I. Kinds of Contracts
a. Bilateral K: Exchange of promises. “I promise to give you $500k at the closing, you promise to give me the deed.”
b. Unilateral K: I’ve made a promise, and you can only accept by performance. “I will give you $25 if you mow my lawn tomorrow.”
i. Offer is irrevocable once performance starts.
– So the argument here is if you started performance when you put your lawn mower in the truck, or when you started mowing my lawn.
ii. But, once you start performance, you don’t have to finish.
– Ex. So if you start climbing up the flagpole, I can’t revoke. But you can always decide not to climb all the way to the top.
c. Bilateral or Unilateral?
i. If there’s doubt or confusion, then the offeree makes the choice.
– If you chose bilateral, you have to finish performance.
– If you chose unilateral, you can stop during it.
– If it’s unilateral and you begin performing, but the other
party doesn’t know, you have to let them know or they could revoke it.
d. Option Contract- These are unilateral initially. I pay you something to keep an option open. Even a dollar is fine, it’s like the old-time seal.
Section 87. Option contract
(1) An offer is binding as an option contract if it
(a) is in writing and signed by the offeror, recited a purported consideration for the making of the offer, and proposes an exchange on fair terms within a reasonable time or
(2) An offer which the offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice.
– 87(1) is the conventional option K.
– 87(2) is the reliance kind of option K, as in Drennan v. Star Paving.
Section 45. Option Contract Created by Part Performance or Tender
(1) Where an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance, an option contract is created when the offeree tenders or begins the invited performance or tenders a beginning of it.
(2) The offeror’s duty of performance under any option contract so created is conditional on completion or tender of the invited performance in accordance with the terms of the offer.
– Restatement 45(1) prevents the “flagpole” problem. As soon as you start, my offer is locked in.
– 45(2) means you only have to pay if offeree finishes.
e. UCC 2-205 Firm Offers.
– Consideration is irrelevant if it’s a signed writing from a merchant
f. Ks for exclusive dealings: Imply a promise to use good faith efforts to bring the condition into being.
i. Ex. Wood v. Lucy, Lady Duff-Gordon
ii. UCC version of this good faith requirement is UCC 2-306
(Output, Requirements, and Exclusive Dealings). “Best efforts” to supply goods or promote sales.
iii. Requirement K: “I promise to buy all of my coal from you. I give up the right to buy it elsewhere.”
– Issue: Courts worry about this being speculative. You triple your order very suddenly.
iv. Output K: “I’m going to sell of my good X to you. I give up the right to sell to anyone else.”
– Ex. Feld v. Henry Levy & Sons: Plaintiff agreed to buy all of seller’s bread crumbs. Even producing 0 would be consideration, because producer can’t sell to anyone else. “Defendant would be justified, in good faith, in ceasing production only if its losses from continuance would be more than trivial.”
– These require “in good faith” and not “unreasonably disproportionate.
i. Can’t claim if you don’t know of reward. There’d be no mutual reciprocal inducement.
ii. Public officials and employees can’t claim rewards for things in the scope of their duties.
h. Advertisements are not Ks.
– Ex. Moulton: Salt case.
I. Contract can’t be too ambiguous.
– Ex. Jospeh Martin, Jr., Delicatessen: Retail lease renewal for a period “to be agreed upon.” Void for indefiniteness. Can’t ‘agree to agree.’
– Price CAN be open if:
1. You intend to agree on price and
2. You give the court some way of assessing what the price
would be (i.e. tying it into an index, etc.)
– And also see the UCC: “Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.”
II. Consideration and its Substitutes
a. A k is an agreement supported by consideration.
b. Definition: Consideration is a bargained for exchange. Some requested act or promise. Or forbearance- something you’re requested not to do.
c. Forbearance of a legal right is consideration.
i. Hammer v. Sidway- Uncle promised money to nephew to not smoke, drink, or gamble. There was mutual reciprocal inducement here. Uncle ASKED him to give up legal rights, and he did.
ii. Has to be a legal right. If I forebear from doing heroin because you ask, it’s still not consideration.
iii. If you say, “Chas, don’t beer,” but I was not going to do it anyway, that’s still consideration.
d. Detrimental Reliance can substitute for consideration.
i. Congregation: Rabbi visits sick person who makes oral agreement to donate. Congregation tries to enforce promise and fails. There was no consideration, and no detrimental reliance.
– This would have been a much better case if they had, say, relied by building an addition to the Synagogue.
iii. How will this come up on exam? Someone is not doing what they promised.
– Did this person ask for anything in exchange for promise?
– Did party trying to enforce K give up promised detriment?
e. Courts only need to see more than nominal consideration.
i. Ex. If you pay a dollar for a car, it’s not an enforceable K. It’s a gift.
f. Promises grounded in the past
elied on reasonably and forseeably (3) unjust not to enforce promise. When people do things they are not asked to do, it’s not consideration but it might require promissory estoppel, which will make it enforceable.
a. A counteroffer kills an offer unless offeror does something to revive it.
i. Ex. Livingstone: Counteroffer killed offer, but offeror revised it with his communication that referred to the earlier price.
ii. Ex. ‘I can only pay $1600’ is probably a counteroffer that kills.
iii. Ex. ‘Can you do $1600?’ is probably an inquiry. Does not kill.
a. Default position is, that the offeror is the master of the offer. If I’m making it, I can specify how you must accept.
b. If offeror doesn’t specify how you accept, courts will determine what’s reasonable.
c. Restatement on when power to accept terminates:
Section 36. Methods of Termination of the Power of Acceptence.
(1) An offeree’s power of acceptance may be terminated by
(a) rejection or counter-offer by the offeree, or
(b) lapse of time, or
(c) revocation by the offeror, or
(d) death or incapacity of the offeror or offeree.
(2) In addition, any offeree’s power of acceptance is terminated by the nonoccurrence of any condition of acceptance under the terms of the offer.
d. Under the UCC, an exchange of standard forms can create acceptance.
i. 2-207 (1) Rejects mirror image rule. But, it is a counteroffer if its expressly conditional.
ii. 2-207 (3) Will insert “off the rack” terms such as reasonable provisions, etc.
iii. UCC ‘Last Shot’ Principle concedes the terms to the last party who fires off last counteroffer before negotiations end and performance begins.
e. Mirror image Rule: In contract, mirror image rule in common law says acceptance has to look like offer or it’s a counteroffer.
i. This is still good law for non-goods Ks.
f. Mailbox Rule: Offer is accepted when acceptance is put into the mail.
i. Offeror is still the master of the offer. He could always say in the k, acceptance is not accepted until it arrives.
g. The default rule is that silence is not acceptance. When is it? See Restatement:
Section 69. Acceptance by Silence or Exercise of Dominion
Where an offeree fails to reply to an offer, his silence and inaction operate as an acceptance in the following