Guss v. Nelson

Background

A group of buyers entered a contract with a seller named Nelson involving company stock. The buyers paid $500 described as an option fee running until March 4, 1901. The contract then required that on that date the buyers pay an additional $4,500 or, instead, return the property delivered by Nelson. Nelson delivered the stock and gave proxies as director, and the buyers later notified the seller that they declined to purchase.

Reasoning

The main question was whether the deal was merely an option to buy or a completed sale with a limited right to return. The Court explained that although the contract called one payment an option, it also contained an absolute promise to pay $4,500 at a specific date or to return the property. Because the buyers kept the stock, received the proxy rights, and did not return the property by the date, the Court treated the transaction as a completed sale and held the buyers liable for the unpaid balance. The Oklahoma Supreme Court’s judgment was therefore affirmed.

Real world impact

The ruling means that when a contract gives possession and corporate rights to buyers while only allowing a short option to return, courts may treat the deal as a sale if the return option is not exercised. Parties who keep delivered stock past the return date can be required to pay the remaining purchase price.