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32Invitation of Promise or Performance, Restatement (Second) of Contracts 32 (1981)

Restatement (Second) of Contracts 32 (1981)


Restatement of the Law - Contracts
Database updated June 2014
Restatement (Second) of Contracts
Chapter 3. Formation of ContractsMutual Assent
Topic 3. Making of Offers
32 Invitation of Promise or Performance
Comment:
Reporter's Note
Case Citations - by Jurisdiction
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.

Comment:
a. Promise or performance. In the ordinary commercial bargain a party expects to be bound only
if the other party either renders the return performance or binds himself to do so either by express
words or by part performance or other conduct. Unless the language or the circumstances indicate
that one party is to have an option, therefore, the usual offer invites an acceptance which either
amounts to performance or constitutes a promise. The act of acceptance may be merely symbolic
of assent and promise, or it may also be part or all of the performance bargained for. See 2, 4,
18, 19. In either case notification of the offeror may be necessary. See 54, 56.
The rule of this Section is a particular application of the rule stated in 30(2). The offeror is often
indifferent as to whether acceptance takes the form of words of promise or acts of performance,
and his words literally referring to one are often intended and understood to refer to either. Where
performance takes time, however, the beginning of performance may constitute a promise to
complete it. See 62.

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32Invitation of Promise or Performance, Restatement (Second) of Contracts 32 (1981)

Illustrations:
Illustrations:
1. A writes B, If you will mow my lawn next week, I will pay you $10. B can accept
A's offer either by promptly promising to mow the lawn or by mowing it as requested.
2. A says to B: If you finish that table you are making and deliver it to my house today,
I will give you $100 for it. B replies, I'll do it. There is a contract. B could also accept
by delivering the table as requested.
b. Offer limited to acceptance by performance only. Language or circumstances sometimes make
it clear that the offeree is not to bind himself in advance of performance. His promise may be
worthless to the offeror, or the circumstances may make it unreasonable for the offeror to expect a
firm commitment from the offeree. In such cases, the offer does not invite a promissory acceptance,
and a promise is ineffective as an acceptance. Examples are found in offers of reward or of prizes
in a contest, made to a large number of people but to be accepted by only one. See 29. Noncommercial arrangements among relatives and friends (see Comment a to 19, Comment c to
21) and offers which leave important terms to be fixed by the offeree in the course of performance
(see 33, 34) provide other examples.
It is a separate question whether the offeree undertakes any responsibility to complete performance
once begun, or whether he takes any responsibility for the quality of the performance when
completed.

Illustrations:
Illustrations:
3. A publishes the following offer: I will pay $50 for the return of my diamond bracelet
lost yesterday on State Street. B sees this advertisement and at once sends a letter to A,
saying I accept your offer and will search for this bracelet. There is no acceptance.
4. A writes to B, his nephew aged 16, that if B will refrain from drinking, using tobacco,
swearing, and playing cards or billiards for money until he becomes 21 years of age, A
will pay B $5,000. B makes a written reply promising so to refrain. There is probably
no contract. But if B begins to refrain, A may be bound by an option contract under
45; and if B refrains until he becomes 21, A is bound to pay him $5,000.

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32Invitation of Promise or Performance, Restatement (Second) of Contracts 32 (1981)

c. Shipment of goods. An order or other offer to buy goods for prompt or current shipment normally
invites acceptance either by a prompt promise to ship or by prompt or current shipment. Uniform
Commercial Code 2-206(1)(b). If non-conforming goods are shipped, the shipment may be an
acceptance and at the same time a breach. But there is no acceptance if the offeror has reason to
know that none is intended, as where the offeree promptly notifies him that non-conforming goods
are being shipped and are offered only as an accommodation to him.

Illustrations:
Illustrations:
5. A mails a written order to B, offering to buy specified machinery on specified terms.
The order provides, Ship at once. B immediately mails a letter to A, saying I accept
your offer and will ship at once. This is a sufficient acceptance to form a contract. See
Uniform Commercial Code 2-206(1).
6. In Illustration 5, instead of mailing a letter of acceptance, B immediately ships
the machinery as requested. This is a sufficient acceptance to form a contract. If the
machinery is defective, the shipment is both an acceptance forming a contract and a
breach of that contract, unless B promptly notifies A that the shipment is offered only
as an accommodation to A. See Uniform Commercial Code 2-206(1).

