Bishop v. Eaton - 161 Mass. 496, 37 N.E. 665 (1894)

Rule:

In a case of an offer to be bound in consideration of an act to be done, the doing of the act constitutes the acceptance of the offer and furnishes the consideration. Ordinarily there is no occasion to notify the offeror of the acceptance of such an offer, for the doing of the act is a sufficient acceptance, and the promisor knows that he is bound when he sees that action has been taken on the faith of his offer. But if the act is of such a kind that knowledge of it will not quickly come to the promisor, the promisee is bound to give him notice of his acceptance within a reasonable time after doing that which constitutes the acceptance. In such a case it is implied in the offer that, to complete the contract, notice shall be given with due diligence, so that the promisor may know that a contract has been made.

Facts:

On January 7, 1887, Harry Eaton gave his promissory note for two hundred dollars to one Stark, payable in one year. The plaintiff signed the note as surety, relying on the letter of the defendant, and looked to the defendant guarantor solely for reimbursement, if called upon to pay the note. Shortly afterward the plaintiff wrote to the defendant a letter stating that the note had been given and its amount, and deposited the letter in the mail at Sycamore, postage prepaid, and properly addressed to the defendant at his home in Nova Scotia. The letter was not received by the defendant. At the maturity of the note, the time for its payment was extended for a year, without the knowledge of the defendant. On October 1, 1981, the plaintiff paid the note, and thereafter made no effort to collect it from Harry Eaton, the maker. Subsequently, the plaintiff instituted an action to recover on the guaranty contract. The trial court ruled that the plaintiff was entitled to recover, and ordered judgment for him. On appeal, the defendant alleged exceptions, arguing that the letter constituted only an offer of a guaranty, that delay in giving him notice after accepting and acting upon the letter was unreasonable, and that he was discharged by virtue of an extension in the due date of the note.

Issue:

1. Did the letter constitute an offer of a guaranty?
2. Under the circumstances, should the defendant be discharged from liability?

Answer:

1) Yes. 2) Yes.

Conclusion:

The Court noted that the language relied on by the plaintiff was an offer to guarantee, which was to become effective as a contract upon the doing of the act referred to. It was an offer to be bound in consideration of an act to be done, and in such a case, the doing of the act constituted the acceptance of the offer and furnished the consideration. In the case at bar, the Court held that, where the guarantor would not know of himself, from the nature of the transaction, whether the offer has been accepted or not, that he was not bound without notice of the acceptance, seasonably given after the which constituted the consideration. However, the Court found that the plaintiff did all that he was required to do when he seasonably sent the defendant a letter by mail informing him of what had been done. Notwithstanding this, however, the Court noted that when the note became due, the time for the payment was extended without the consent of the guarantor. The Court stated that the guarantor was thereby discharged unless he subsequently assented to the extension and ratified it.