Winders v. . Kenan

77 S.E. 687, 161 N.C. 628

• Court: Supreme Court of North Carolina
• Decided: March 19, 1918
• Status: Published

Opinion

AlleN, J.

In bilateral contracts there are reciprocal promises, so that there is something to be don'e or forborne on both sides, while in a unilateral contract there is a promise on one side only, the consideration on the other side being executed. 9 Cyc., 244. An option belongs to the latter class. It is a contract to give another the right to buy, and not a contract to sell; and it is because of the fact that the other party is not compelled to buy, that it is spoken of as an offer.

In Black v. Maddox, 104 Ga., 157, approved in Trogden v. Williams, 144 N. C., 199, it is defined to be “the obligation by which one binds himself to sell, and leaves it discretionary with the other party to buy, which is simply a contract by which the owner of property agrees with another person that he shall have the right to buy the property at a fixed price within a certain time.”

If not based on a valuable consideration, the rigjit to buy may be withdrawn at any time before acceptance (Paddock v. Davenport, 107 N. C., 710); but if there is a valuable consideration to support it, the right continues during the period fixed in the option. Cummins v. Beaver, 103 Va., 230. In this case the Court said: “The distinction between an option given without a consideration and an option given for a valuable consideration is, that in the first case it is simply an offer to sell, and can be withdrawn at any time before acceptance, upon notice to the vendee; but, in the second, where a consideration is paid for the option, it cannot be withdrawn by the vendor before the expiration of the time specified in the option.”

If no conditions are imposed upon the prospective purchaser, and it is a simple proposition giving the right to buy, upon notice of acceptance it becomes a contract of sale and is obligatory on both parties, and it is then the duty of the seller to tender his deed and of the purchaser to pay according to its terms. Hardy v. Ward, 150 N. C., 393.

The maker has, however, the right to impose conditions which must be performed precedent to the exercise of the right to buy, and among these is the payment of the agreed price. Weaver v. Burr, 31 W. Va.; 201; Pollock v. Brookover, 6 L. R. A. (N. S.), 407; Trogden v. Williams, 144 N. C., 201.

In the Trogden case the language in the contract was: “If they shall, within the time hereinafter specified, elect to purchase said land, then and in that event they shall pay one-half cash and the balance in twelve months, to be secured by mortgage”; and the Court held that “payment of one-half the purchase money and securing the other half constitute the method of electing to purchase,” and quoted with approval the following excerpt from Weaver v. Burr, supra: “The period of sixty days from 7 June, 1883, mentioned in the option, within which plaintiff had the privilége of buying the land . . . expired on 6 August, 1883. During the whole of that period and during the whole of 6 August plaintiffs had the privilege of converting the offer of John Burr into a valid and binding contract by an unconditional acceptance of and compliance with the terms thereof. They could not do so in any other manner than by actual payment or tender of the whole price of the land before the sixty days expired. Neither could they withhold the payment, or tender of payment, until a proper deed was executed or survey could be made and the excess number of acres ascertained.” Contracts of this character, being unilateral in their inception, are construed strictly in favor of the maker, because the other party is not bound to performance, and is under no obligation to buy, and it is generally held that time is of the assence of such a contract, and that the conditions imposed must be performed in order to convert the right to buy into a contract of sale.

The acceptance must be according to -the terms of the contract, and if these require the payment of the purchase money or any part thereof, precedent to the exercise of the right to buy, tbe money must be paid or tendered, and a mere notice of an intention to buy or tbat tbe party will take tbe property does not change tbe relations of tbe parties. Bateman v. Lumber Co., 154 N. C., 251; Clark v. Lumber Co., 158 N. C., 139; Kelsey v. Crowther, 162 U. S., 404; Pom. Spec. Per., sec. 387; Weaver v. Burr, supra; Trogden v. Williams, supra; Pollock v. Brookover, 6 L. R. A. (N. S.), 407; Killough v. Lee, 2 Tex. Civ. App., 260; Stembridge v. Stembridge, 87 Ky., 94; Shields v. Horback, 30 Neb., 540; Holleman v. Conlon, 143 Mo., 379.

In tbe Bateman case, Justice Hoke, in discussing a provision in a contract in regard to land, says: “Tbe provision in question, conferring, as it does, a privilege, and unilateral in its obligation, partakes to some extent of tbe nature of an option, in wbicb time is ordinarily of tbe essence, and tbe accepted doctrine in reference to tbis and other instruments containing tbe same and similar language is tbat they should be strictly construed. There is, moreover, a strong inclination on tbe part of tbe courts to view any delay with great strictness, on tbe ground tbat tbe party seeking to enforce performance was not bound, while tbe other party was bound,” and quotes with approval from Estes v. Furlong, 59 Ill., 298, tbat “when a contract is in any wise unilateral, tbe court will regard any delay on the part of tbe purchaser with especial strictness.”

In tbe Kelsey case tbe Court said: “Tbe action was in tbe nature of a bill for specific performance of a contract for tbe sale and purchase of a tract of land. If tbe contract is construed as making it the duty of Orowtber to tender tbe abstract, yet bis failure to do so did not dispense with performance or tbe offer to perform on tbe part of tbe complainants. His failure to furnish tbe abstract might have justified tbe complainants in declaring themselves off from tbe contract, and might have formed a successful defense to an action for damages brought by Crowther. But if they wished to specifically enforce tbe contract, it was necessary for the complainants themselves to tender performance. To entitle themselves to a decree for specific performance of a contract to sell land, it has always been held necessary tbat tbe purchasers should tender tbe purchase money. Tbis is tbe rule in tbe ordinary case of a mutual contract for the sale and purchase of laud. And tbe rule is still more stringently applied in the case of an optional sale, like the present one, where time is of the essence of the contract, and where Crowther could not have enforced specific performance. In such a case, if the vendee wishes to compel the other to fulfill the contract, he must make his part of the agreement precedent, and cannot proceed against the other without actual performance of the agreement on his part or a tender and refusal.”

In the case from Texas the appellant paid $50 for an option to buy within six days thereafter a lot in Galveston for $12,000 cash, upon payment of which appellee was to make deed: Within the six days he notified the agent of appellee that he would take it, and offered to deposit such amount as might be required of him to bind the purchase pending examination of title, which was declined, and payment of the whole $12,000 required, and it was held that payment of the purchase price was necessary to constitute a valid acceptance.

And in the case from Missouri the Court declares the same principle, saying: “The distinction is justly taken by the authorities between a perfected contract, that is, where both parties are bound, and therefore, ordinarily speaking, time is not regarded as of the essence of the contract, and an option contract, where only the intended vendor is bound and the intended vendee not bound, where the relation of vendor and purchaser does not exist and does not become existent until acceptance by the proposed vendee by the performance of the specified condition and within the time specified. In such cases a court of equity will hold that in consequence of the one party being bound and yet unable to enforce the unilateral contract against the other, who is free, that the parties do not 'stand on an equal footing, and that, in consideration of these things, time must be deemed of the essence of the contract, and that when the time given by the memorandum expires without performance on the part of the option holder, the right of such holder is ipso facto gone.”

It is needless to quote further from the authorities cited. They fully sustain the principle announced, except, perhaps, the Clark case, which is only pertinent upon the proposition that an acceptance must be upon the terms imposed by the offer.

Applying these principles to the facts, we are of opinion that the plaintiffs are not entitled to specific performance.

The paper-writing does not purport to be a contract to convey, is unilateral, and is what is designated as an option.

In Alston v. Connell, 140 N. C., 488, the paper construed by the Court was as follows: This is to certify that I, Thomas Connell, did on this the 5th day of December, 1898, purchase the 600-acre tract, known as the ‘Tusculum farm/ and doth thereby bind himself, heirs and assigns, at any time previous to 1 December, 1898, to sell the same to whom P. G. Alston may direct for $3,502. Witness, etc. Thomas Connell (Seal). Two hundred and fifty dollars of which is for improvements for 1899, which if not used, or any part thereof, is to be returned to the said P. G. Alston. (Signed) Thomas Connell.”

This paper had many more of the characteristics of a contract to sell than the one relied on by the plaintiff, because the maker binds himself to sell before a certain time; but the Court said: “We agree with the defendants, that this was' a unilateral contract, commonly called ‘an option’ — a proposition to sell, binding and irrevocable by the owner till- the stipulated time expires, but in which time was of the essence under ordinary circumstances, and, in cases like the present, requiring payment of the price as a condition precedent.”

In the writing before us the makers, in consideration of $500 paid, agree upon the payment of $10,000, of which $2,000 was to be paid 1 April, 1905, and the remainder in four annual installments at 6 per cent interest, to give, grant, sell, and convey by proper deed, etc., which if we adopt a liberal and not a strict construction, can mean no more than that the $500 was paid for the right to buy, and that this right could not be exercised, nor were the makers under any obligation to convey, until payment or tender of the purchase money.

If this is the correct interpretation of the writing, the notice given by the plaintiffs in March, 1905, that they would take the timber, did not change the relations of the parties and con vert the writing into a contract to sell, because tbe writing imposed the further condition of payment of the purchase money.

Nor can the conversation at the time the deed was written have this effect, as no money was presented or tendered, and it amounted to no more than an expression of readiness to make the first payment of $2,000 upon delivery of the deed.

It may be conceded, as contended by the plaintiffs, for the purposes of this appeal, and not, otherwise, that the conversation with one of the defendants in March, the delay in the execution of the writing sued on and in the execution of the deed, work a waiver of the right to demand payment on 1 April, 1905; but it appears from the record that the paper-writing was complete on 25 April, 1905, and was registered on 1 May, thereafter, and the plaintiffs were notified on 27 April,-1905, that the deed was ready for delivery.

After notice of the execution of the writing and of the deed, there was no excuse for further delay, and it was then incumbent on the plaintiffs to pay or tender the sum of $2,000 at •least, promptly.

They did not do this, but, on the contrary, waited until 30 May, 1905, before they offered to pay any amount, and then only the sum of $1,500, which was not in compliance with the writing upon which they sue, in time or amount.

The defendants refused .to accept, and declared the contract at an end, as they had the right to do, and it could not be revived without their consent by subsequent offers to pay.

In the view of the case we have adopted, the altercation of the deed after it was written is not material, as the correspondence shows that while -the defendants wished some modification of the option, they did not refuse to execute a deed in accordance with its terms until the plaintiffs had by delay lost their right to demand it.

If under the writing the plaintiffs had been required to do no more than give notice of acceptance, they would have had the right to delay payment until a deed was tendered conforming to the writing, but they were required to pay before they were entitled to demand a deed of any kind, and had not placed themselves in position to criticise the one offered.

We bave discussed tbe case in tbe light most favorable to tbe plaintiffs, upon tbe assumption that they could bave demanded a deed upon tbe payment of $2,000, but we do not so decide, as tbe writing says upon tbe payment of $10,000, of wbicb $2,000 was to be paid on 1 April, 1905, and tbe remainder in four annual installments, tbe makers agree to sell and convey.

For tbe reasons given, we are of opinion there was no error in entering tbe judgment of nonsuit.

Affirmed.