778 F.2d 460

                      John A. NEWMAN, Appellant,
                        Irwin SCHIFF, Appellee.

                       John A. NEWMAN, Appellee,
                        Irwin SCHIFF, Appellant.
                         Nos. 84-1856, 84-1976.
                    United States Court of Appeals,
                            Eighth Circuit.
                       Submitted March 11, 1985.
                         Decided Nov. 27, 1985.

	John A. Newman, St. Louis, Mo., for appellant.
	Benson A. Snaider, New Haven, Conn., for appellee.

	Before HEANEY, Circuit Judge, BRIGHT, Senior Circuit Judge, and
ARNOLD, Circuit Judge.

	BRIGHT, Senior Circuit Judge.
	John A. Newman, an attorney practicing law in St. Louis, Missouri,
brought this action against Irwin Schiff of Hamden, Connecticut, alleging
breach of contract.  Newman claimed that Schiff had made a public offer of
reward to anyone who could cite any section of the Internal Revenue Code
that says an individual is required to file an income tax return.  Newman
asserted that he accepted Schiff's offer, and that Schiff breached the
contract by failing to pay him the reward.  The district court [FN1] ruled
in favor of Schiff by finding that Newman's acceptance was not timely, and
Newman appeals.  We affirm the judgment of the district court.

	FN1. The Honorable John F. Nangle, United States District Judge
for the Eastern District of Missouri.

	Irwin Schiff is a self-styled "tax rebel", who has made a career
and substantial profits out of his tax protest activities. [FN2]  Schiff's
basic contention is that the federal income tax is a voluntary tax which
no one is required to pay. [FN3]  Schiff has prepared various books and
materials espousing his point of view, including The Tax Rebel's Guide to
the Constitution and Declaration of Independence, The Freedom Kit ("For
those wanting the original work that ignited the tax rebellion * * * "),
The Biggest Con:  How the Government is Fleecing You, and How Anyone Can
Stop Paying Income Taxes ("The amazing new best seller that exposes the
fraud and deception by which the IRS extracts income taxes from uninformed
Americans ... and shows you how you can PUT A STOP TO IT-NOW!").  He has
promoted his books by appearing on over five hundred radio and television
programs, including Larry King's national radio talk show, Tom Snyder's
"Tomorrow" show, and "The David Susskind Show," and by giving lectures in
over sixty cities.  Schiff claims that his activities have caused over
100,000 people to no longer file or pay income taxes.

	FN2. Schiff refers to himself as an "economist and
constitutionalist", and as "America's leading untax expert."  He recently
served four months in prison for failing to file federal income tax

	FN3. This position is meritless.  See infra, p. 467.

	On February 7, 1983, Irwin Schiff appeared live on CBS News
Nightwatch (Nightwatch), a nighttime television program with a viewer
participation format.  Schiff was interviewed by host Karen Stone from
approximately 3:00 a.m. to 4:00 a.m. Eastern Time.  The words "Nightwatch
Phone-In" and the telephone number (212) 955-9555 were flashed on the
screen periodically during Schiff's appearance.  In addition, Ms. Stone
repeated the telephone number and encouraged viewers to call and speak
directly with Schiff on the air.
	During the course of the Nightwatch program, Schiff repeated his
long-standing position that, "there is nothing in the Internal Revenue
Code which I have here, which says anybody is legally required to pay the
tax."  Following a discussion of his rationale for that conclusion, Schiff
stated:  "If anybody calls this show--I have the Code--and cites any
section of this Code that says an individual is required to file a tax
return, I will pay them $100,000."
	Newman did not see Schiff's live appearance on Nightwatch.  He
did, however, see a two-minute taped segment of the original Nightwatch
interview that was rebroadcast several hours later on the CBS Morning
News.  The CBS Morning News rebroadcast included Schiff's reward
proposal. [FN4]

	FN4. The following is a partial transcript of the CBS Morning News
rebroadcast of Schiff's Nightwatch appearance: DIANE SAWYER [Morning News
commentator]:  Benjamin Franklin said nothing is certain in this world but
death and taxes.  Irwin Schiff has gone a long way to try to disprove the
second part of that certainty, because Schiff says no one really has to
pay taxes, and he talked about that this morning with Karen Stone on the
CBS News broadcast NIGHTWATCH. [Thereafter, the following was replayed in

KAREN STONE:  Why do you object to the federal income tax? 

