Dickinson v. Dodds & the Legal Importance of Time

Time Law Contract Formation Property

Legal Weight of Time

In so many areas of life, timing is of extreme importance. Timing is particularly important in the business world. As so many stock brokers and other businesspeople are aware, small portions of time can mean the difference between many thousands – and even millions – of dollars. Smart businesspeople know that most – if not all – sound business decisions involve an element of time: a sound decision is not solely about what transpires, but when something transpires as well.

Unsurprisingly, business contracts follow this same rule: our law recognizes that time is something which naturally carries value of itself. In contract parlance, time has bargaining power, and as such it can be used to provide consideration for an agreement. The case of Dickinson v. Dodds (1876) should be required reading for every business professional: in this famous case, an offer was extended for a certain period of time, but because nothing of value was given by the prospective buyer, the seller was free to withdraw the offer prematurely and give a new offer to a third party. Dickinson v. Dodds provides clear evidence of the legal significance of time in contract formation.

Facts

Dickinson (the buyer and plaintiff) received an offer from Dodds (the seller and defendant) regarding a piece of real property. Dodds offered to sell his property to Dickinson for a sum of £800. Dodds made the offer on Wednesday and verbally agreed to keep the offer open until 9 am on Friday. On Thursday, while Dickinson was still contemplating the offer, a third party (Mr. Berry) notified Dickinson that the property had already been sold to another party (Mr. Allan). Dickinson, believing that the original offer was still viable, met Dodds at a railway station at approximately 7 am on Friday and attempted to accept the price of £800 for the property. Dodds informed Dickinson that the property had indeed already been sold to the other party and that, although the original offer was apparently still open until Friday morning, acceptance was no longer possible.

Dickinson brought suit against Dodds (and Mr. Allan) in order to nullify the sale on the grounds that a valid offer was still “on the table.”

Law

In the formation of contracts, time has value, and therefore it must be bargained for in order for one party to benefit from it. Hence, if a buying party wishes to keep an offer open for a certain period of time while he contemplates its merits, he must give something of value in return otherwise there is no consideration for the period of time given by the selling party.

Ruling

The court (the Court of Appeal of the Chancery Division in England) ruled in favor of Dodds. Dickinson’s interpretation of the communication from Dodds, which held that a third party could not purchase the property until after 9 am on Friday morning, was false. Though, on the surface, it may have seemed like Dickinson had the exclusive privilege of buying the property until Friday morning, this was not actually the case because the element of time had not been bargained for.

Dickinson’s acceptance at approximately 7 am on Friday was invalid given the fact that he had already received reliable communication of acceptance by another party. Dickinson’s attempted acceptance on Friday morning was predicated on the assumption that Dodds was unable to extend an offer to a different party until after 9 am on Friday. This assumption was false.

The lesson is clear: the significance of time is such that it is encoded in our law. Businesspeople must be aware of the fact that time has this type of legal importance as they engage in business negotiations.

Image credit: Sean MacEntee

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Seattle CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.

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