62 terms

Restatement (second) of Contracts

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§344. PURPOSES OF REMEDIES
Judicial remedies under the rules stated in this Restatement serve to protect one or more of the following interests of a promisee:
(a) his "expectation interest," which is his interest in having the benefit of his bargain by being put in as good a position as he would have been in had the contract been performed,

(b) his "reliance interest," which is his interest in being reimbursed for loss caused by reliance on the contract by being put in as good a position as he would have been in had the contract not been made, or

(c) his "restitution interest," which is his interest in having restored to him any benefit that he has conferred on the other party.
§20. EFFECT OF MISUNDERSTANDING
(1) There is no manifestation of mutual assent to an exchange if the parties attach materially different meanings to their manifestations and:
(a) neither party knows or has reason to know the meaning attached by the other; or
(b) each party knows or each party has reason to know the meaning attached by the other.

(2) The manifestations of the parties are operative in accordance with the meaning attached to them by one of the parties if:
(a) that party does not know of any different meaning attached by the other, and the other knows the meaning attached by the first party; or
(b) that party has no reason to know of any different meaning attached by the other, and the other has reason to know the meaning attached by the first party.
§21. INTENTION TO BE LEGALLY BOUND
Neither real nor apparent intention that a promise be legally binding is essential to the formation of a contract, but a manifestation of intention that a promise shall not affect legal relations may prevent the formation of a contract.

Comment: Agreement not to be legally bound:
Parties to what would otherwise be a bargain, and a contract, sometimes agree that their legal relations are not to be affected. In the absence of any invalidating cause, such a term is respected by the law like any other term, but such an agreement may present difficult questions of interpretation:
(1)it may mean that no bargain has been reached, or that a particular manifestation of intention is not a promise;
(2) it may reserve a power to revoke or terminate a promise under certain circumstances but not others.
(3)In a written document prepared by one party it may raise a question of misrepresentation or mistake or overreaching; to avoid such questions it may be read against the party who prepared it.
§26. PRELIMINARY NEGOTIATIONS
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.

(Example)
A clothing merchant, advertises overcoats of a certain kind for sale at $50. This is not an offer, but an invitation to the public to come and purchase. The addition of the words "Out they go Saturday; First Come, First Serve" might make the advertisement an offer.
§32. INVITATION OF PROMISE OR PERFORMANCE
In case of doubt, an offer is interpreted as inviting the offeree to accept, either by promising to perform what the offer requests, or by rendering the performance, as the offeree chooses.
§33. CERTAINTY
(1) Even though a manifestation of intention is intended to be understood as an offer, it cannot be accepted so as to form a contract unless the terms of the contract are reasonably certain.

(2) The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy.

(3) The fact that one or more terms of a proposed bargain are left open or uncertain may show that a manifestation of intention is not intended to be understood as an offer or as an acceptance.
§34. CERTAINTY AND CHOICE OF TERMS; EFFECT OF PERFORMANCE, OR RELIANCE
(1) The terms of a contract may be reasonably certain even though it empowers one or both parties to make a selection of terms in the course of performance.

(2) Part performance under an agreement may remove uncertainty and establish that a contract enforceable as a bargain has been formed.

(3) Action in reliance on an agreement may make a contractual remedy appropriate even though uncertainty is not removed.
§37. Termination of Power of Acceptance Under Option Contract
Notwithstanding §38-49: The power of acceptance under an option contract is not terminated by rejection or counter-offer, by revocation, or by death, or by incapacity of the offeror, unless the requirements are met for the discharge of a contractual duty.
§38: REJECTION OF AN OFFER BY COUNTER-OFFER
A counter-offer by the offeree, relating to the same matter as the original offer, is a rejection
of the original offer, unless the offeror in his offer, or the offeree in his counter-offer states that in
spite of the counter-offer the original offer shall not be terminated.
§39. COUNTER-OFFERS
(1) A counter-offer is an offer made by an offeree to his offeror relating to the same matter as the original offer and proposing a substituted bargain differing from that proposed by the original offer.

(2) An offeree's power of acceptance is terminated by his making of a counter-offer, unless the offeror has manifested a contrary intention or unless the counter-offer manifests a contrary intention of the offeree.
§40. WHAT LAPSE OF TIME TERMINATES AN OFFER
1) The power to create a contract by acceptance of an offer terminates at the time specified in the offer, or, if no time is specified, at the end of a reasonable time.

