 373, 395-396; Note (1928) supra, 26 Mich.L.Rev. 942, 943-944.

Retired Associate Justice of the Supreme Court sitting under assignment of the Chairman of the Judicial Council.