IRWIN SCHIFF:  Well, first of all, there's two reasons I object to it, on
legal grounds, and I object to it on economic grounds.  But first of all--
legally, the income tax is a voluntary tax.  There's nothing in the
Internal Revenue Code, which I have here, which says anybody's legally
required to pay the tax.  It's a voluntary tax, and if it were mandatory,
it would be unconstitutional.  Now, the question is why--

* * *

STONE:  But you went to jail for four months and paid a $10,000 fine.  So
in essence, haven't you really paid your federal income taxes for those
years that you didn't file? SCHIFF:  No. No. No, no.  That was a fine, and
I'm going to be getting that back.  We'll be suing the government--

* * *

STONE:  Now--okay--Every year--you know, we all get our 1040s in the mail
or go pick them up, and you're saying that--that we are tricked into
believing that we-- 

SCHIFF:  You're required to file. 

STONE:  That we're required to file. 

SCHIFF:  Absolutely.  If anybody calls this show--I have the Code--and
cites any section of this Code that says an individual is required to file
a tax return, I'll pay them $100,000.  The fact of the matter is that
you're not required to file.  The income tax is voluntary, and it's not
that I say it--(emphasis added).

	Newman felt certain that Schiff's statements regarding the
Internal Revenue Code were incorrect.  Upon arriving at work that day, he
researched the issue and located several sections of the Code that to his
satisfaction demonstrated the mandatory nature of the federal income tax
system.  The next day Newman telephoned CBS Morning News and cited the
following provisions of the Internal Revenue Code as authority for his
position that individuals are required to pay federal income tax:  26
U.S.C. ss 1, 6012, 6151, 6153, 7201, 7202 and 7203.  Newman placed his
call to (212) 975-4321, the number given him by the long distance operator
for CBS in New York.  He then reduced this conversation to writing and
sent it to the CBS Morning News. [FN5]  Newman's letter stated that it
represented "performance of the consideration requested by Mr. Schiff in
exchange for his promise to pay $100,000."

	FN5. The text of Newman's letter to the CBS Morning News, dated
February 8, 1983, reads as follows: This letter is in response to a
statement made by Mr. Erwin [sic] Schiff, who was a guest on the CBS
Morning News on Monday, February 7, 1983. During the interview,
Mr. Schiff, who regards himself as a tax protestor, stated that the
Internal Revenue Code did not mandate the payment of tax. Mr. Schiff
presented a copy of the Code, declaring that if anyone could find any
provision in the Code making the payment of tax mandatory, he would pay
that person $100,000. In response to Mr. Schiff's offer, I have located
the pertinent portions of the Internal Revenue Code mandating the payment
of tax.  Code section 1 "imposes" tax on individuals according to their
respective income levels and filing status.  Code section 6012 provides
that individuals meeting certain income threshholds [sic] "shall" file a
return.  Webster's New Collegiate Dictionary states that "shall," when
used in laws or regulations, constitutes a directive "to express what is
mandatory."  Code section 6151 provides that persons required to make
returns "shall ... pay such tax ... at the time and place for filing the
return."  Section 6653 imposes various civil penalties for "failure to pay
tax," the severity of which depends on the taxpayer's degree of
culpability.  Finally, Code sections 7201, 7202 and 7203 impose criminal
sanctions, including fines and imprisonment, for failure to pay tax
imposed by the Code. In light of the foregoing, it is clear that our
system of taxation is indeed mandatory and that we are required to pay
tax.  This letter is intended to constitute performance of the
consideration requested by Mr. Schiff in exchange for his promise to pay
$100,000. I am communicating directly with CBS in this matter because the
offer was extended over the CBS network and your staff was unable to
provide Mr. Schiff's own address.  I will, of course, look solely to
Mr. Schiff for performance of his promise.  Meanwhile, could you please
send me a copy of the relevant portions of the program transcript, and
Mr. Schiff's address if it can be located?

