Restatements

 §45. Option Contract Created by Part Performance or Tender

o (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
o (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
 §71. Requirement of Exchange; Types of Exchange
o (1) to constitute consideration, a performance or a return promise must be bargained for.
o (2) a performance or return promise is bargained for if it is sought by the promisor in exchange for his
promise and is given by the promisee in exchange for that promise
o (3) the performance may consist of
 (a) an act other than a promise, or
 (b) a forbearance, or
 (c) the creation, modification, or destruction of a legal relation
o (4) the performance or return promise may be given to the promisor or to some other person. It may be
given by the promisee or by other person
 §86. Promise for Benefit Received
o (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
o (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
 §87. Option Contract
o (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
offer, and proposes an exchange on fair terms within a reasonable time, or
 (b) is made irrevocable by statute
o (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 an option contract to the extent necessary to avoid injustice
 §90. Promise Reasonably Inducing Action or Forbearance – Promissory Estoppel, under Consideration
o (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 such action or forbearance is binding if injustice
can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as
justice requires.
o (2) a charitable subscription or a marriage settlement is binding under subsection (1) without proof that
the promise induced action or forbearance
o Roadmap Paragraph:
 1. Should the promisor reasonably have expected the promisee’s reliance on that promise
 2. Did promisee actually rely on the promise
 3. Will injustice result unless the promise is enforced
 §129. Action in Reliance; Specific Performance
o A contract for the transfer of an interest in land may be specifically enforced notwithstanding failure to
comply with the statute of frauds if it is established that the party seeking enforcement, in reasonable
reliance on the contract and on the continuing assent of the party against whom enforcement is sought,
has so changed his position that injustice can be avoided only by specific enforcement
 §139. Enforcement by Virtue of Action in Reliance – an Exception to Statute of Frauds
o (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.
o (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 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
Definitions
 Contract: a promise or set of promises the breach of which the law provides a remedy
 Offer: present manifestation of a 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
 Option Contract: a promise which meets the requirement for the formation of a contract and limits the promisor’s
power to revoke an offer
 Ways to terminate an offer: rejection/counter-offer, lapse of time, revocation by the offeror, or death or incapacity
of the offeror or offeree
 Rejection: an offeree’s termination of her power of acceptance unless there is a contrary intention of offeror or of
offeree to take the offer under further advisement
 Counter-offer: an offer made by an offeree that is related to the original offer but proposes a substituted bargain
 Revocation: termination of the offer by the offeror that is communicated to the offeree through words or actions
before the offeree accepts the offer; can be communicated by a reliable third party
 Forms of Acceptance: offeror may invite or require acceptance; the offeror is the master of his offer
 R2 45: in unilateral contract, an option contract is created when the offeree tenders the beginning of it
 Time of Acceptance: when 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 (except in the case of an option K – mailbox rule)
 Consideration: what is being exchanged through a contract
 Mutual Assent: a present willingness to enter into a bargain; meeting of the minds; modern test – objectivity
 Element of Mutual Assent: offer and acceptance
 Acceptance: an offeree’s assent, either by express act or by implication from conduct, to the terms of an offer in a
manner authorized or requested by the offeror, so that a binding contract is formed; can be through words,
actions, or even sometimes silene or inaction; objective
 Ways to Keep an offer open: option with consideration, R2 45, promissory estoppel, and statutes
 Option Contract: a promise which meets the requirements (namely, consideration) for the formation of a contract
and limits the promisor’s power to revoke and offer
 Unilateral K: a promise for an act; act is both acceptance and consideration
 Mailbox Rule: acceptance is effective upon transmission (i.e. when the letter is put into the mailbox)
 Benefit/Detriment Test: common law test; promise must be a benefit to the promisor OR a detriment to the
promisee
 Bargained For Test: modern test; promises/acts are being exchanged for one another; value is not weighed by
there must be actual inducement taking place
 Keeping Unilateral K open: when performance has been tendered, the offeror msut keep the offer open for
amount of time to reasonably complete the act
 Agency: the fiduciary relationship that arises when one person (principle) manifests assent to another (agent) to
allow the agent to act on the principle’s behalf
 Actual Authority (agency): express (words – oral or written) or implied (conduct) manifestations of agency
 Apparent Authority (agency): third party reasonably believes that a principle has manifested agency on a person
(even if the agent is unaware of this authority); manifestation can be inferred from title, job description, etc.
