I. Entering into a Contract:
a. Offer:
i. May be revoked at any time prior to acceptance. (lonergan v. scolnick)
1. Limited however by promissory estoppel and statutory limitations
2. Known as power of revocation
3. Can result if offeree takes action that can be interpreted as a rejection (e.g.: counteroffer)
b. Restatement Law:
i. Restatement §24: Restatement Offer Defined
1. 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.
ii. Restatement §26: Preliminary Negotiations
1. A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent.
iii. Restatement §63: Time When Acceptance Takes Effect
1. Unless the offer provides otherwise:
II.an acceptance made in a manner and by a medium invited by an offer is operative and completes the manifestation of mutual assent as soon as put out of the offeree’s possession, without regard to whether it ever reaches the offeror; but
a. an acceptance under an option contract is not operative until received by the offeror.
b. Binding nature of offer:
i. Joking: no contract only if other party aware, or should reasonably be aware, that offeror is jesting. Otherwise enforceable.
ii. Invitation to an offer is not an offer, Newspaper ads are invitations to offers (Lonergan v. Scolnick)
c. Getting to an offer:
i. Invitation to an offer: (e.g.: for sale at a price not below $100)
III. 2.
a. Acceptance:
i. Restatement §17: manifestation of mutual assent
1. This may entail a written document, oral agreement or commencement of performance.
ii. No meeting of the minds:
iii. Revoking an offer:
1. Must occur before acceptance.
2. Offeror sets rules for form and manner of acceptance.
iv. Methods of acceptance:
1. UCC 2-206: a purchase order can be coupled by any reasonable medium including performance.
2. Restatement §§32 and 62: performance is a reasonable way to accept a contract. Starting such performance binds not only offeror but also the offeree.
v. Offer w/o a time limit stays opened for a reasonable time.
1. Unless
vi. counteroffer
vii. partial perfomance
viii. Unilateral Contracts:
1. Restatement §45:
b. Commencement of performance creates an option contract in offeree.
c. Free to complete work but not bound to do so.
1. Peterson v. Pattberg (1928)
IV. Classical unilateral contract case
V. Could be withdrawn until completion – now Restatement 45 has taken over.
1. Cook v. Coldwell Banker (1998): D announced a bonus sales program that would reward great sales with bonuses paid out at end of program. D tried to argue that offer was revoked when she left firm–that intention of program was to reward loyalty. Court held that a unilateral contract is binding on offeror once substantial performance has occurred.
b. Additional Casebook Case Law:
i. Ray v. William O. Eurice Borthers (1952): A developer signed a contract without reading it and later tried to get out of the special demands the property owner had made. Court held that the standard for evaluating a contract is objective. “Meeting of the minds”. Absent fraud, duress or mutual mistake, signing is binding.
ii. Lonergan v. Scolnick (1954): P responds to an ad in paper for land in Joshua Tree placed by D. D sent a form letter in response. P belie
ii. is made irrevocable
b. 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.
b. Restatement §90: waves need for consideration to make a subcontractor’s bid a binding promise.
c. UCC 2-205: firm offer needs no consideration as long as such intent is clear and the time is not unreasonable.
d. Evolution of the Case Law:
a. See Drennan v. Star Paving Co. (1958): P won contract from school to build based in part on quote from D. D then stated that made error and could not perform – attempt to w/draw offer. Court held that offer by subcontractor includes “subsidiary provision to accept if contractor wins bid, despite lock of conventional consideration.
b. But contrast with, James Baird Co. v. Gimbel Bros. (1933): Judge Learned Hand held that subcontractor was not bound as he received no promise in return, and contractor was free to renegotiate. Furthermore, promissory estoppel was aimed at donative cases not offers of service or sale.
e. Contractor under current law is bound by its own bid to the subcontractor if he wins the bid.
X. 4.5 Option contracts
a. Berryman v. Kmoch
i. Option contract for $10., and other valuable consideration – ten dollars was never paid, and valuable consideration was not asked for. Defendant sold land to third party – justified because consideration to keep option open was never paid