	CBS responded to Newman's letter on March 3, 1983, informing him
that a copy of it had been forwarded to Schiff at Freedom Press.  On April
13, 1983, after not hearing from Schiff for over a month, Newman wrote to
him at Freedom Press.  Newman repeated the portion of his previous letter
which discussed Internal Revenue Code provisions that stand for the
mandatory nature of the federal tax system.  He then reiterated his claim
for the $100,000 reward.
	On April 20, 1983, Schiff wrote to Newman and stated that:
"[y]our letter to Mr. O'Regan at CBS Morning News was forwarded to me.  I
did make an offer on the February 7, 1983 news (which was actually part of
an interview conducted earlier in the week)."  Schiff said, however, that
Newman had not properly accepted his offer for both substantive and
procedural reasons. [FN6]

	FN6. The text of Schiff's letter to Newman, dated April 20, 1983,
reads as follows: Your letter to Mr. O'Regan at CBS Morning News was
forwarded to me.  I did make an offer on the February 7, 1983 news (which
was actually part of an interview conducted earlier in the week).  That
offer was to pay $100,000 to the first person who could produce a section
of the code that states anyone is required to file. You did not produce a
section that states an individual is required to file a return.  Section
6012 does not state anyone is required to file as explained in my book
(see attachment). In addition, my offer was extended beginning last
October and I had received numerous letters claiming that same section of
the code as proof prior to the February 8 date of your letter (which
obviously had to be mailed after February 8).  Since that letter was dated
after receipt of others naming the same code you did, you would not, in
any case, be eligible even if that section proved that individuals were
required to file.

	Newman then sued Schiff in federal district court for breach of
contract.  The district court decided that:  (1) Schiff intended for his
offer to remain open only until the conclusion of the live Nightwatch
broadcast;  (2) the rebroadcast on CBS Morning News did not renew or
extend Schiff's offer;  and therefore (3) Newman's acceptance of the offer
was untimely.  The district court went on to state that Schiff's argument
that there is no requirement for individuals to file a tax return is
"blatant nonsense."
	Newman moved for additional findings of fact and an amendment of
judgment. The district court did not alter its judgment, but did make
additional conclusions.  The district court decided that Schiff ratified
the CBS Morning News rebroadcast of his original Nightwatch offer by
failing to object after learning of the rebroadcast, by accepting the
benefits of the added publicity, and expressly by his letter dated April
20, 1983.  The district court said that the ratification constituted a
renewal of Schiff's original offer. Nevertheless, it decided that Newman's
failure to respond on the morning of the rebroadcast meant that his
acceptance was still untimely.  This appeal followed.
	Newman contends that the district court applied the wrong standard
in judging the timeliness of his response to the rebroadcast.  We do not
reach the issue of timeliness, however, because we conclude that the
district court erred by ruling that Schiff renewed his Nightwatch offer
through ratifying the CBS Morning News rebroadcast.  Consequently, we
affirm the judgment of the district court on grounds that Newman did not
accept Schiff's initial and only offer that had been made on the
Nightwatch program.
	A. The Requirement of Mutual Assent.
	It is a basic legal principle that mutual assent is necessary for
the formation of a contract.  A significant doctrinal struggle in the
development of contract law revolved around whether it was a party's
actual or apparent assent that was necessary.  This was a struggle between
subjective and objective theorists.  The subjectivists looked to actual
assent. [FN7]  Both parties had to actually assent to an agreement for
there to be a contract. External acts were merely necessary evidence to
prove or disprove the requisite state of mind.  The familiar cliche was
that a contract required a "meeting of the minds" [FN8] of the parties.  1
S. Williston, Williston on Contracts s 22, at 48 (3d ed. 1957).  The
objectivists, on the other hand, looked to apparent assent.  The
expression of mutual assent, and not the assent itself, was the essential
element in the formation of a contract.  As the court in Woburn National
Bank v. Woods, 77 N.H. 172, 89 A. 491 (1914), said:

	FN7. For a history of the subjective theory of assent, and its
eventual displacement, see M. Horowitz, The Transformation of American Law
1780- 1860, 180-88 (1977);  Williston, Mutual Assent in the Formation of
Contracts, 14 Ill.L.Rev. 85 (1919);  Ricketts v. Pennsylvania R.R., 153
F.2d 757, 760 (2d Cir.1946) (Frank, J., concurring).