Reporter's Note
This Section is derived from former 31, but replaces that Section's presumption that an offer
invited a bilateral contract with the present formulation. See Whittier, The Restatement of
Contracts and Mutual Assent, 17 Calif.L.Rev. 441, 453 (1929); 1 Williston, Contracts 31A,
78A (3d ed.1957); 1 Corbin, Contracts 62, 70, 77 (1963 & Supp.1980).
Comment a. Illustrations 1 and 2, while based on Illustrations 1 and 2 to former 31, are modified
to reflect the substantive changes made in the formulation.
Comment b. Illustration 3 is new. Illustration 4 is based on Hamer v. Sidway, 124 N.Y. 538, 27
N.E. 256 (1891).
Comment c. Illustrations 5 and 6 are new; see Comments 2 and 4 to Uniform Commercial Code
2-206.

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32Invitation of Promise or Performance, Restatement (Second) of Contracts 32 (1981)

Case Citations - by Jurisdiction

D.Colo.
D.Del.Bkrtcy.Ct.
D.Me.
S.D.N.Y.
S.D.Ohio
Ariz.App.
Colo.App.
Fla.App.
Ill.App.
Neb.
N.M.App.
Or.
Tex.
Va.App.
Wyo.
D.Colo.
D.Colo.2011. Cit. in disc. Secondary-school principal brought action for breach of contract, inter
alia, against school district, alleging that district reneged on a promise to renew her contract for
the coming school year. This court granted summary judgment for district, holding that Colorado
law explicitly required that all teacher and administrator contracts be in writing and plaintiff
failed to show that she had a written contract with district. In making its decision, however,
the court held that plaintiff did have an oral contract with district for re-employment; while
district superintendent's conversation with plaintiff in which he told her that he was recommending
contract renewal to the school board was not an offer (because the board still needed to take
further action before the bargain could be concluded), superintendent's conversation with plaintiff
following the board's approval was an offer, since, at that time, superintendent and plaintiff had
agreed to all material terms. Harper v. Mancos School Dist. RE-6, 837 F.Supp.2d 1211, 1218.
D.Colo.1998. Cit. and quot. in disc., adopted in case cit. in disc. Microsurgeon who was denied
disability benefits after he suffered a stroke sued insurer for, inter alia, breach of contract.

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32Invitation of Promise or Performance, Restatement (Second) of Contracts 32 (1981)

Defendant moved for summary judgment on the ground that plaintiff had canceled his policy
before becoming ill. Granting the motion in part and denying it in part, the court held, among other
things, that a letter plaintiff sent defendant in which he requested cancellation constituted an offer
to cancel his policy, and that, while it was clear defendant did not accept the offer by promising to
perform, material factual issues existed as to whether defendant accepted by rendering substantial
performance. Arenberg v. Central United Life Ins. Co., 18 F.Supp.2d 1167, 1175.

D.Del.Bkrtcy.Ct.
D.Del.Bkrtcy.Ct.2007. Subsec. (2) quot. in sup. Company that performed maintenance and repair
work at Chapter 11 debtor's oil refinery brought an adversary proceeding against debtor, alleging
that debtor made an offer to plaintiff, in their postpetition calls and meetings, that debtor would
pay all amounts accrued prepetition if plaintiff completed the rebuilding of the refinery's coker
unit. Granting judgment for plaintiff, this court held, inter alia, that the statements made by
debtor's representatives constituted an offer to plaintiff. The court concluded that plaintiff clearly
understood debtor's chief operating officer to be making an offer, and debtor acted as if it were
making an offer, since debtor coupled its statements of its intent to pay the prepetition claims with
its request that plaintiff continue the coker rebuilding without interruption. In re Orion Refining
Corp., 372 B.R. 688, 696.

D.Me.
D.Me.2008. Cit. in sup. Lender sued individual borrower and related corporate borrowers for
breach of contract, after they allegedly failed to repay a loan. Granting in part and denying in part
plaintiff's motion for summary judgment, this court held, inter alia, that, while defendants were in
default on the loan contract, a genuine issue of material fact remained as to whether the parties had
already reached a settlement agreement, in light of individual borrower's allegations that plaintiff
had e-mailed an offer to settle for an initial down payment of $26,000, and that lender had accepted
by actual performance when he wired that amount to lender. The court noted that, unless explicitly
foreclosed by the offeror, acceptance of an offer could occur either by actual performance or by a
promissory acceptance. Michael v. Liberty, 547 F.Supp.2d 43, 50.

