                                                   No.     93-525
                  IN THE SUPREME COURT OF THE STATE OF MONTANA
                                                          1994


KENNETH L, HAUGSTAD and
VERNA G. HAUGSTAD,
                  Plaintiffs and Appellants,


EUGENE F. MARTIN and
CAROLINE M. MARTIN,
                  Defendants and Respondents.




APPEAL FROM:            District Court of the Thirteenth Judicial District,
                        In and for the County of Yellowstone,
                        The Hon. Maurice R. Colberg, Jr., Judge presiding.


COUNSEL OF RECORD:
                  For Appellant:
                        Wendell Dean Stanton, Attorney at Law,
                        Billings, Montana
                  For Respondent:
                        Stewart R. Kirkpatrick; Murphy                  &   Kirkpatrick
                        Billings, Montana

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                                                    Submitted on Briefs:      March 10, 1994
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Justice John Conway Harrison delivered the Opinion of the Court.


     This is an appeal from the Thirteenth Judicial District Court,
Yellowstone County. Kenneth and Verna Haugstad (Haugstads) appeal
that court's     refusal to enter judgment pursuant to Rule 68,
M.R.Civ.P.     We affirm.
     Eugene and Carol Martin (Martins) sold their home to the
Haugstads in May 1991, for $104,900. The sale closed in July 1991.
     In January 1992, the Haugstads sent a notice of rescission to
the Martins.     The Haugstads claimed that the heating system was
inadequate and the water well was contaminated.    They filed suit
against the Martins seeking rescission of the purchase agreement,
the return of the purchase price plus interest, costs of suit,
attorney's    fees, replacement of the well and heating system, and
punitive damages.
     Trial was scheduled for March 16, 1993. On March 5, 1993, the
Martins sent a Rule 68, M.R.Civ.P.,      offer of judgment to the
Haugstads. On March 11, 1993, the Haugstads filed an objection to
the Martins' offer of judgment because it was untimely and lacked
merit.       On that same day, the Haugstads served seven trial
subpoenas on witnesses.     On March 12, the Haugstads served their
trial brief on the Martins by mail.
     However, on the morning of trial, the Haugstads withdrew their
objection and attempted to accept the Martins' offer of judgment.
After a hearing, the District Court concluded that the Martins'
offer of judgment was untimely and that the Haugstads' objection to
the offer of judgment was a rejection and terminated the offer.
The court refused to enter judgment pursuant to Rule 68, M.R. Civ.P.
     The case went to trial and the court directed a verdict in
favor of the Martins.   Later, the Martins petitioned for an award
of attorney's    fees against the Haugstads and the court granted
their request.
     The Haugstads appeal the District Court's    refusal to enter
judgment pursuant to Rule 68, M.R.Civ.P., and present two issues:
     1.   Did the District Court err by concluding that the
Haugstadst objection to the offer of judgment constituted a
rejection and terminated the offer?
     2. Did the District Court err by concluding that the Martinsf
offer of judgment was not timely and, therefore, void?
                                 I
     Did the District Court err by concluding that the Haugstads'
objection to the offer of judgment constituted a rejection and
terminated the offer?
       It is well settled that contract principles guide this Court
in examining whether a valid offer and acceptance exists under Rule
68, M.R.Civ.P.    Weston v. Kuntz (1981), 194 Mont. 52, 56-57, 635
P.2d 269, 271-72; See also Kyreakakis v. Paternoster (D.N.3 . 1990),
732 F.Supp. 1287, 1290 fn 3; Radecki v. Amoco Oil Co. (8th Cir.
1988), 858 F.2d 397, 400.   We also rely on contract principles to
examine whether the offeree rejected the original offer.        See
Mallory v. Eyrich (6th Cir. 1991), 922 F.2d 1273, 1279-80.
     The Martins argue that the Haugstads rejected the offer of
judgment when the Haugstads objected to the offer as untimely. The
Haugstads, in turn, contend that their objection was only an
objection and they did not reject the Martinst offer of judgment.
      Montana case law is silent as to what constitutes a rejection
of an offer.      However, the Restatement (Second) of Contracts
§   38 (2) (1981), states:
      A manifestation of intention not to accept an offer is a
      rejection unless the offeree manifests an intention to
      take it under further advisement.
The offeree can reject an offer with words or conduct. Williston,
Contracts 4th ed. 1 5:3      (1990).   When rejecting an offer the
offeree can state that the offer is rejected or the offeree can do
an act which justifies an inference by the offeror that the offeree
does not intend to accept the offer.       17A Am. Jur. 2d Contracts 5
63 (1991).
       In this case, the Haugstads objected to the Martinst Rule 68,
M.R.Civ.P., offer of judgment as untimely. Although the Haugstads
did not specifically reject the offer, the Martins were justified
by relying on that objection to conclude that the Haugstads did not
intend to accept the offer of judgment.         We conclude that the
Haugstads rejected the Martinst offer by objecting to the Rule 68,
M.R.Civ.P., offer of judgment.
      When an offer is rejected, the offeree cannot later accept
that offer. See Restatement (Second) of Contracts 5 38 (1) (1981)    .
The offer no longer exists after it is rejected.      See Restatement
(Second) of Contracts S 38 (1) (1981)  .
      Here, the Haugstads terminated the Martins' offer of judgment
by rejecting the offer.     The Haugstads could not, as they argue,
accept that same offer at a later date because the offer no longer
existed. We hold that the District Court correctly concluded that
the Haugstads' objection to the Rule 68, M.R.Civ.P.,      offer of
judgment was a rejection of that offer and effectively terminated
the offer.
     Since this issue is dispositive, we need not discuss the
second issue.   Affirmed.
     Pursuant to Section I, Paragraph 3(c), Montana Supreme Court
1988 Internal Operating Rules, this decision shall not be cited as
precedent and shall be published by its filing as a public document
with the Clerk of the Supreme Court and by a report of its result
to Montana Law Week, State Reporter and West Publishing Company.




We concur:
