S & M MACH. v. PARAVIS Indus. - No. 266316, 2007 Mich. App. LEXIS 377 (Ct. App. Feb. 15, 2007)

Rule:

An option is a continuing offer by which the owner of property agrees with another that the latter may buy the property at a fixed price within a specified period, securing the privilege to buy. An option is composed of two elements: (1) the offer to sell, and (2) the completed contract to leave the offer open for a time certain. Consideration supporting the option must be distinguished from consideration for the sale in the event of acceptance.

Facts:

In January 2002, S&M Machinery, Inc. learned that Lunar Industries was in need of a wire electric discharge machine (EDM). S&M Machinery, a used machinery dealer, knew of an available EDM owned by Dynamic Machine. According to Mark Conway, a salesperson for S&M Machinery, Dynamic was willing to sell the EDM for $95,000, and any amount S&M Machinery obtained above that price from a buyer would go to S&M Machinery. S&M Machinery claimed that it offered the EDM to Lunar Industries for $110,000 and, following an inspection, Lunar Industries indicated they were very interested in the machine, but wanted to have a weekend to deliberate. According to Conway, Dynamic agreed to hold the machine over the weekend. However, Dynamic actually sold the machine to another dealer on the same day it allegedly agreed to the hold. That dealer then completed the sale to Lunar Industries. S&M Machinery brought a breach of contract action against Dynamic claiming that Dynamic had violated an option contract to hold the machine for the weekend. The district court concluded that there was no evidence of a valid contract other than Conway's "self serving statement" and granted Dynamic’s motion for summary disposition. The district court also granted a motion for sanctions brought against S&M Machinery.

Issue:

Was there a binding promise to hold the offer open in the instant case?

Answer:

No.

Conclusion:

S&M Machinery failed to present any evidence that there was consideration supporting Dynamic’s alleged promise to leave the offer open over the weekend. In fact, S&M Machinery’s counsel admitted "[i]nitially there was no consideration." Accordingly, if such a promise to hold the offer open was made, it was a nudum pactum, i.e., an unenforceable voluntary promise. Thus, the fact that Conway and Dynamic may have disagreed about whether the promise to hold open was actually made is not a material dispute. Even if a promise to hold the offer open was made, the offer was not legally binding because S&M Machinery exchanged nothing for the offer.