(2) What is a reasonable time is a question of fact, depending on all the circumstances existing when the offer and attempted acceptance are made.

(3) In the absence of usage or a provision in the offer to the contrary....an offer sent by mail is seasonably accepted if an acceptance is mailed at any time during the day on which the offer is received.
§41. LAPSE OF TIME
1) An offeree's power of acceptance is terminated at the time specified in the offer, or, if no time is specified, at the end of a reasonable time.

(2) What is a reasonable time is a question of fact, depending on all the circumstances existing when the offer and attempted acceptance are made.

(3) Unless otherwise indicated by the language or the circumstances, and subject to the rule stated in §49, an offer sent by mail is seasonably accepted if an acceptance is mailed at any time before midnight on the day on which the offer is received.
§42. REVOCATION BY COMMUNICATION FROM OFFEROR RECEIVED BY OFFEREE
An offeree's power of acceptance is terminated when the offeree receives from the offeror a manifestation of an intention not to enter into the proposed contract.
§43. INDIRECT COMMUNICATION OF REVOCATION
An offeree's power of acceptance is terminated when the offeror takes definite action inconsistent with an intention to enter into the proposed contract and the offeree acquires reliable information to that effect.
§44. Effect of Deposit on Revocability of Offer
An offeror's power of revocation is not limited by the deposit of money or other property to be forfeited in the event of revocation, but the deposit may be forfeited to the extent that it is not a penalty.
§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.
§46 - Revocation of General Offers
When offer is made by advertisement or other general notification device to people unknown to the offeror, offeree's power of acceptance is terminated when a notice of termination is given publicly by advertisement or other general notification equal to the offer, and no better means of termination is available.
§48. Death or Incapacity of Offeror or Offeree
An offeree's power of acceptance is terminated when the offeree or offeror dies or is deprived of legal capacity to enter into the proposed contract.
§50. Acceptance of an Offer Defined; Acceptance by Performance; Acceptance by Promise.
(1) Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer.

(2) Acceptance by performance requires that at least part of what the offer requests be performed or tendered and includes acceptance by a performance which operates as a return promise.

(3) Acceptance by a promise requires that the offeree complete every act essential to the making of the promise.
§51. Effect of Part Performance Without Knowledge of Offer
Unless the offeror manifests a contrary intention, an offeree who learns of an offer after he has rendered part of the performance requested by the offer may accept by completing the requested performance.
§52. Who may accept an Offer
An offer can only be accepted by a person whom it invites to furnish the consideration.
§53. Acceptance by Performance; Manifestation of Intention Not to Accept
(1) An offer can be accepted by rendering of a performance only if the offer invites such an acceptance.

(2) Except as stated in 69, the rendering of a performance does not constitute an acceptance if within a reasonable time the offeree exercises reasonable diligence to notify the offeror of non-acceptance.

(3) Where an offer of a promise invites acceptance by performance and does not invite a promissory acceptance, the rendering of the invited performance does not constitute an acceptance if before the offeror performs his promise the offeree manifests an intention not to accept.
§54. ACCEPTANCE BY PERFORMANCE; NECESSITY OF NOTIFICATION TO OFFEROR
(1) Where an offer invites an offeree to accept by rendering a performance, no notification is necessary to make such an acceptance effective unless the offer requests such a notification.

(2) If an offeree who accepts by rendering a performance has reason to know that the offeror has no adequate means of learning of the performance with reasonable promptness and certainty, the contractual duty of the offeror is discharged unless

(a) the offeree exercises reasonable diligence to notify the offeror of acceptance, or

