Humble Oil & Refining Co. v. Westside Investment Corp.

Nature of the Case

This was a suit in specific performance based on a written option contract.

Facts

Humble Oil & Refining (P) agreed to buy on option a $35,000 acre tract of land from Westside Investment Corp. (D). The option contract was supported by consideration. The strike date of the option was notice by 9:00 pm on June 4, 1963 and by paying to Westside at the time of such notice or within 10 days the sum of $1750 earnest money. That sum with the $50 option price left a balance due and owing on the land of $33,200 to be paid as purchase money in accordance with the option contract.

Humble paid the $1750 on May 14, 1963. Westside contends that the option agreement was rejected and repudiated by the plaintiff in letters to Westside on May 2nd and May 14th. The May 2nd letter included a utilities clause that Westside would have the gas, water, sewer, and electricity extended to the property prior to closing. Humble’s letter included a signature line for Westside with a request to sign and return. The May 14th letter repudiated the utilities clause and merely sought to exercise the option. All parties filed motions for summary judgment and Westside’s motion was granted. Humble appealed.

Issue

Does entry into an option contract foreclose all further negotiation relative to the contract?

Holding and Rule of Law

No. Entry into an option contract does not foreclose further negotiation relative to the contract.

The option contract is a separate contract that is accepted by performance of its conditions. This does not foreclose additional negotiation on the contract underlying the option. While the option contract may not be varied or renegotiated without further consideration and express agreement, the underlying contract may. The option contract merely keeps an offer irrevocable for a specific period of time.

Humble was free to accept or reject the option to purchase the real estate in the sense that it was free to take the action required to close the transaction. Humble was not foreclosed from negotiating a better deal on the underlying contract. The rule that a counteroffer terminates the power of acceptance does not apply to option contracts.

Disposition

Reversed and remanded.