 Ratification (agency): a principle giving an agent their authority to act on the principle’s behalf, after the action has
taken place
 PE to keep offer open: an offer which the offeror could reasonably foresee the offeree relying on, and the offeree
has SUBSTANTIALLY relied on the offer to their detriment and fairness and justice requires a remedy; typically
used for bids in construction law
 Statutes that keep offers open: stock sales in a new corporation, auctions, and UCC firm offer
 Goods: items movable at the time of identification for the sale
 Firm offer: “gift” by a merchant to keep the offer open without consideration – must be signed writing by the offeror
and will not be held open for more than three months
 UCC Merchant: broad understanding; anyone who has knowledge of business practices
 Expectation Damages: remedy that puts the damaged party where they would have been had the contract been
fulfilled/completed
 Reliance Damages: lesser remedy that gives the damaged party what they have put into the contract back
 Mirror-image Rule: common law application of terms of the contract: the terms of the offer and acceptance must
exactly match or there is no K
 Last-Shot Approach: the way the common law is applied when the terms do not match; because acceptance can
be through conduct, the last form exchanged will define the terms of the contract
 Ways to distinguish between common law application and UCC Art 2 application: UCC applies to sales of goods
and common law applies to everything else; determined by: language of the K, nature of the supplier's business,
and weighing the intrinstic worth of forces (esp. when goods and services are both present in the K)
 UCC 2-207 (1): different or additional terms will still create a K when the first document has the requirements for
an offer and the second has the requirements of an acceptance, even if there are small differences (of the non-
dickered terms), UNLESS the offree expressly makes his acceptance conditional on assent to differences (ex.
clear intent to create a counter-offer, "subject to" not clear enough
 UCC 2-207: attempts to reflect business practices for different forms or a form with other info than verbal
agreement; does not accept last-shot
 UCC 2-207 (2): once K is formed, this section determines whose terms win with Ks with additional or different
terms
 UCC K with additional terms – non-merchant: the first form is governing and added terms become proposals to be
accepted by the offeror in words (conduct not sufficient)
 UCC K with additional terms – merchant: Additional terms become part of the K UNLESS (1) offer expressly limits
acceptance to its terms, (2) additional terms materially alter the offer (ex. no warranties terms; surprised/hardship
test), or (3) notification of objection has been given or is given within a reasonable time
 UCC K with different terms: there is a K, but 2-207 does not address. Court interpret in three ways: (1) terms
become proposals (accepted by words not conduct) which makes this a first-shot approach, (2) apply additional
terms application (likely to be found as a material change), or (3) knock-out rule - different terms knock each other
out and neither become part of the K and court fills in the differences by intentions
 Material terms: subject matter, price, payment terms, quantity, quality, duration, description of the work
 Indefinite Terms (agreements to agree): (1) common law: no K, (2) courts fill in the gaps based on intent and other
common business factors (always for UCC art 2), or (3) court finds that the parties have a K to keep bargaining in
good faith
 UETA – Uniform Electronic Transactions Act: a K may not be denied legal effect solely bc it is an electronic
record, requires that the parties agree to electronic transaction, deals with signatures and automation
 Promissory Estoppel: alternative legal theory to bind a promise; requires: (1) a promise (2) that the promisor can
reasonably foresee the promisee relying on (3) a actual reliance by the promisee (to their detriment), and (4) the
enforcement of which allows fairness and justice to prevail
 Remedy for Promissory Estoppel: flexible; courts can award varied remedies to provide the best fit for fairness
and justice
 Things that are NOT offers: predictions, opinions, ads, catalogs, estimates, statements of future intentions, and
inquiries
 Policy for definite and certain terms: required for mutual assent and enables courts to determine remedy
 K now or later?: courts consider factors of an oral agreement to determine if the parties intended to make the
agreement binding immediately or upon formal writing. Factors and how courts tend to respond: if agreement is
usually in writing (if so - later), few or many details (few - now, many - later), small or large amount of $ (small -
now, large - later), express agreement on all terms (if so - now), if any party has taken action (if so - now)
 Ks pertaining to marriage and the family: the state has a special interest in protecting the family, so Ks may have
different standards; examples: Ks between married couples may be unenforceable because they conflict with
martial harmony, restraints on marriage were void at common law and now only enforceable within reason,
breaking engagements can be considered a BOK, pre-nup or ante-nuptial agreements are now accepted by
statute, courts will interfere to protect children during divorce settlements, and now co-habitation may be protected
by statute
 Charitable Subscriptions: generally promises to make gifts are not enforceable; a pledge is promise to make a gift
supported by giving possession right now with intention of transferring title later; consideration can be created by
matching pledges; R2-90(2) allows for PE without actual reliance but few courts accept it
 Elements of Restitution: (1) benefit conferred (2) justice and fairness requires compensation, although a promise
is absent
 Restitution Remedy: value of the benefit conferred; constructive trust - court acts as if there is a trust when one
party unlawfully holds and gains off another's property
 Benefit Conferred: enrichment; cannot be a gift - generally actions must be taken with dollar signs in the eyes; can
be goods, services, and relief (i.e. from pain)
 Promissory Restitution: (1) benefit conferred (2) party who benefit was conferred upon make a promise to pay for
that benefit (3) justice and fairness
 Ks without consideration: A new promise to pay a pre-existing debt, promise to pay a debt that has been
discharged (statute of limitations or bankruptcy), promise to act on a promise that is voidable (ex. made by a
minor), promise to uphold a K that is unenforceable due to the statute of frauds, or a promise to pay for material
benefits (prom. resti.)
