Jack Montgomery owned an apartment building that he had insured for the past 10 years under a fire insurance policy sold by Todd Manning Insurance. Two months prior to the expiration of the current policy, Manning notified Montgomery that the building would be insured for $239,000 (or 80 percent of the building's value) as required by the insurance company. Montgomery replied that he wanted the insurance to match the amount of the outstanding mortgage on the building (i.e., $85,000), and that if Manning could not sell this insurance, he would go elsewhere. Manning sent a new insurance policy in the face amount of $239,000, with the notation that Montgomery could "cancel" the new policy by returning either the policy itself or the lost policy receipt, and absent that, the policy would be automatically accepted through the inaction of Montgomery. Montgomery did not reply, and did not pay the premiums on the policy. After three months, Manning sued to recover the premiums.

Did Montgomery and Manning form a valid contract? Would your answer be different if the cancellation clause had been in every policy between Montgomery and Manning, or if this were the first time there was such a clause?