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Recently I have reviewed a number of Purchase and Sale Agreements brought in both by agents and by principals. A frequent question has been, “Is this enforceable?” The answer to that question often turns on whether the parties have a “meeting of the minds.” Because it is easy to get confused, a short review of the rules on offer and acceptance appears to be in order. Last fall, our state Supreme Court restated the basic rules in Sea-Van Investments v. Hamilton, 125 Wn. 2d. 120 (1994).

In Sea-Van, a developer tried to buy two adjoining ten-acre parcels to build a golf course. The developer made an offer on the properties via a letter. The letter stated the owners could accept either of two purchase options. The first option set a price per acre of $3,000, 20% down, an interest-only note for two years on the balance, the note to be secured by a Deed of Trust. The second option was for $2,500 per acre, all cash at closing. Both options were subject to the developer’s receiving clear title and both parcels closing together. No completed Deed of Trust form accompanied the letter.

The developer later learned that one of the properties had a $60,000 judgment encumbering it. The developer told the owner of the encumbered parcel he could not purchase it due to the judgment. The developer then tried to close on the remaining parcel. The property owners refused to sell, saying both parcels had to sell together. Later, the property owners refused to sell under the terms of the original offer. The developer sued the owners for specific performance on their purchase and sale agreement and/or for damages.

The Supreme Court refused to side for the developer. The Court ruled that there was no “meeting of the minds” as to the terms of the contract, and thus no contract to enforce. I have taken the liberty of paraphrasing the rules the Court cited in making its decision. They are as follows:

The acceptance of an offer must exactly reflect the terms of the offer, or there is no contract;
An acceptance which changes the terms of the offer in any “material respect” is a counter offer, and not an acceptance. Thus, no contract is formed;
An acceptance can request a modification of terms PROVIDED the request is not a condition of acceptance, and the acceptance stands on its own;
If additional conditions are requested in the acceptance, AND they can be implied from the terms of the original offer, then they are not a “material” variance from the offer and a contract will be formed. For example, the Sea-Van Court reviewed the owners’ request for quarterly interest payments rather than the monthly interest payments and concluded this was not a “material variance;” and
What constitutes a “material variance” depends on the facts of each case.

In Sea-Van, the Court applied the above rules to the facts and concluded that the owner’s initial attempt to close the sales separately worked as a counter offer, and not an acceptance. The Court also found at least one of the owners could not supply clear title, and that the developer had not waived this condition. The Court also held that the Deed of Trust mentioned in the developer’s offer was not attached to the offer. Accordingly, most of the precise terms of the financing were not discussed or agreed to by the parties.

For all these reasons, the court found that there was no meeting of the minds, and thus no contract.

In your own work as agents, be sure to keep the above rules in mind as your principals instruct you to make or accept an offer. As the Sea-Van Court stated:

It seems necessary to reiterate once again that negotiation, not litigation is the proper method for agreeing upon these vital terms. Agreements to buy and sell real estate must be definite enough on material terms to allow enforcement without the Court supplying those terms.

This article contains information of general interest, and is not intended to be, nor should it be relied upon as a substitute for specific legal advice.