	FN8. We agree with Professor Farnsworth that this abused metaphor
should be abandoned.  He traces its origins to a "faulty etymology", under
which it was wrongly assumed that the word "agreement" was derived from
aggregatio mentium, a meeting of the minds.  See Farnsworth, "Meaning" in
the Law of Contracts, 76 Yale L.J. 939, 943-44 (1967).

	A contract involves what is called a meeting of the minds of the
parties. But this does not mean that they must have arrived at a common
mental state touching the matter in hand.  The standard by which their
conduct is judged and their rights are limited is not internal, but
external.  * * * [T]he question is:  What did the party say and do?  "The
making of a contract does not depend upon the state of the parties' minds;
it depends on their overt acts." Id. at 175, 89 A. at 492.
	The Missouri Court of Appeals [FN9] issued a classic decision that
illustrates the objective theory of assent. [FN10]  Embry
v. Hargadine-McKittrick Dry Goods Co., 127 Mo.App. 383, 105 S.W. 777
(1907).  The case concerned an alleged oral employment contract.  Embry
was an employee of the Hargadine-McKittrick Dry Goods Company under a
written contract to expire December 15, 1903.  Embry contended that on
December 23, 1903 he spoke with Mr. McKittrick, the company's president,
and was re-employed for one year. Approximately two months later Embry was
discharged.  He sued for breach of contract.  The dispute centered on the
meaning of the December 23rd conversation between Embry and McKittrick.
The trial court required the jury, in order to decide there was a
contract, "not only to find the conversation occurred as [Embry] swore,
but that both parties intended by such conversation to contract with each
other * * *."  Id. at 387, 105 S.W. at 778.  Embry challenged this
instruction and the court of appeals reversed.  It said that insofar as
"intention is an influential element, it is only such intention as the
words or acts of the parties indicate * * *."  Id. at 388, 105 S.W. at
778. Therefore, the court of appeals ruled that the trial "court erred in
making the formation of a contract depend on a finding that both parties
intended to make one."  Id. at 392, 105 S.W. at 780.  It held that "though
McKittrick may not have intended to employ Embry * * * if what McKittrick
said would have been taken by a reasonable man to be an employment, and
Embry so understood it, it constituted a valid contract of employment for
the ensuing year."  Id. at 390, 105 S.W. at 779.

	FN9. We, of course, observe that in the case before us
jurisdiction is based upon diversity of citizenship and Missouri law

	FN10. Lucy v. Zehmer, 196 Va. 493, 84 S.E.2d 516 (1954) provides
another example of the objective approach.  The Lucys brought suit for the
specific performance of an alleged contract for the sale of a farm.  The
Zehmers responded that their offer had been made in jest.  The Virginia
Supreme Court of Appeals held that it is the outward expression of assent,
rather than actual mental assent, that is necessary for the formation of a
contract.  Id. at 502, 84 S.E.2d at 521.  The court noted that there were
many factors which made it reasonable for the Lucys to assume that they
had entered into a binding contract, and therefore it ruled in their
favor.  Id. at 501, 84 S.E.2d at 521.

	By the end of the nineteenth century the objective approach to the
mutual assent requirement had become predominant, and courts continue to
use it today.  E. Allan Farnsworth, Contracts s 3.6, at 114 (1982).
Professor Corbin states the rule in the following manner: The great
majority of contracts are bargaining contracts, the purpose of which is to
effect an exchange of promises or of other performances.  To attain this
purpose, there must be mutual expressions of assent to the exchange. These
expressions must be in agreement * * *. 1 A. Corbin, Corbin on Contracts s
107, at 478 (1963) (emphasis added).  This does not mean, however, that
courts should completely ignore the actual and proven assent of either of
the parties. [FN11]  1 A. Corbin, supra s 106, at 477 (1963).  See also
Eisenberg, The Responsive Model of Contract Law, 36 Stan.L.Rev. 1107
(1984);  Farnsworth, "Meaning" in the Law of Contracts, 76 Yale L.J. 939,
945-51 (1967).