S.D.N.Y.
S.D.N.Y.2002. Com. (a) cit. in case quot. in disc. Insured lessees of two office buildings that
were destroyed in a terrorist attack using two hijacked airplanes sued property insurers to
recover on their claims. Granting insurers summary judgment, the court held that the definition
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32Invitation of Promise or Performance, Restatement (Second) of Contracts 32 (1981)

of occurrence contained in the binders was susceptible of the one reasonable reading that
each insurer was liable to insureds for only one payment in the face amount of its policy. SR
International Business Ins. v. World Trade Center Properties LLC, 222 F.Supp.2d 385, 390,
judgment affirmed 345 F.3d 154 (2d Cir.2003).
S.D.N.Y.1992. Com. (b) cit. in ftn. Company borrowed money from bank to purchase property.
Later, after company filed for Chapter 11 reorganization, the loan guarantors' counsel telephoned
the bank's counsel and asked if bank would accept the property in full satisfaction of all claims
against the company and guarantors. Bank agreed, and company's counsel voiced approval of
the agreement. During the following weeks, bank's counsel tried to ascertain whether company
had filed a motion to abandon the property in bankruptcy court, and then bank withdrew the
offer. Company sought a bankruptcy court order authorizing abandonment of the property, and
bankruptcy court granted the motion and approved the settlement agreement. Affirming, this court
held, inter alia, that bank's offer was not a unilateral offer requiring performance as acceptance. It
was reasonable for company's counsel to believe that company's promise to perform constituted
acceptance. Wachovia Bank v. Apex Tech of Georgia, 144 B.R. 649, 654.

S.D.Ohio
S.D.Ohio, 1984. Quot. in sup. (Erron. cit. as Restatement of Contracts.) A collective bargaining
agreement between the general contractor on a construction project and the building and
construction trades council and their affiliated unions covered all work to be done on a project. The
agreement prohibited strikes and work stoppages of any kind. Eight days after construction began,
the boilermakers, millwrights, and ironworkers walked off the job in a work jurisdiction dispute,
resulting in a work stoppage. The ensuing litigation included a suit by the sheet metal subcontractor
against the millwrights under the Labor Management Relations Act (LMRA). The LMRA provides
that if a collective bargaining agreement provides for mandatory arbitration of certain disputes
under the agreement, contractual remedies must first be exhausted. The arbitration provision in
this case excluded questions of jurisdiction on work and provided a separate mechanism for
those disputes. This court awarded a judgment to the subcontractor after concluding that the
subcontractor's failure to comply with a provision of the project agreement that each subcontractor
shall become signatory and a party to the agreement by signing an attached letter of assent did not
preclude the subcontractor from accepting the offer orally, which happened in this case. United
Broth. of Carpenters v. Backman Sheet Metal, 598 F.Supp. 212, 219.

Ariz.App.

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32Invitation of Promise or Performance, Restatement (Second) of Contracts 32 (1981)

Ariz.App.1992. Quot. in sup. State sued former governor and his spouse to recover funds that had
been collected by an independent committee to finance the governor's inaugural ball and reception,
and subsequently transferred to the governor's office during the committee's compromise of a
dispute with the state over the legality of the funds. The trial court granted the state summary
judgment and denied defendants' motions to vacate judgment and for a new trial. Affirming,
this court held that state and committee had entered into binding contract when committee
accepted state's offer to compromise the dispute when it delivered the funds' account passbook
to the governor's office and changed the signature cards. Moreover, the committee chairman's
letter to state notifying it of the passbook's delivery was not an act of acceptance but only a
notice of performance; the performance itself had already indicated committee's acceptance of the
compromise. State v. Mecham, 173 Ariz. 474, 844 P.2d 641, 647.

Colo.App.
Colo.App.1997. Cit. in headnote, cit. in disc. Shipper brought tort and contract action against
freight forwarder after plaintiff's cargo was damaged during transport. The trial court determined
that defendant was liable under the Carriage of Goods by Sea Act (COGSA) and entered judgment
for plaintiff. Remanding, this court held that an extremely finely printed provision on the back
of the parties' invoice purporting to limit defendant's liability for damaged goods to $50 did not
become part of the parties' agreement, since evidence of mutual assent was lacking; that questions
existed as to whether defendant was a carrier under COGSA; and that the lower court did not
err in applying the common law doctrine of deviation. Industrial Products Intern. v. Emo Trans,
962 P.2d 983, 984, 988.

