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Empire Machinery Co. v. Litton Business Telephone Systems

    Brief Fact Summary.

    Plaintiff sued Defendant for breach of contract when Defendant failed to ship or install an “interconnect” telephone system on Plaintiff’s property. The trial court granted Defendant’s motion for summary judgment. Plaintiff appealed.

    Synopsis of Rule of Law.

    If an offeree with authority to legally bind its organization takes steps to begin performance of its contractual obligations that would lead a reasonable offeror to believe that the contract has been accepted, such conduct may constitute acceptance of the contract.

    Facts.

    In summer 1973, Empire Machinery Co. (Plaintiff) became interested in acquiring an “interconnect” telephone system from Litton Business Telephone Systems (Defendant). Murphy, Defendant’s National Account Manager, personally contacted Plaintiff and submitted a proposal for the phone system for Plaintiff’s consideration. Plaintiff and Defendant entered negotiations. On July 30, 1973, Murphy submitted a letter to Plaintiff stating that “upon receipt of a signed order and deposit” from Plaintiff, Defendant would install an interconnect telephone system on Plaintiff’s property. Following receipt of this letter from Murphy, Whitman, Plaintiff’s president, signed an “Equipment Sales Agreement” and delivered to Defendant a deposit of $8,546.00 as a down payment. Defendant deposited these funds upon receipt. The Equipment Sales Agreement contained a clause stating that the agreement would only become effective and binding after “approval, acceptance, and execution” of the agreement by Defendant’s home office. Neither Murphy nor any member of Defendant’s home office signed the Equipment Sales Agreement. On August 9, 1973, Plaintiff was instructed by Murphy to send a form letter to Mountain Bell, the telephone service provider, designating Defendant as Plaintiff’s representative with authority to act in connection with the installation of the interconnect system on Plaintiff’s property. Plaintiff provided a letter stating that it had formed a “contractual relationship” with Defendant. On August 30, 1973, Defendant sent a similar letter to Mountain Bell stating that it had formed a “contractual relationship” with Plaintiff. Additionally, Plaintiff, at Defendant’s request, purchased approximately $12,000 worth of electrical equipment to support the interconnect system equipment that would be installed by Defendant. Finally, on December 3, 1973, Scott, Defendant’s service manager, requested a new telephone number for Plaintiff to be put in service as of December 21, 1973. After this date, Defendant never shipped nor installed the interconnect system on Plaintiff’s property. Plaintiff sued Defendant in Arizona state court, alleging breach of contract. The trial court granted summary judgment for Defendant on the ground that no binding contract was formed between Defendant and Plaintiff. Plaintiff appealed.


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