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Contracts II
University of Dayton School of Law
Morris, Jeffrey B.

    CONTRACTS II
OUTLINE
 
I. MUTUAL ASSENT
II. CONTROL OVER CONTRACTUAL FORMATION
                A. Cobaugh v. Klick-Lewis
1. 1987 Golf game- Amos Cobaugh playing in the East End Open Golf Tournament. 9th Tee- new Chevy Beretta “Hole in One Wins.” Amos hit a hole in one and attempted to claim prize. Klick refused to deliver car. They had offered the car as a prize for a different tournament two days earlier and had neglected to remove the car or the sign.
2. RULE: An offer is a 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.
3. RULE: The promoter of a prize winning contest by making public the conditions and rules of the contest, makes an offer, and if before the offer is withdrawn another person acts upon it, the promoter is bound to perform his promise.
4. RULE: The only acceptance of the offer that is necessary is the performance of the act requested to win the prize.
5. Dissent- Making a hole-in one is not skill but luck. An element of chance combined with the payment of the entry fee and the reward meets the necessary elements of gambling, and thus rendering the contract unenforceable as violating public policy.
                B. UNKNOWN OFFERS OF REWARD
1. Performance rendered in ignorance is not a contract. There can be no contract unless the claimant when giving the desired information knew of the offer of the reward and acted with the intention of accepting the offer.
2. It is impossible for an offeree actually to assent to an offer unless he knows of its existence.
                C. MASTER OF THE OFFER
1. Offeror has the power to determine the substance of the exchange, the identity of the offeree and procedural matters such as time and place or mode of acceptance.
2. Using the Post to Make An Offer: When a person uses the post to make an offer, the offer is not made when it is posted but when it is received.
                a. The words have no legal existence until they are received.
                D. Textron, Inc. v. Froelich
                ORAL OFFERS AND POWER OF ACCEPTANCE                
1. Telephone conversation with steel rod producer. Broker wanted to buy rods, but had to first check with customers. Five weeks later Broker calls back and says fine. Rods never delivered.
2. Trial Court: No Contract. An oral offer ordinarily terminates with the end of the conversation. No contract was formed by virtue of lapse of the offer.
3. Appellate Court: If no time for expiration of a power of acceptance is specified in the offer, the power terminates at the end of a reasonable time. REASONABLE TIME: Question of fact, nature of contract, business and other circumstances that the offeree knows or has reason to know.
                E. Allied Steel & Conveyors, Inc. v. Ford Motor Co.
                OFFEROR AND MODES OF ACCEPTANCE
1. Ford contracted with Allied to install machinery. Included in the contract was an indemnity clause that Allied would assume. Allied began work before signing the indemnity clause and an Allied employee was injured as a result of a Ford employee’s negligence. Contract stated that Allied could accept by executing and returning the contract which they did not do until after the accident.
2. RULE: An offeror may prescribe the manner in which acceptance of his offer shall be indicated by the offeree, and an acceptance of the offer in the manner prescribed will bind the offeror.
3. RULE: If the offeror prescribes an exclusive manner of acceptance, an attempt on the part of the offeree to accept the offer in a different manner does not bind the offeror in the absence of a meeting of the minds on the altered type of acceptance. However, if the offeror merely suggests a permitted method of acceptance, other methods of acceptance are not precluded.
4. RULE: If the offer requests a return promise and the offeree without making the promise actually does or tenders what he was requested to promise to do, there is a contract of such a performance is completed or tendered within the time allowable for accepting by making a promise. In such a case a tender operates as a promise to render complete performance.
                F. Panhandle Eastern Pipe Line Co. v. Smith
                OFFEROR AND MODES OF ACCEPTANCE
1. The offeror is the master of the offer, but the offer itself must clearly and definitely express an exclusive mode.
2. The offeror wishes to create an exclusive mode of acceptance he/she must clearly do so.
3. The more unreasonable the method appears, the less likely it will be that a court will interpret the offer as requiring a specific mode of acceptance.
G. Davis v. Jacoby– P moves from Canada to take care of D under a contractual agreement, P will inherit everything if P does so. P moves D dies, will says differently. D claims unilateral contract revoked at time of death because P had not yet performed. Courts says no bilateral all that was needed was a promise.
                MODES OF ACCEPTANCE AND UNILATERAL CONTRACTS
1. Unilateral Contract: No promisor receives a promise as consideration for his promise. A bilateral contract is one in which there are mutual promises between two parties to the contract; each party being both a promisor and a promisee.
2. Whether a contract is unilateral or bilateral depends upon the intent of the offerer and the facts and circumstances of each case.
3. Rule: In case of doubt it is presumed that an offer invites the formation of a bilateral contract by an acceptance in effect to a promise by the offeree to perform what the offer requests, rather than the formation of one or more unilateral contracts by actual performance on the part of the offeree. (A bilateral contract is assumed because it immediately and fully protects both parties).
4. Rule: When an offer has indicated the mode and means of acceptance an acceptance in accordance with that mode or means is binding on the offerer.
H. Jordan v. Dobbins – D co-signed for Moore. D died before actual sale to Moore. Moore defaulted. P filed suit against D’s estate to recover. Held: Judgment for D’s estate. No consideration passed to P at the time he executed the writing to become guarantor for Moore. Such a guaranty is revocable by the guarantor at anytime before it is acted upon. The death of the guarantor operates as a revocation of it.
1. Rule: Death revokes any authority or license the deceased may have given, if it has not been executed or acted upon. Death or incapacity of either offeror or offeree terminates the power of acceptance.
                I. Methods of Termination of the Power of Acceptance Restatement
                                1. An offeree’s power of acceptance may be terminated by
                                                a. rejection or counter-offer by the offere, or
                                                b. lapse of time
                                                c. revocation by the offeror, or
                                                d. death or incapacity of the offeror or offeree.
2. In addition, an offeree’s power of acceptance is terminated by the nonoccurrence of any condition of acceptance under the terms of the offer.
J. Petterson v. Pattberg- D offered a unilateral contract with P that if the mortgage was paid off early the D will deduct $780 from the cost. P shows up at D’s house, but D informs P that mortgage was already sold and does not accept payment. HELD: D revoked offer before P had performed, thus no contract.
                REVOCATION OF OFFER IN UNILATERAL CONTRACTS
1. Any offer to enter into a unilateral contract may be withdrawn before the act requested to be done has been performed.
2. RULE: The offeror may see the approach of the offeree and know that an acceptance is contemplate

