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Restatement (Second) of contracts [contract formation]
Terms in this set (55)
§ 17- Requirement of a bargain
1. Except as stated in subsection 2, the formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration.
2. Whether or not there is a bargain, a contract may be formed under special rules applicable to formal contracts or under the rules stated in § 82-94
§ 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.
§ 22- Mode of Assent: Offer and Acceptance
1. The manifestation of mutual assent to an exchange ordinarily takes the form of an offer or proposal by one party followed by an acceptance by the other party or parties.
2. A manifestation of mutual assent may be made even though neither offer nor acceptance can be identified and even though the moment of formation cannot be determined.
§ 24 - Offer Defined
An offer is the manifestation of willingness to enter a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.
§ 50 - Acceptance of 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.
§ 36 - Methods of Termination of the Power of Acceptance
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, an offeree's power of acceptance is terminated by the nonoccurrence of any condition of acceptance under the terms of the offer.
§ 38 - Rejection
An offeree's power of acceptance is terminated by his rejection of the offer, unless the offeror has manifested a contract intention.
§ 39 - Counter-Offer
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.
Rejection or counter-offer by mail or telegram does not terminate the power of acceptance until received by the offeror, but limits the power so that a letter or telegram of acceptance started after the sending of an otherwise effective rejection or counter-offer is only a counter-offer unless the acceptance is received by the offeror before he receives the rejection or counter-offer.
§ 40 - Time when Rejection or Counter-offer Terminates the Power of Acceptance
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.
§ 43 - Indirect Communication of Revocation
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.
§ 42 - Revocation by Communication from Offeror Received by Offeree
Unless the offer provides otherwise,
1. 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
2. An acceptance under an option contract is not operative until received by the offeror.
§ 63 - Time When Acceptance Takes Effect
1. An offer is binding as an option contract if it
A. Is in writing and signed by the offeror, recites a purported consideration for the making of the, and proposes an exchange on fair terms within a reasonable time; or
B. Is made irrevocable by statute
§ 87(1) - An option is binding as an option if it
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 incapacity of the offeror, unless the requirements are met for the discharge of a contractual duty.
§ 37 - Termination of Power of Acceptance Under Option Contract
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.
§ 32 - Invitation of Promise of Performance
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.
§ 45 - Option Contract Created by Part Performance or Tender
1. Where an offer invites an offeree to choose between acceptance by promise and acceptance by performance, the tender or beginning of the invited performance or a tender of a beginning of it is an acceptance by performance.
2. Such an acceptance operates as a promise to render complete performance.
§ 62 - Effect of Performance by Offeree where Offer Invites Either Performance or Promise
1. An offer is binding as an option contract if Is
A. in writing and signed by the offeror, recites a purported consideration for the making of the offer, and proposes an exchange on fair terms within a reasonable time; or
B. Is made irrevocable by statute
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 - Option Contract
1. Unless otherwise unambiguously indicated by the language or circumstances
A.An offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances;
B. An order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or non-conforming goods, but such a shipment of non-conforming 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.
2. Where the beginning of a requested performance is a reasonable mode of acceptance an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance.
U.C.C. § 2-206 - Offer and Acceptance in Formation of Contract
1. A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.
2. An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.
3. 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.
U.C.C. § 2-204 - Formation in General
1. A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.
2. The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:
A. The offer expressly limits acceptance to the terms of the offer;
B. The materially alter it; or
C. Notification of objection to them has already been given or is given within a reasonable time after notice of them is received.
3. Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act.
U.C.C. § 2-207 - Additional Terms in Acceptance or Confirmation
1. Except as stated in § 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 agreement 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 wherever 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 no do so if he knew that the writing contained a particular term, the term is not part of the agreement.
Restatements (Second) of Contracts § 211 - Standardized Agreements
1. An agreement modifying a contract within this Article needs no consideration to be binding.
2. A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party.
3. The requirements of the statute of frauds section of this article (2-201) must be satisfied if the contract as modified is within its provisions.
4. Although an attempt at modification or rescission does not satisfy the requirements of subsection (2) or (3) it can operate as a waiver.
5. A party who has made a waiver affecting an executory portion of the contract may retreat the waiver by reasonable notification received by the other party that strict performance will be required of any term waived, unless the retraction would be unjust in view of a material change of position in reliance on the waiver.
U.C.C. § 2-209 - Modification, Rescission and Waiver
Differing terms cancel each other out and the UCC applies
whoever sent in the last terms before acceptance won and got the terms they desired.
