Download BILATERAL CONTRACTS Painting House subject matter of Contract

BILATERAL CONTRACTS
Painting House subject matter of Contract
I will pay you $3,00, if you agree to paint my house
I agree to paint your house
BILATERAL CONTRACTS
Painting House subject matter of Contract
Reaching Agreement: The Process of Contract Formation
B. Offer and Acceptance: Unilateral Contracts
1. Unlike bilateral contracts, unilateral contracts involve a promise by
one party (offeror) which is given in exchanged for the actual
performance by the other (offeree).
a. The offeror does not seek a return promise but the actual
rendering of the performance. Acceptance of the offeree in a
unilateral contract would be the rendering of performance.
a. In a unilateral contract it is the offeror who has maximum
protection.
1. The offeror is not bound unless and until he receives the
performance sought.
2. The offeree, however, bears a greater risk: that revocation
will occur before completion of performance (acceptance).
Reaching Agreement: The Process of Contract Formation
B. Offer and Acceptance: Unilateral Contracts
c.
The classical illustration of the consequences of the unilateral
contract is seen in Professor Wormser's Brooklyn bridge
hypothetical.
1. The offeror promises to pay the offeree $100 if the offeree
walks across the bridge.
2. Before the offeree begins to walk across the bridge, he is not
bound to walk across the bridge, but the offeror is bound to
pay $100 if the offeree walks across the bridge.
3. The offeror can withdraw the offer before completion of
acceptance: that is walking across the bridge by the offeree,
because what constitutes acceptance is full performance;
walking across the bridge.
UNLATERAL CONTRACTS
Painting House
subject matter
of contract
If you paint my house, I will pay you $3,000
Is a promise requested?
To accept, must complete Painting House
UNLATERAL CONTRACTS
Painting House subject matter of contract
Mary communicates her revocation of the offer
When performance ½ completed
Tom begins painting,
Reaching Agreement: The Process of Contract Formation
B. Offer and Acceptance: Unilateral Contracts
2. Under classical contract law, the offer for an unilateral contract
remains revocable until the offeree’s full performance of the act
called for in the offer. When the performance is rendered
a. That performance furnishes the acceptance of the offer; and
b. The consideration necessary to bind the offeror to the promise
3. To ameliorate the harshness of the classical approach, the First
Restatement of Contracts declared that in all doubtful cases, the
presumption should be that the offeror solicited acceptance by
promise.
a. This approached showed the preference for bilateral contracts.
b. This meant that the offeror would be bound at an earlier time in
the contract formation process.
c. This would be so because the beginning of performance by the
offeree would imply a promise to complete the performance
called or in the offer.
UNLATERAL CONTRACTS
Painting House subject matter of contract
In doubtful cases offeror presumed
to invite acceptance by promise
Tom begins painting,
Implied Promise to Complete Performance
Reaching Agreement: The Process of Contract Formation
B. Offer and Acceptance: Unilateral Contracts
4. Restatement (2nd) § 32, continues the same approach as the First
Restatement.
a. In case of doubt, an offer is interpreted as inviting the offeree to
accept either by promising to perform what the offer requested or by
rendering the performance, as the offeree chooses.
5. The Second Restatement follows UCC § 2-206(1)(b). According to that
provision
a. Unless otherwise unambiguously indicated by the language or the
circumstances …
1. an order or other offer to buy goods for prompt or current
shipment shall be construed as inviting
2. acceptance either by a prompt promise to ship or
3. by the prompt current shipment of confirming or nonconfirming
goods.
4. However, shipment of nonconfirming goods does not constitute
an acceptance if the seller seasonably notifies the buyer that the
shipment is offered only as an accommodation to the buyer.
Reaching Agreement: The Process of Contract Formation
B. Offer and Acceptance: Unilateral Contracts
6. Injustice would still occur if the offeror was sufficiently clear that she
wanted acceptance by performance only.
7. The First Restatement also limited the offeror’s untrampled right to
revoke the offer, by giving the offeree an option contract under
section 45.
a. Section 45 under the First Restatement provided:
1. If an offer for a unilateral contract is made, and part of the
consideration requested in the offer is given or tendered by
the offeree in response thereto, the offeror is bound by a
contract, the duty of immediate performance of which is
conditional on the full consideration being given or tendered
within the time stated in the offer, or , if no time is stated
therein, within a reasonable time.
Reaching Agreement: The Process of Contract Formation
B. Offer and Acceptance: Unilateral Contracts
b. Section 45 of the Second Restatement substantially repeats the
language of the First Restatement, but eliminates any reference
to unilateral contracts.
1. Where an offer invites an offeree to accept by rendering a
performance and does not invite 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 of tender of the
invited performance in accordance with the terms of the
offer.
Reaching Agreement: The Process of Contract Formation
B. Offer and Acceptance: Unilateral Contracts
c.
What is an option contract?
1. Section 25, Restatement (2nd) Contracts defines an option
contract as:
a. “a promise which meets the requirements for the
formation of a contact and limits the promisor’s power to
revoke an offer.”
2. Under what circumstances would a promise meet the
requirements of a contract?
a. When consideration is given.
3. What effect does the option contract have on the offeror’s
power to revoke the offer?
a. Limits to power to revoke, making the offer irrevocable.
4. If under Restatement (2nd) section 45 an option contract is
created, what is the consideration for this option contract?
a. What action provides the consideration for the
irrevocability of the offer?
UNLATERAL CONTRACTS
Painting House subject matter of contract
If you paint my house, I will pay you $3,000
that offeror will not revoke.
Creates Subsidiary promise Implied
The beginning performance
Provides the consideration for
Implied promise not to revoke
Beginning painting