Aaron Reed, a photographer, was in a dispute with Ezelle Investment Properties, Inc., over Ezelle allegedly using one of Reed’s photographs without permission.
Reed sent Ezelle a cease-and-desist letter along with a proposed settlement agreement that gave Ezelle the option of immediately settling for \($5,000.\) The settlement agreement contained, among other things, a confidentiality clause. After negotiations, Ezelle sent Reed \($1,000,\) along with a signed settlement agreement with the confidentiality clause crossed out. Ezelle claimed that the \($1,000\) was not a settlement offer, but that Reed was welcome to accept it. Reed accepted the payment, but told Ezelle the confidentiality clause was non-negotiable. Reed then demanded \($20,000\) to settle the case. Shortly thereafter, negotiations fell through, and Reed filed suit. Ezelle moved for summary judgment, arguing that the settlement agreement precluded Reed’s suit.
Judge You Under Oregon law, whether a contract exists is a question of law…. A “contract is most commonly formed by an offer, an acceptance of that offer, and an exchange of consideration.” Moro v. State of Oregon, … “Oregon applies an objective theory of contracts.” … That is, the existence and terms of a contract are determined by the evidence of the parties’ communications and acts, not their subjective understandings….
Oregon follows the mirror image rule of offer and acceptance. Arboireau v. Adidas-Salomon AG, … “In Oregon, it is settled that the acceptance of an offer must correspond to the offer at every point, leaving nothing open for future negotiations.” … “The acceptance must be positive, unconditional, unequivocal, and unambiguous, and must not change, add to, or qualify the terms of the offer.” C. R. Shaw Wholesale Co. v. Hackbarth, … “Where the offeree … makes a counter offer or conditional acceptance which amounts to a counter offer, or makes an attempted acceptance which seeks to modify one or more of the terms of the offer, this operates as a rejection of the original offer.” Id. at 95-96. Before the counteroffer can become a contract, it must be accepted by the party who made the original offer. Id. at 96; see also RESTATEMENT (SECOND) OF CONTRACTS § 59 (“a reply to an offer which purports to accept but is … different from those offered is not an acceptance but is a counteroffer”).
Here, there is no binding settlement agreement because Ezelle’s purported acceptance modified a material term of the agreement and thus constituted a counteroffer. Reed’s first email to Ezelle included a copy of the Proposed Settlement Agreement, which contained the confidentiality clause at issue…. parties negotiated the settlement amount for the next several weeks. … Ezelle proposed a settlement amount of \($1,000,\) and Reed sent Ezelle another copy of the Proposed Settlement Agreement to be signed and returned with payment…. Ezelle mailed a \($1,000\) check to Reed with a signed copy of the Proposed Settlement Agreement, but with the confidentiality provision crossed out. Id., … After that, Reed’s counsel advised Ezelle’s counsel that it was “a shame” they could not come to an agreement and said they were filing a complaint….
Under the mirror image rule, Ezelle’s tender, which included the deletion of the confidentiality clause, constituted as a rejection of Reed’s offer and a counteroffer that Reed was then free to accept or reject. Given Reed did not accept this counteroffer, the parties did not enter into a binding settlement agreement as a matter of law.
Statements by Ezelle’s attorney, before and after the making the counteroffer, support this conclusion. In his August 11, 2017 email, Ezelle’s attorney stated “[w]e are not making a settlement offer,” and after Reed’s counsel rejected the counteroffer, Ezelle’s attorney stated that “[i]f the deletions are unacceptable, you can return the check to me.” … Moreover, the Proposed Settlement Agreement specifically states that the “Agreement may not be modified or amended except by written agreement, signed by all Parties.” Proposed Settlement Agreement … Reed did not agree to Ezelle’s modification with a signed writing.
Ezelle cites Remark LLC v. Adell Broad, … in support of his argument…. However, Remark is easily distinguishable because there the plaintiff actually accepted the defendant’s counteroffer before it retained new counsel and contested a term of the settlement agreement…. Here, Reed did not accept the counteroffer before contesting a term of the settlement agreement. Instead, upon receiving the counteroffer, he informed Ezelle that the confidentiality clause was non-negotiable.
Judgment in favor of Plaintiff.
CRITICAL THINKING:
Can you think of any additional information that could have changed the outcome of this case if the defendant could have provided it?
ETHICAL DECISION MAKING:
If each party had been thinking about the universalization test when taking the actions that led to this litigation, do you think either of them would have behaved differently? Why or why not?