The test for an offer's duration in the absence of an express or implied limitation is a "reasonable time." A reasonable time for the acceptance of an offer is that which is reasonable to the offeror rather than to the offeree. It is the time that a reasonable man in the exact position of the offeree would believe to be satisfactory to the offeror. It is not the time that the offeree would like to have, in order to watch the market or adjust his other affairs or to make estimates or calculations, however reasonable it may be for him to desire the necessary time. The purpose of the offeror, to be attained by the making and performance of the contract, will affect the time allowed for acceptance, if it is or should be known to the offeree. In such case there is no power to accept after it is too late to attain that purpose.
Plaintiff lender and the defendant borrower corporation entered into a loan agreement. When the defendant defaulted on the loan, the officers held discussions with the plaintiff to work out ways to repay the loan. A proposed plan for repayment, which provided for a recapitalization of the borrower, was submitted by the officers to the lender. The proposal requested that the lender examine the proposal and advise the borrower of its reaction at the earliest possible time. The lender prepared a written acceptance of the offer which was deliberately withheld for over a week. The lender filed an action to recover the loaned amount and for specific performance under the proposed plan. The borrower confessed judgment on the claim for the loaned amount, and the district court dismissed the specific performance claim. On appeal, the court afirmed.
Was the offer accepted within a reasonable time, thus making it a binding contract?
The court affirmed, holding that the lender's acceptance of the proposed plan was not timely made. The court held that the test for an offer's duration in the absence of an express or implied limitation was a reasonable time and that acceptance of the offer was not made within a reasonable time under the circumstances. The evidence in the present case substantiates the trial court's finding that acceptance of the offer was not made within a reasonable time under the circumstances and that there was, therefore, no binding contract.