6,000 purchase price.
1. Option contracts are binding agreements, irrevocable, within the time designated, and that the stipulations may be enforced and made effective by appropriate remedies when such time is reasonable and there is nothing oppressive and unconscionable in the terms of the principal contract and so long as there is sufficient consideration (the seal sufficing).
2.RESTATEMENT § 366 A contract that is binding solely by reason of its being under seal, or in writing, or having nominal consideration will not be specifically enforced.
3.On acceptance and offer to perform within the time period stated, a bilateral contract is formed.
D. Woodall v. Prevatt P. 393 CONSIDERATION IN OPTIONS CONTRACT A seal would not make a promise enforceable in equity even though it had that effect at law. MINORITY VIEW
E. Johnson v. Norton Housing Authority P. 393MAJORITY VIEW: Option agreement under seal is valid in a jurisdiction where the common law significance of the seal remains, even though no consideration is given.
                1. This is not true in states that have abolished the seal.
2. This is not true in states whose statutes merely make the seal prima facie evidence of consideration.
F. Mersh v. Lott P. 393 MAJORITY VIEW – CONSIDERATION IN OPTIONS CONTRACT Defendant in writing gave P an option to buy land for $100,000, in consideration for option .25 cents paid. Option would expire 1 June 1905 with privilege of 30 days extension. June 1 P opted to extend contract. June 2 Defendant revoked the option. June 29 P exercised the option and tendered payment. P filed suit for specific performance. Held: Any money consideration, however small, paid and received for an option to purchase property at its adequate value is binding upon the seller thereof for the time specified therein.
G. Smith v. Wheeler P. 394 Optioner contends that the contract was unilateral in nature and since the optioner withdrew his prior to the tender and payment of the one dollar recited as consideration for the option agreement, the option is a nullity and has no legal force and effect.
1. MAJORITY: The offeror may prove that the consideration had not been paid and that no other consideration had taken its place.
2. COURT HOLDS WITH MINORITY: Even if it is shown that the dollar was not paid it does not void the contract. The recital of one dollar consideration gives rise to an implied promise to pay which can be enforced by the other party.
3. OTHER COURTS BUT SAME DECISION: An optionor who, in writing, acknowledges receipt of $1 consideration for an option is “estopped to deny” the statement. If a seal had been used it would have imported a consideration that could not have been contradicted, and this it would be neither logical nor consistent to hold that the intentional insertion of an actual consideration may be overthrown.
                H. RESTATEMENT § 87 Option Contract
                1. An offer is binding as an option contract if it
a. is in writing and signed by the offerer, recites a purported consideration for the making of the offer, and proposes an exchange on fair terms within a reasonable time; or