(b) the offeror learns of the performance within a reasonable time, or

(c) the offer indicates that notification of acceptance is not required.
§56. ACCEPTANCE BY PROMISE; NECESSITY OF NOTIFICATION TO OFFEROR
Except as stated in §69 or where the offer manifests a contrary intention, it is essential to an acceptance by promise either that the offeree exercise reasonable diligence to notify the offeror of acceptance or that the offeror receive the acceptance seasonably.
§58: Necessity of Acceptance Complying with Terms of Offer
An acceptance must comply with the requirements of the offer as to the promise to be made or the performance to be rendered.
§59: Purported Acceptance Which Adds Qualifications
A reply to an offer which purports to accept it but is conditional on the offeror's assent to terms additional to or different from those offered is not an acceptance but is a counter-offer.
60: Acceptance of Offer Which States Place, Time or Manner of Acceptance
If an offer prescribes the place, time or manner of acceptance its terms in this respect must be complied with in order to create a contract. If an offer merely suggests a permitted place, time or manner of acceptance, another method of acceptance is not precluded.
61: Acceptance Which Requests Change of Terms
An acceptance which requests a change or addition to the terms of the offer is not thereby invalidated unless the acceptance is made to depend on an assent to the changed or added terms.
63: Time When Acceptance Takes Effect
Unless the offer provides otherwise,



(a) 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



(b) an acceptance under an option contract is not operative until received by the offeror
68: What Constitutes Receipt of Revocation, Rejection, or Acceptance
A written revocation, rejection, or acceptance is received when the writing comes into the possession of the person addressed, or of some person authorized by him to receive it for him, or when it is deposited in some place which he has authorized as the place for this or similar communications to be deposited for him.
72: Exchange of Promise for Performance
Except as stated in 73 and 74, any performance which is bargained for is consideration
74: Settlement of Claims
Forbearance to assert or the surrender of a claim or defense which proves to be invalid is not consideration unless



(a) the claim or defense is in fact doubtful because of uncertainty as to the facts or the law, or



(b) the forbearing or surrendering party believes that the claim or defense may be fairly determined to be valid.



(2) The execution of a written instrument surrendering a claim or defense by one who is under no duty to execute it is consideration if the execution of the written instrument is bargained for even though he is not asserting the claim or defense and believes that no valid claim or defense exists.
75: Exchange of Promise for Promise
Except as stated in 76 and 77, a promise which is bargained for is consideration if, but only if, the promised performance would be consideration.
76: Conditional Promise
(1) A conditional promise is not consideration if the promisor knows at the time of making the promise that the condition cannot occur.



(2) A promise conditional on a performance by the promisor is a promise of alternative performances within 77 unless occurrence of the condition is also promised.
77: Illusory and Alternative Promises
A promise or apparent promise is not consideration if by its terms the promisor or purported promisor reserves a choice of alternative performances unless



(a) each of the alternative performances would have been consideration if it alone had been bargained for; or



(b) one of the alternative performances would have been consideration and there is or appears to the parties to be a substantial possibility that before the promisor exercises his choice events may eliminate the alternatives which would have been consideration.
79: Adequacy of Consideration; Mutuality of Obligation
If the requirement of consideration is met, there is no additional requirement of



(a) a gain, advantage, or benefit to the promisor or a loss, disadvantage, or detriment the promisee; or



(b) equivalence in the values exchanged; or



(c) "mutuality of obligation"
81: Consideration as Motive or Inducing Cause
1) The fact that what is bargained for does not of itself induce the making of a promise does not prevent it from being consideration for the promise.

(2) The fact that a promise does not of itself induce a performance or return promise does not prevent the performance or return promise from being consideration for the promise
86: Promise for Benefit Received
(1) A promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice

(2) A promise is not binding under Subsection (1)

(a) if the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched; or

(b) to the extent that its value is disproportionate to the benefit

Warning: Courts may change contract's terms against P's interests JUST enough to prevent injustice. May wish to go revival promise route for maximum benefit.
151: Mistake Defined
A mistake is a belief that is not in accord with the facts.
152: When Mistake of Both Parties Makes a Contract Voidable
1) Where a mistake of both parties at the time a contract was made as to a basic assumption on which the contract was made has a material effect on the agreed exchange of performances, the contract is voidable by the adversely affected party unless he bears the risk of the mistake under the rule stated in 154.
153: When Mistake of One Party Makes a Contract Voidable
Where a mistake of one party at the time a contract was made as to a basic assumption on which he made the contract has a material effect on the agreed exchange of performances that is adverse to him, the contract is voidable by him if he does not bear the risk of the mistake under the rule stated in 154 and

(a) the effect of the mistake is such that enforcement of the contract would be unconscionable, or

