Akers v. J.B. Sedberry, Inc. – Case Brief
Akers v. J. B. Sedberry, Inc., 39 Tenn. App. 633, 286 S.W.2d 617 (1955).
Facts: Sedberry (D), through majority shareholder Mrs. Sedberry, entered into a contract with Akers (P) whereby Akers would serve as Chief Engineer for five years. Sedberry entered into a similar five year employment contract with Whitsitt (P). Akers and Whitsitt were to perform their duties at the Jay Bee Manufacturing Company in Tyler, Texas.
Mrs. Sedberry later purchased stock in Jay Bee owned by Jay Bee’s general manager, who was then replaced by Sorenson. Ps had difficulty working with Sorenson and Jay Bee owed large amounts of money to a bank whose officials were concerned the company would fail under Sorenson. The bank addressed its concerns to Ps, who then met with Sedberry without Sorenson’s knowledge to discuss possibilities for the refinancing of Jay Bee. As a show of good faith, Ps offered their resignations on ninety days notice; Sedberry refused. Ps returned to Jay Bee with instructions; however, the next day Mrs. Sedberry informed Ps that their resignations were accepted effective immediately.
Ps sued D for breach of their employment contracts and contended that Mrs. Sedberry had refused their resignations and that no offer remained open. The trial court awarded damages to Ps and D appealed.
Issue: If two parties are in each other’s presence and one party extends an offer without indicating any time period for acceptance, for how long will the offer remain open?
Holding and Rule: If two parties are in each other’s presence and one makes an offer without indicating any time for acceptance, an inference will be drawn that that offer will not extend beyond the time of the conversation unless special words or circumstances indicate a contrary intention on the part of the offeror.
An employee’s tender of resignation is not binding until it has been accepted by the employer. Such an offer must be accepted according to its terms and within the time fixed. An offer may be terminated by: 1) rejection, or 2) failure to accept within the time fixed, or 3) failure to accept within a reasonable time if no time is fixed.
A determination of what constitutes a “reasonable time” is a question of fact depending on the nature of the contract proposed, usages of business, and other factual circumstances. An offer made by one to another face to face is deemed to continue only to the close of their conversation and cannot be accepted thereafter (Restatement (2d) of Contracts 40).
The court held that in this case Ps’ face to face offer was terminated when Mrs. Sedberry rejected it. The attempt by D to terminate the contract the following day was a breach and Ps were entitled to the recovery granted by the trial court.
Notes: This is known as the in praesenti rule and it applies to telephone conversations as well as face to face meetings.