Fla.App.
Fla.App.1993. Cit. in sup. Printer sued advertising agency after an advertiser failed to pay
for brochures ordered by agency on the advertiser's behalf. Reversing the trial court's entry of
judgment for printer, this court held that advertising agency could not be liable, as agency's
purchase order, which became a contract upon performance by printer, specifically provided that
agency was contracting for a disclosed principal. Philip Schwartz, Inc. v. Gold Coast Graphics,
Inc., 623 So.2d 819, 820.

Ill.App.
Ill.App.1981. Cit. in disc. (Cit. section 31 of the Tentative Drafts, which is now section 32 of the
Official Draft.) Tenured teacher, who resigned during the school year, brought an action against
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32Invitation of Promise or Performance, Restatement (Second) of Contracts 32 (1981)

the school board, seeking recovery of the amount withheld by the school board from the teacher's
final paycheck pursuant to a liquidated damages policy. The lower court entered judgment in favor
of the school board, and the plaintiff teacher appealed. The plaintiff contended, inter alia, that he
was not bound by the liquidated damages policy because it was not part of any contract between
himself and the school board. The court disagreed and found that the plaintiff accepted the policy as
a part of his teaching contract since the school board offered the plaintiff two terms of employment
in return for his teaching during the school year: (1) his salary and (2) the liquidated damages
policy and, like any offeree, he had the freedom to accept or reject the offer. The court noted that
the fact that the plaintiff signed no document containing the liquidated damages policy did not
mean that he never accepted it since contract law recognizes various modes of acceptance other
than the signing of a piece of paper. The court held, inter alia, that the plaintiff accepted the terms
of employment the school board had offered for the school year, including the liquidated damages
policy and his salary increase, by accepting a paycheck reflecting the salary he was to receive
under a notification by the school board of the salary increase which also included the liquidated
damages policy. The court found that a breach of contract action was available to the school board
against the plaintiff in view of the fact that a teacher's tenured status is contractual in nature and
that the school board had the authority to liquidate damages in advance. The court noted that the
liquidated damages provision must conform to the requirements laid down by the Illinois courts
for testing the validity of such contract terms; if the provision is in fact a penalty imposed upon
a party to compel performance of a contract, rather than a term giving compensatory damages
to a nonbreaching party, then it is unenforceable. The court found that the liquidated damages
provision at issue was not a penalty and was enforceable. The judgment of the lower court was
affirmed. Arduini v. Bd. of Ed., Pontiac Tp. High Sch., 93 Ill.App.3d 925, 49 Ill.Dec. 460, 418
N.E.2d 104, 107. Reversed 92 Ill.2d 197, 65 Ill.Dec. 281, 441 N.E.2d 73 (1982).

Neb.
Neb.1986. Cit. in sup. In his will, the decedent granted an option to purchase land to one
beneficiary. When the beneficiary sought to exercise the option, another beneficiary sued the
decedent's personal representative seeking to have the option declared void as irreconcilable with
the rest of the will and as a result of undue influence on the part of the beneficiary who received
the option. The trial court found for the personal representative. Affirming, this court held that
the bequest of the option was valid, and that the beneficiary had properly accepted the option by
delivering a letter of intent and tendering payment to the personal representative. The court noted
that where a contract failed to specify a method of acceptance, the acceptance might be signified
by a promise to perform whatever the contract requires. In re Estate of Michels, 223 Neb. 286,
389 N.W.2d 285, 289.

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32Invitation of Promise or Performance, Restatement (Second) of Contracts 32 (1981)

Neb.1982. Cit. in sup. In 1978 the defendants gave the plaintiff an option to buy real property.
The option stated that it would remain open until January 1, 1980, and required a down payment
of 25% of the purchase price. On December 29, 1979, the defendants received a letter from the
plaintiff electing to exercise the option under the terms of the option agreement, but it was not
accompanied by payment or any specific offer of payment. The plaintiffs refused to proceed with
the sale, and the plaintiff brought this action for specific performance. The trial court dismissed the
plaintiff's case, asserting that the option was not exercised because the down payment required was
not tendered or paid before the option expired. This court disagreed, noting that the option did not
specify a particular manner of acceptance. Where the manner of acceptance was not specified, the
holder could exercise the option to by promising to perform what the option required of him. The
court held that the plaintiff's letter of acceptance, couched in the words of the option agreement
itself, was a clear exercise of the option. The judgment was reversed and the case was remanded
for further proceedings. Gleeson v. Frahm, 211 Neb. 677, 320 N.W.2d 95, 97.