"last shot rule"
the mutual assent essential to contract formation most often occurred when an offer was accepted. Because an offeror was deemed to have consented only to the terms of the offer actually made, this rule required that the acceptance perfectly match the offer.
Common law "mirror image" rule
Injustice can only be remedied by enforcing the promise.
Elements of offertory estoppel
The court held that, "the question of what is a reasonable time for acceptance of an offer is typically a question of fact that is reserved for a jury to decide.
Vaskie v. W American Ins. Co. (1989)
Offer that terminates by lapse of time
If an offer is sent by mail, the countdown to accept starts when the offer is received, not when the offer is sent.
Caldwell v. Cline (1930)
Offer that terminates by their own terms
An offeror has the power to revoke an offer at any time before it is accepted. But if the offer is somehow made legally irrevocable, then an attempted revocation has no effect and it can be accepted despite it.
Irrevocable Offers: Option Contracts
How is a unilateral contract different from an option contract?
In restatement terms (45), a unilateral contract becomes optional once the acting party has tendered action towards satisfying the requirement of the p-sor.
Offeror of an option contract has no power to revoke their offer for the terms of the option because consideration has already been given for the option.
As long as the option remains open, the offeree is in total control of the situation. The offeree decided whether or not the offeror is bound to perform.
The option survives a rejection of the option during the option term So the offeree could reject the option and still have the overall option remain
A valid and enforceable contract exists if a reasonable person could infer from the defendant's conduct an intent to renew the contract. Subjective (or the actual intent of the defendant) does not matter.
Embry v. Hargadine, McKittrick Dry Goods Co. (1907)
Contract relations will be determined by the objective and clearly stated intentions and not the "interior" or unmanifested intentions.
"objective theory of contracts"
If the p-see's actions are beneficial to the p-sor and were not done gratuitously, then a promise to pay for past services is enforceable.
Edson v. Poppe (1910)
"Goods" means all things which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid.
UCC 2-105 Definitions
A "sale" consists in the passing of title from seller to the buyer for a price
UCC 2-106 Definitions
the "price" can be made payable in money or otherwise. If it is payable in whole or in part in goods each party is a seller of the goods which he is to transfer.
2-304 Price in money, goods, realty, or otherwise
When does Article 2 apply?
Article 2 applies if the predominant purpose of the contract is the sale of goods; the common law applies if the predominant purpose is a sale of services.
What is the predominant Purpose Rule?
When the predominant purpose of the contract is the sale of goods; the common law applies if the predominant purpose is a sale of services.
What are the steps of a contract analysis?
1. Determine if there is a contract at all
2. Was there consideration?
3. Was the contract reliance based?
4. Determine if restitution applies
How is restitution decided?
1. There's been a conferral of a benefit;
2. The benefit was conferred in good faith; and
3. The benefit was not intended as a gratuity and there was expectation of compensation
What is the policy reason for promissory estoppel?
To protect someone from harm they suffered from a breached promise
What is the policy reason for restitution?
To prevent unjust enrichment that occurs at the expense of another.
What does restitution provide a plaintiff?
what the defendant gained from their unjust enrichment and not what the plaintiff lost.
The court required that the plaintiff demonstrate that equity and good conscience require restitution, if a claim does not do this it should be dismissed.
Tasini v. AOL, Inc. (2012)
- This is not a contract, it is an obligation by law to do justice even though no promise was made or intended
- Decedent gets benefit from claimant which would be inequitable to retain without paying for the benefit
- If it is unequitable, then the defendant is unjustly enriched
Implied-in-law contract/quasi contract
- The person given the gift is enriched but not unjustly.
- A person is not entitled to be compensated for the value of a gift that they has given to another person.
The recipient of an unrequested benefit is not obligated to pay for it unless they were given a choice between retaining the service or good for a price or not retaining the service or good.
"A person who supplies goods or services to another person will not have a claim for restitution unless both parties understood, at the time the goods or services were provided, that the defendant would compensate the plaintiff for them.
Choice and gift principle rule
1. The existence of a contract, including its essential terms;
2.A breach of duty imposed by the contract; and
3. Resulting damages
- There may be sufficient consideration to form an enforceable contract even though the parties have not bargained for the specific terms of the agreement.
A cause of action for breach of contract must be established by
How to find a bargained-for contract?
look for an offer and acceptance
What is an offer?
A promise to do something, conditioned, on getting something else back from the agreement
When is a contract formed?
When there is an offer, acceptance, and consideration.
To determine whether a contract has been made, we look for what?
Language of manifestation
An objective manifestation of assent.
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Restatement (Second) of Contracts [Contract Interp…
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