(b) the other party had reason to know the mistake or his fault caused the mistake
154: When a Party Bears the Risk of a Mistake
A party bears the risk of a mistake when

(a) The risk is allocated to him by agreement of the parties, or

(b) he is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient, or

(c) the risk is allocated to him by the court on the ground that it is reasonable in the circumstances to do so.
59: Misrepresentation Defined
A misrepresentation is an assertion that is not in accord with the facts.
131. General Requisites of a Memorandum
Unless additional requirements are prescribed by the particular statute, a contract within the Statute of Frauds is enforceable if it is evidenced by any writing, signed by or behalf of the party to be charged, which

(a) reasonably identifies the subject matter of the contract,

(b) is sufficient to indicate that a contract with respect thereto has been made between the parties or offered by the signer to the other party, and

(c) states with reasonable certainty the essential terms of the unperformed promises in the contract.
132. Several Writings
The memorandum may consist of several writings if one of them is signed, and the writings in the circumstances clearly indicate that they all relate to the same transaction.
§ 133. Memorandum NOT Made as Such
Except in the case of a writing evidencing a contract upon consideration of marriage, the Statute may be satisfied by a signed writing not made as a memorandum of contract.
134. Signature
The signature to a memorandum may be any symbol made or adopted with an intention, actual or apparent, to authenticate the writing as that of the signer.
135. Who Must Sign
Where a memorandum of a contract within the Statute is signed by fewer than all parties to the contract and the Statute is not otherwise satisfied, the contract is enforceable against the signers but not against the others.
136. Time of Memorandum
A memorandum sufficient to satisfy the Statute may be made or signed at any time before or after the formation of the contract.
137. Loss or Destruction of a Memorandum
The loss or destruction of a memorandum does not deprive it of effect under the Statute.
138. Unenforceability
Where a contract within the Statute of Frauds is not enforceable against the party to be charged by an action against him, it is not enforceable by a set-off or counterclaim in an action brought by hium, or as a defense to a claim by him
139(1): Enforcement by Virtue of Action in Reliance
(1) A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce the action or forbearance is enforceable notwithstanding the Statute of Frauds if injustice can be avoided only by enforcement of the promise. The remedy granted for breach is to be limited as justice requires.
139(2): Enforcement by Virtue of Action in Reliance
(2) In determining whether injustice can be avoided only by enforcement of the promise, the following circumstances are significant.

(a) the availability and adequacy of other remedies, particularly cancellation and restitution

(b) the definite and substantial character of the action or forbearance in relation to the remedy sought;

(c) the extent to which the action or forbearance corroborates evidence of the making and terms of the promise, or the making and terms are otherwise established by clear and convincing evidence;

(d) the reasonableness of the action or forbearance

(e) the extent to which the action or forbearance was foreseeable by the promisor.
208: Unconscionable Contract or Term
If a contract or term thereof is unconscionable at the time the contract is made a court may refuse to enforce the contract, or may enforce the remainder of the contract without the unconscionable term, or may so limit the application of any unconscionable term as to avoid any unconscionable result.
16: Intoxicated Persons
A person incurs only voidable contractual duties by entering into a transaction if the other party has reason to know that by reason of intoxication

(a) he is unable to understand in a reasonable manner the nature and consequences of the transaction, or

(b) he is unable to act in a reasonable manner in relation to the transaction.
§ 25 OPTION CONTRACTS
An option contract is a promise which meets the requirements for the formation of a contract and limits the promisor's power to revoke an offer.
§211. STANDARDIZED AGREEMENTS
(1) Except as stated in Subsection (3), where a party to an agreement signs or otherwise manifests assent to a writing and has reason to believe that like writings are regularly used to embody terms of agreements of the same type, he adopts the writing as an integrated agreement with respect to the terms included in the writing.

(2) Such a writing is interpreted whereever reasonable as treating alike all those similarly situated, without regard to their knowledge or understanding of the standard terms of the writing.

(3) Where the other party has reason to believe that the party manifesting such assent would not do so if he knew that the writing contained a particular term, the term is not part of the agreement.
§ 27 EXISTENCE OF CONTRACT WHERE WRITTEN MEMORIAL IS CONTEMPLATED
Manifestations of assent that are in themselves sufficient to conclude a contract will not be prevented from so operating by the fact that the parties also manifest an intention to prepare and adopt a written memorial thereof; but the circumstances may show that the agreements are preliminary negotiations.
§ 18 MANIFESTATION OF MUTUAL ASSENT
Manifestation of mutual assent to an exchange requires that each party either make a promise or begin or render a performance.

