Court Finds Offer and Acceptance in Email - Contract Law - U.S. Tenth Circuit
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Court Finds Offer and Acceptance in Email

Get ready for a flashback to first-year Contracts, with a modern twist.

The Tenth Circuit Court of Appeals ruled recently that a bank and a hospital had formed an enforceable contract regarding the sale of medical equipment in an offer-and-acceptance-based breach of contract dispute.

Republic, a bank in Utah, acquired, several pieces of medical equipment — a CT scanner, a CT workstation, an ultrasound machine, and an ultrasound table — through a lease default. Republic hired Tetra Financial Services to market the equipment to potential buyers. In 2007, West Penn Allegheny Health System expressed an interest in buying the equipment.

On February 13, 2008, Mark Loosli, a Tetra employee acting on behalf of Republic, offered via email to sell the CT scanner to West Penn for $750,000, and the ultrasound equipment for an additional $30,000.

Loosli was directed to talk to West Penn’s negotiator, Michele Hutchison, so he left Hutchison a voicemail asking her to return his call to discuss Republic’s offer further.

Rather than returning Loosli’s call, Hutchison sent Loosli an email on February 26, stating:

We are interested in the 64 slice scanner, CT work station, ultrasound and ultrasound table.

Our offer is as follows: Scanner - $600,000CT Workstation - $50,000 Ultrasound and ultrasound table - $26,500 If there is a good time for us to talk live, let me know.

Upon receiving Hutchison’s email, Loosli called Hutchison to discuss the specific terms of the deal. On March 4, 2008, Loosli emailed Hutchison stating that he had conveyed her offer to Republic’s President, Boyd Lindquist, and that he hoped to have “something concrete in the next day or so.” Loosli later emailed Hutchison to let her know the deal had been approved.

On May 1, 2008, the deal for the CT scanner fell apart. West Penn claimed it was not contractually bound to purchase any of the items because West Penn had not yet signed a purchase order or sales agreement. Republic maintained that there was offer and acceptance via email.

Republic decided to auction the equipment in order to obtain fair market value. The auction yielded $350,303.76; a difference of $299,694.24 from the agreed upon price between West Penn and Republic. Republic sued West Penn for the difference.

Here, the Tenth Circuit Court of Appeals found that the email communications between West Penn and Tetra/Republic satisfied the Uniform Commercial Code requirements. While West Penn claimed that it wasn’t obvious that Republic had accepted the terms of its counter-offer, the appellate court concluded that the evidence, taken as a whole, indicated that Republic’s response was indeed intended as an acceptance, and that West Penn understood it as such. Thus West Penn could be held liable for breach of contract.

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