	FN11. The extreme position that the actual intentions of the
parties are irrelevant is exemplified by Judge Learned Hand's frequently
quoted dictum: A contract has, strictly speaking, nothing to do with the
personal, or individual, intent of the parties.  A contract is an
obligation attached by the mere force of law to certain acts of the
parties, usually words, which ordinarily accompany and represent a known
intent.  If, however, it were proved by twenty bishops that either party,
when he used the words, intended something else than the usual meaning
which the law imposes on them, he would still be held, unless there were
mutual mistake, or something else of the sort. Hotchkiss v. National City
Bank, 200 F. 287, 293 (S.D.N.Y.1911), aff'd, 201 F. 664 (2d Cir.1912),
aff'd, 231 U.S. 50, 34 S.Ct. 20, 58 L.Ed. 115 (1913).

	B. The Mechanics of Mutual Assent:  Offer and Acceptance.
	Courts determine whether the parties expressed their assent to a
contract by analyzing their agreement process in terms of offer and
acceptance.  An offer is the "manifestation of willingness to enter into a
bargain, so made as to justify another person in understanding that his
assent to that bargain is invited and will conclude it."  Restatement
(Second) of Contracts s 24 (1981).  Coffman Industries,
Inc. v. Gorman-Taber Co., 521 S.W.2d 763, 768 (Mo.Ct.App.1975).

