Arizona Court of Appeals Division One Holds That an Offer With a Deadline That is Conveyed Late Due to the Offeror’s Fault or the Offeror’s Approved Means of Transmission Can Nevertheless Be Accepted and Enforced If the Offereee Neither Knows Nor Has Reason to Know That There Has Been Delay.

During mediation, Perry offered to pay Bennett $400,000 to settle the case, which offer Bennett rejected.  Two weeks later, on October 21, 2009, Bennett authorized his attorney to settle the case for $400,000 provided that the offer was accepted by 5:00 p.m. on October 26, 2009, and asked his attorney to contact the mediator who could convey the offer to Perry.  Bennett’s attorney conveyed the settlement offer to the mediator but did not convey the October 26, 2009 deadline.  The mediator did not inform Perry of the offer until October 27, 2009.  Two days later, Perry accepted.  The mediator then asked both parties to confirm the agreement. Perry confirmed but Bennett did not.  Bennett stated that he would not agree to the settlement.  Perry filed a motion to enforce the settlement.  The trial court denied the motion, stating that Bennett’s attorney did not have the authority to settle the case after October 26, 2009, at 5:00 p.m.  Perry then petitioned the Arizona Appeals Court for special action relief.    

The Appeals Court accepted jurisdiction and granted relief to Perry, remanding to the trial court to enforce the settlement agreement.  Perry argued that his acceptance of the offer was timely pursuant to Section 49 of the Restatement (Second) of Contracts.    Section 49 provides:

If communication of an offer to the offeree is delayed, the period within which a contract can be created by acceptance is not thereby extended if the offeree knows or has reason to know of the delay, though it is due to the fault of the offeror; but if the delay is due to the fault of the offeror or to the means of transmission adopted by him, and the offeree neither knows nor has reason to know that there has been a delay, a contract can be created by acceptance within the period which would have been permissible if the offer had been dispatched at the time that its arrival seems to indicate.

The Court expressly adopted that section and held that the parties entered into an enforceable settlement agreement when Perry accepted Bennett’s offer.  As the Court explained, the “period” referred to in Section 49 is the period of time that would have been permissible if no delay had occurred.  In making his offer, Bennett allowed for five calendar days/three working days for acceptance.  Perry accepted the offer within two days of receiving it from the mediator, within the time period that would have been allowed if the offer had not been delayed. The Court further held Arizona Rule of Civil Procedure 80(d) inapplicable to the facts of the case because Bennett did not dispute the existence or the terms of the agreement, he only disputed whether he was bound by it.     

Judge Orozco authored the opinion, Judges Johnsen and Thompson concurred.