N.M.App.
N.M.App.1995. Cit. in headnote and in sup. Buyer sued for breach of a residential purchase
agreement. The trial court granted summary judgment for buyer, finding the purchase agreement
enforceable. Affirming, this court held that the evidence established as a matter of law that buyer
accepted seller's signed counteroffer by her performance, thus making seller's promises binding.
The court said that the counteroffer invited acceptance by any manner reasonable under the
circumstances. Long v. Allen, 120 N.M. 763, 906 P.2d 754, 754, 756.

Or.
Or.2005. Quot. in ftn. to conc. and diss. op. Participants in Public Employment Retirement System
(PERS) petitioned for judicial review of statutory amendments to PERS, claiming, in part, that the
amendments impaired the PERS contract. Upholding certain amendments, this court held, inter
alia, that legislation that eliminated employer match of member contributions, thus reducing value
of one of the benefit-calculation formulas under PERS, did not impair the PERS contract; instead,
court found that legislature expected that another of the PERS formulas would be the primarybenefit calculator for PERS. The concurring and dissenting opinion argued that a public body
could not modify a retirement plan to effect a practical reduction in benefits, either directly or
through alteration of applicable benefit-calculation formula, after employees had been induced to
render service in reliance on a previous plan. Strunk v. Public Employees Retirement Bd., 338 Or.
145, 256, 108 P.3d 1058, 1121.

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32Invitation of Promise or Performance, Restatement (Second) of Contracts 32 (1981)

Tex.
Tex.2006. Cit. in conc. op. Employer sued former at-will employee who left his position to work
for a competitor, alleging breach of a covenant not to compete contained in an employment
agreement signed by employee. The trial court granted summary judgment for employee, and
the court of appeals affirmed. Reversing in part and remanding, this court held that the Texas
statute governing covenants not to compete did not require an agreement containing a covenant to
be enforceable the instant the agreement was made; thus, a unilateral contract made enforceable
by employer's subsequent performance satisfied the statute's requirements. A concurrence agreed
with the court that an agreement based on an illusory promise could become enforceable as a
unilateral contract when the employer performed, but argued that the performance had to occur
within a reasonable time after the agreement was made. Alex Sheshunoff Management Services,
L.P. v. Johnson, 209 S.W.3d 644, 661.
Tex.1968. Section 31 of Tentative Draft 1 which is now Section 32 of the Official Draft cit. in
op. A contract to construct a pipeline was assigned to a third party by defendant assignor a nonnegotiable note being delivered as consideration to take over this construction contract. There
was a dispute as to whether there had actually been a valid contract between these parties, hence
whether the endorsers were liable on this note or whether they were excused from liability by
certain variations between assignor's offer and written acceptance by assignee of the construction
contract. Held: Assignee had actually substantially performed this contract, its written acceptance
also being in substance more favorable to the assignor and assignor's sureties than the terms offered
by assignor. Therefore, the court held the note an enforceable obligation. United Concrete Pipe
Corp. v. Spin-Line Co., 430 S.W.2d 360, 364.

Va.App.
Va.App.2001. Quot. in sup. Following entry of divorce decree and property distribution, both
parties appealed trial court's holding that wife did not exercise option to purchase husband's interest
in property that husband and wife held as tenants in common. This court reversed in part, holding
that where agreement granting option to buy tract of land required that it be exercised on or prior to
designated date, but was silent as to time of payment of stipulated price, option could be exercised
without paying at time of exercise. Wife's first letter to husband, unconditionally accepting decree's
terms, was valid exercise of option. A subsequent letter in which she tried to pay less than full
amount related to performance and was not failure to exercise option. Hart v. Hart, 35 Va.App.
221, 544 S.E.2d 366, 374.

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Wyo.
Wyo.1988. Cit. in sup. A signed agreement for the lease of a construction crane was delivered
to a contractor who made two changes, signed the lease, and returned it to the lessor; the lessor
initialed only one of the changes, and the contractor began work on the demolition project. After
the crane was damaged, the lessor sued the contractor for breach of the lease agreement based
on its refusal to reimburse the lessor for repair costs and its refusal to pay the lease rent. The
trial court entered judgment for the lessor. Affirming, this court held, inter alia, that the plaintiff
accepted the defendant's counteroffer by performing under the terms of the lease agreement; the
written agreement did not require acceptance exclusively in writing. The court concluded that a
valid contract existed, and that the contractor breached its clear terms by failing to insure the crane.
Anderson Excavating v. Certified Welding, 769 P.2d 887, 890.

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