The present case concerns a special type of offer:  an offer for a reward.
At least since the time of Lilli Carlill's unfortunate experience with the
Carbolic Smoke Ball, courts have enforced public offers to pay
rewards. Carlill v. Carbolic Smoke Ball Co., (1892) 2 Q.B. 484, aff'd,
(1893) 1 Q.B. 256 (C.A.1892).  In that case, frequently excerpted and
discussed in student lawbooks, the Carbolic Smoke Ball Company advertised
that it would pay a "1001 reward" to anyone who contracted "the increasing
epidemic influenza, colds, or any disease caused by taking cold, after
having used the Carbolic Smoke Ball three times daily for two weeks
according to the printed directions supplied with each ball."  Id.
Ms. Carlill, relying upon this promise, purchased and used a Carbolic
Smoke Ball.  It did not, however, prevent her from catching the flu.  The
court held that the advertised reward constituted a valid offer which
Ms. Carlill had accepted, thereby entitling her to recovery.
	The Missouri courts enforced a public reward offer in a case
concerning the notorious desperado Jesse James.  Rudy Turilli, operator of
the "Jesse James Museum," appeared before a nationwide televised audience
and offered $10,000 to anyone who could disprove his contention that Jesse
James was not murdered in 1882, but in fact lived for many years
thereafter under the alias J. Frank Dalton and last resided with Turilli
at his museum into the 1950's.  Stella James, a relative of Jesse James,
accepted the challenge and produced affidavits of persons who had
identified Jesse James' body after the shooting in 1882.  Turilli denied
that the evidence satisfied the requisite degree of proof and refused to
pay the $10,000.  The trial court ruled that Ms. James was entitled to the
reward, and the Missouri Court of Appeals upheld this judgment.  James
v. Turilli, 473 S.W.2d 757, 763 (Mo.Ct.App.1971).
1. The Nightwatch Offer.
	In the present case, Schiff's statement on Nightwatch that he
would pay $100,000 to anyone who called the show and cited any section of
the Internal Revenue Code "that says an individual is required to file a
tax return" constituted a valid offer for a reward.  In our view, if
anyone had called the show and cited the code sections that Newman
produced, a contract would have been formed and Schiff would have been
obligated to pay the $100,000 reward, for his bluff would have been
properly called.
2. The CBS Morning News Rebroadcast.
	Newman, however, never saw the live CBS Nightwatch program upon
which Schiff appeared and this lawsuit is not predicated on Schiff's
Nightwatch offer.  Newman saw the CBS Morning News rebroadcast of Schiff's
Nightwatch appearance.  This rebroadcast served not to renew or extend
Schiff's offer, but rather only to inform viewers that Schiff had made an
offer on Nightwatch.  The rebroadcast constituted a newsreport and not a
renewal of the original offer. An offeror is the master of his offer and
it is clear that Schiff by his words, "If anybody calls this show * * * ",
limited his offer in time to remain open only until the conclusion of the
live Nightwatch broadcast.  A reasonable person listening to the news
rebroadcast could not conclude that the above language--"calls this
show"--constituted a new offer;  rather than what it actually was, a
newsreport of the offer previously made, which had already expired.
	The district court further concluded, however, that Schiff's
conduct subsequent to the rebroadcast and his letter of April 20, 1983
were a ratification of the CBS Morning News rebroadcast and constituted a
renewal of the Nightwatch offer.  We disagree.
	Schiff's conduct and letter should not be analyzed under the
rubric of ratification.  Instead they are pertinent to the initial
question of whether the CBS Morning News rebroadcast was an offer.  As we
discussed above, this question is to be decided using an objective
approach without completely disregarding the actual and proven assent of
either of the parties.  Here, in Schiff's letter, we have a statement
indicating that the rebroadcast may have been an offer.  If Schiff
believed that the rebroadcast was an offer, then that belief would tend to
make it appear more reasonable for Newman to have reached the same
conclusion.  We note, however, that both Schiff's conduct and his letter
are indefinite.  He still denied the obligation.  Schiff's conduct and
correspondence do not change the facts that the rebroadcast was merely a
newsreport and that it was not reasonable for the hearer to construe the
newsreport as a new offer.
	C. Ratification.
	Even if we were to analyze Schiff's letter and conduct using
ratification principles, we would reach a different conclusion than the
district court.
	Under Missouri law ratification is an express or
implied adoption or confirmation by one person, with knowledge of all
material matters, of an act performed on his behalf by another who lacked
the authority to do so.  Hyken v. Travelers Insurance Co., 678 S.W.2d 454,
459 (Mo.Ct.App.1984);  Wilks v. Stone, 339 S.W.2d 590, 595
(Mo.Ct.App.1960);  Restatement (Second) of Agency s 82 (1958).
Ratification relates back and is the equivalent of authority at the
commencement of the act.  In a typical situation an agent, without
authority, enters into a contract on the principal's behalf and the
principal later ratifies the contract thereby agreeing to be bound by the
agent's action. Ratification may occur either expressly or indirectly
through conduct of the party.  Wilks v. Stone, supra, 339 S.W.2d at 595.
See also Weber v. Towner County, 565 F.2d 1001, 1008-09 (8th Cir.1977).
	Ratification serves to authorize that which was
unauthorized. Ratification cannot, however, give legal significance to an
act which was a nullity from the start.  If, for example, an agent enters
into a contract lacking in consideration, subsequent ratification by the
principal cannot, by itself, create a valid contract.  See W. Seavey,
Handbook of the Law of Agency s 33, at 61 (1964).
	Applying these principles to the present case, we conclude that
Schiff did not renew his Nightwatch offer by ratifying the CBS Morning
News rebroadcast. Schiff may have ratified (i.e. authorized) CBS's act of
rebroadcasting an excerpt of his Nightwatch interview, yet this did not
give the rebroadcast legal effect as a renewed offer.  The rebroadcast
itself was not an offer, only a newsreport.  Schiff's subsequent conduct
and letter do not convert it into an offer.
	D. Mandatory Nature of the Federal Income Tax System.
	Schiff's claim that there is nothing in the Internal Revenue Code
that requires an individual to file a federal income tax return demands
comment. The kindest thing that can be said about Schiff's promotion of
this idea is that he is grossly mistaken or a mere pretender to knowledge
in income taxation.  We have nothing but praise for Mr. Newman's efforts
which have helped bring this to light.
	Section 6012 of the Internal Revenue Code is entitled "Persons
required to make returns of income," and provides that individuals having
a gross income in excess of a certain amount "shall" file tax returns for
the taxable year. 26 U.S.C. s 6012.  Thus, section 6012 requires certain
individuals to file tax returns.  United States v. Drefke, 707 F.2d 978,
981 (8th Cir.), cert. denied, 464 U.S. 942, 104 S.Ct. 359, 78 L.Ed.2d 321
	The district court stated that Schiff's argument is "blatant
nonsense." Schiff did not challenge this ruling in his cross-appeal.
	We affirm the judgment of the district court for the reasons
discussed above.
	Although Newman has not "won" his lawsuit in the traditional sense
of recovering a reward that he sought, he has accomplished an important
goal in the public interest of unmasking the "blatant nonsense" dispensed
by Schiff. For that he deserves great commendation from the public.
Perhaps now CBS and other communication media who have given Schiff's
mistaken views widespread publicity, see supra, pp. 461-62, will give John
Newman equal time in the public interest.
	Affirmed but without any costs against John Newman.