(additional comments):
a. Manifestation of assent. Assent to the formation of an informal contract is operative only to the extent that it is manifested. Compare § 3 and Comment b to § 2. As to the manifestation of assent by conduct other than words, see §§ 4 and 19. Rules for cases where one party could reasonably draw more than one inference as to the intention of another are stated in the following sections, in connection with the scope of contractual obligations (see §§ 201, 219), and in connection with mistake (see § 151-58).

b. Assent by promise or performance. Where a bargain has been fully performed on one side, there is commonly no need to determine the moment of making of the contract or whether the performing party made a promise before he performed. Those issues ordinarily become important only when a dispute arises at an earlier stage. In the typical case such a dispute involves an exchange of promises before any performance takes place; there is an offer containing a promise and made binding by an acceptance containing a return promise. Section 50. The beginning or tender of performance may operate as such a return promise under § 63. In less common cases, acceptance may be made by a performance under § 54, and the beginning of performance may have an intermediate effect of making the offer irrevocable under § 45.

c. Sham or jest. Where all the parties to what would otherwise be a bargain manifest an intention that the transaction is not to be taken seriously, there is no such manifestation of assent to the exchange as is required by this Section. In some cases the setting makes it clear that there is no contract, as where a business transaction is simulated on a stage during a dramatic performance. In other cases, there may be doubt as to whether there is a joke, or one of the parties may take the joke seriously. If one party is deceived and has no reason to know of the joke the law takes the joker at his word. Even if the deceived party had reason to know of the joke, there may be a claim for fraud or unjust enrichment by virtue of the promise made. Where the parties to a sham transaction intend to deceive third parties, considerations of public policy may sometimes preclude a defense of sham. Cf. Illustration 1 to § 21.
218. Untrue Recitals; Evidence of Consideration
(1) A recital of a fact in an integrated agreement may be shown to be untrue.

(2) Evidence is admissible to prove whether or not there is consideration for a promise, even though the parties have reduced their agreement to a writing which appears to be a completely integrated agreement.
§370. REQUIREMENT THAT BENEFIT BE CONFERRED
A party is entitled to restitution under the rules stated in this Restatement only to the extent that he has conferred a benefit on the other party by way of part performance or reliance.

(Comments):
a. Meaning of requirement. A party's restitution interest is his interest in having restored to him any benefit that he has conferred on the other party.... However, a party's expenditures in preparation for performance that do not confer a benefit on the other party do not give rise to a restitution interest....If, for example, the performance consists of the manufacture and delivery of goods and the buyer wrongfully prevents its completion, the seller is not entitled to restitution because no benefit has been conferred on the buyer. See Illustration 2.

Illustrations.
2. A contracts to sell B a machine for $100,000. After A has spent $40,000 on the manufacture of the machine but before its completion, B repudiates the contract. A cannot get restitution of the $40,000 because no benefit was conferred on B.
§371. MEASURE OF RESTITUTION INTEREST
If a sum of money is awarded to protect a party's restitution interest, it may as justice requires be measured by either:
(a) the reasonable value to the other party of what he received in terms of what it would have cost him to obtain it from a person in the claimant's position, or

(b) the extent to which the other party's property has been increased in value or his other interests advanced.


Comments:

a. Measure of benefit....An especially important choice is that between the reasonable value to a party of what he received in terms of what it would have cost him to obtain it from a person in the claimant's position and the addition to the wealth of that party as measured by the extent to which his property has been increased in value or his other interests advanced. In practice, the first measure is usually based on the market price of such a substitute. Under the rule stated in this Section, the court has considerable discretion in making the choice between these two measures of benefit....

b. Choice of measure....The reasonable value to the party from whom restitution is sought (Paragraph (a)), is, however, usually greater than the addition to his wealth (Paragraph (b)). If this is so, a party seeking restitution for part performance is commonly allowed the more generous measure of reasonable value, unless that measure is unduly difficult to apply, except when he is in breach (§374).