It is well established that when a prospective customer, upon the solicitation of a sales representative, signs a written order for goods or services upon terms that expressly provide that the order is taken subject to the acceptance or approval of the salesman's home office or of his principal, the order is nothing more than an offer by the customer and does not become a contract until acceptance of the order has been communicated to the customer.
The plaintiff, a contractor’s sales representative, took the defendant’s order for the construction of two garages, subject to the approval and acceptance by the office manager. The representative called the defendant’s wife to alert him of the approval. In the meantime, the defendant entered into another agreement with a different construction company for the garages. At trial, the court found that the defendant breached the contract and awarded damages based on the liquidated damages clause to the plaintiff.
Did the defendant breach the contract?
No, the appellate court reversed the lower court’s ruling.
The court held that the lower court erred in determining the defendant’s wife was his agent. Furthermore, informing defendant's wife was not equivalent to informing the defendant. Because the plaintiff had yet to perform any work, the court determined that the awarded damages were really a penalty for cancellation of the contract Thus, it reversed and remanded for a new trial.