Story Case

The Monroe Trust Company of New York sent a telegram to the Brewster Stock and Bond Company of Boston, offering to buy one hundred shares of the Pennsylvania Railroad Company stock, provided that they could be purchased at ninety-eight dollars a share, and provided delivery was made to its agent in Boston on the same day. Two hours after the receipt of this telegram, the Brewster Company delivered one hundred shares to the Monroe Trust Company's agent at Boston and debited that company for $9800. The Brewster Company never directly answered the telegram of the Monroe Trust Company, and considered that the delivery of the stock amounted to an acceptance.

At the time the stock was delivered to the agent in Boston, it was selling on the market at ninety-seven dollars a share, having lost in value two dollars a share since the previous day. The Monroe Trust Company thereupon maintained that no contract ever existed between itself and the Brewster Company to pay ninety-eight dollars a share for the stock, since the latter company never expressly accepted its offer made in the telegram. The trust company held that the delivery of the stock and its acceptance by its agent amounted to a new contract and its liability was merely for the market price. Is this a correct contention ?

Ruling Court Case. Reif Vs. Paige, Volume 55 Wisconsin Reports, Page 496; Volume 42 American Reports, Page 731

A certain building was burning. On the fourth floor of the building was the wife of the defendant, Paige. The fire had made such progress that it seemed scarcely possible that she could be rescued. Paige said that he would give $5,000 to any person who would bring the body of his wife from the burning building, whether dead or alive. Reif heard the offer. He entered the building and, after a desperate struggle, located the body and brought it forth.

Thereafter he demanded the $5,000 of Paige, who refused to pay it. Thereupon Reif brought this action to recover the money in question. The defendant contended that he was not bound by this because there was no consideration for his promise to pay the $5,000.

Decision

The offer of Paige in this case was a promise to any one who was willing to risk his life in the burning building in an attempt to rescue the body of the woman. Until the act of rescue was done the offer continued a mere promise, not binding upon Paige. As soon as Reif did rescue the body, however, his promise to pay the money became a binding promise.

This was, therefore, a unilateral contract. In accordance with the offer, by an act, Reif had performed or done all that he was required to do; but the promise of Paige still continues binding upon him, as yet unperformed.

Accordingly, it was held that the plaintiff, Reif might recover of the defendant, Paige, the $5,000.

Ruling Law. Story Case Answer

An unilateral contract is one in which there is a promise on one side only, the consideration on the other side having already been executed. Such contracts are possible only where the offer is made under such circumstances that it can be accepted by an act, and thereby be converted into a binding obligation. This is usually the nature of those contracts which result from the offer of a reward for the doing of an act. For instance, if A issues a statement offering $5 to the man who will find and return his watch, B could not accept the offer by promising to find the watch and return it. It can be accepted only by doing the act. Only one promise therefore ever exists in a unilateral contract.

In the Story Case, the offer of the trust company was so worded that it could be accepted by the performing of an act - namely, the delivery of the stock. Therefore, the trust company is liable for the price stipulated.

Had the trust company added in its telegram "wire reply", the Brewster Company could have accepted only by making a counter promise to deliver the stock. The contention of the trust company that no contract based on their telegram existed of delivery of the stock would have been correct, and they would then have paid only the market price.