Jim Whitney

/ Economics 495

Case summary brief (2-page maximum)

Recorder name: / Alena Morris
Case name: / MINNEAPOLIS AND ST. LOUIS RAILWAY v. COLUMBUS ROLLING MILL.
Citation; Date: / Argued November 12, 1886; Decided November 29, 1886
Court: / United States Supreme Court
Name (if specified) and description of litigants at the original trial court level
Plaintiff: / Minneapolis & St. Louis Railway; purchaser of iron rails
Defendant: / Columbus Rolling Mill; seller of iron rails
Facts of the case:
In 1879, Minneapolis & St. Louis Railway inquired with Columbus Rolling Mill about purchasing 2000 tons of iron rails at $54 per ton. A correspondence followed, in which the plaintiff asked for 1200 tons to be entered and fulfilled. The defendant replied that an order of that size at the price suggested could not be fulfilled. The plaintiff asked for 2000 to be entered, but was not responded to. In 1880, Columbus Rolling Mill denied the existence of any contract to fulfill the order.
Procedural history (remedy sought, prior rulings, grounds for appeal, etc., as available):
Remedy Sought: The Plaintiff claimed that the defendant had not fulfilled the contract and wanted the contract fulfilled.
Circuit Court Southern District of Ohio: Ruled in favor of the defendant; plaintiff sued.
Court opinion (key issues and arguments):
Opinion of the Court, delivered by Mr. Justice Gray;
No contract is complete without agreement to the terms by both parties. When an offer has been neither rejected nor accepted, the negotiations remains open. When an offer is rejected, however, it leaves the matter as if no offer had ever been made. Moreover, an acceptance to the contract on terms not specified in the initial offer is also a rejection and ends the negotiation, unless the party who made the initial offer renews that offer. The other party cannot fall back on the initial offer. The offer must also be accepted within a reasonable time frame, or within the time limit set by the party who made the initial offer.
The judges in this case agreed that the plaintiff rejected the initial offer by offering to buy 1200 tons. The defendant rejected to fulfill these terms; This rejection did not allow for the plaintiff to fall back on the original terms of the offer, 2000 tons at $54 per ton. The negotiations were therefore closed and thus the plaintiffs attempts to fall back on the original offer were ineffectual and created no rights against the defendant.
Dissenting opinion, if any (key issues and arguments):
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Disposition of case:
Held

ANALYSIS OF THE CASE

1. Course topic of the case: / Contract law; the creation of terms of a contract and subsequent rejection or acceptance of terms.
2. How does the case relate to the course topic?
This case shows that contracts require both an offer and acceptance. Moreover, a counter offer implies both a rejection of the original offer and a cancellation of the original offer.
3. Which previously assigned cases, if any, are related to this case, and how does this one differ?
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4. How does the case affect economic incentives and efficiency?
One of the fundamental functions of contracting is to deter both parties from acting opportunistically, which decreases the potential and probability of cheating one of the parties; i.e. when we looked at the worksheet of brokers/investors with and without contracts. Contracts also provide the incentive to take an offer when presented. If a party denies an offer, that original offer is not guaranteed again. Contracts increases efficiency by reducing ability to haggle.