Friday, December 27, 2013

Houston Dairy, Inc. v. John Hancock Mutual Life Insurance Co. case brief

Houston Dairy, Inc. v. John Hancock Mutual Life Insurance Co. case brief summary
643 F.2d 1185 (1981)

Appellant borrower challenged an order from the United States District Court for the Northern District of Mississippi which found appellee lender had both waived a seven-day limitation and validly accepted appellant's counter offer. Accordingly, the court held that the parties had entered into a binding contract and awarded appellee the $ 16,000 deposit as valid, liquidated damages for breach of the loan agreement.

Appellant borrower returned appellee lender's loan commitment letter and good faith deposit after the seven days appellant required when it offered the loan. Appellee then obtained a better loan, and requested a refund of its deposit, which was refused. The district court ruled that there was a binding contract between the parties and that the deposit represented valid, liquidated damages forfeited by appellant when it breached the contract.


  • On appeal, the court held the expiration of the seven-day time period, terminated appellee's offer. 
  • Appellant's action in signing and returning the commitment letter subsequent to the termination of the offer constituted a counter offer which appellee could have accepted within a reasonable time. 
  • Appellee's silence plus retention of appellant's money was not acceptance and notification. 
  • Nor was the depositing of the check sufficient to constitute acceptance of an offer when appellant had no previous dealings or statements that would indicate appellant knew of appellee's policy concerning offers it would not accept.

The judgment finding appellant borrower breached its contract to obtain a loan and forfeited its good faith deposit was reversed. When appellant returned appellee's loan commitment letter several days late, it was proposing a counter offer which appellee lender rejected. Because appellant's policies were unknown to appellant, appellant was entitled to revoke its counter offer and obtained a refund of its deposit.

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