 Promissory Restitution Remedy: value of the promise; but the value of the promise cannot be disproportionate to
the value of the benefit
 Acceptance of partial payment in promissory restitution: can show the party who conveyed the benefit expected
payment (not a good samaritan act)
 Statute of Frauds: requires some Ks to be in writing and signed by the party to be charged; Ks that are not written
and/or signed by the party to be charged are completely unenforceable; found in every jurisdiction and covered by
the UCC for sales of good; requires writing for contracts: (1) Ks by executor/administrator to pay estate's
obligations (2) suretyship, concerning marriage (4) interest in land (5) leases (over a year); (6) Ks over one year
o Policy: doctrine was created to prevent fraud and perjury; evidentiary, cautionary, and channeling (guides
court's ruling) functions; disliked by many courts because it can prevent the enforcement of honest
agreements so they are often lenient with their interpretation
 SoF – land: covers all types of land interest (fee simple absolute, options to buy, mineral interests, easements,
morages, things attached to the land, etc but NOT crops or services on land); policy: typically a substantial sale
 SoF – one year provision: runs from time of agreement to completion of the K; interpreted broadly - if K could be
completed in one year; does not include Ks for a certain # of years over one year; K made and then started the
next day - first partial day is not counted when measuring one year
 Questions for SoF: (1) is this K under the statute of frauds? (2) If so, is there a sufficient writing? (3) If not, is there
a way around the SoF?
 CL SoF writing requirements: (1) identify the parties (2) identify the subject matter (3) include all essential
(material) terms and conditions; can be on more than one document
 CL SoF multiple writings: ways to connect writings: (1) physically, (2) signed document expressly incorporates
unsigned document(s), (3) signed document has an express reference to the unsigned document(s), and (4)
documents that reference each other generally as long as breacher assented to them
 Ways around general SoF: (1) part performance (2) promissory estoppel
 CL SoF part performance: often only allowed with equitable remedies; how much performance is necessary? (1)
full performance by both sides is sufficient, (2) sometimes full performance by one party makes the K binding
(particularly with land if the seller performs full; not usually by the buyer bc the buyer could get $ back through
restitution), (3) partial performance - more performance = more likely to be binding, (particularly with land, buyer -
so valuable and substantial - possession (consistent with agreement) + partial payment or improvements).
 UCC SoF exceptions: (1) between merchants, (2) specially manufactured goods, (3) admits in court (enforceable
for quantity admitted), (4) part performance (enforceable to extent delivered and accepted; legal and equitable
remedies)
 UCC SoF writing requirements: (1) quantity, (2) signed, and (3) sufficient to show intent to K
 UCC SoF – merchant exception: Ks normally under the UCC statute of frauds can still be enforceable without
being signed by the party to be charged when: (1) both parties are merchants, (2) one party sends a writing
(sufficient against the sender - quantity, signed, and in confirmation of oral K) (3) within a reasonable amount of
time from oral K, (4) the other party receives it, and (5) objects within 10 days. Can create a battle of the forms
 Breach of Contract: (1) valid contract (2) breach (3) caused by party to be charged (defendant) (4) damages (to
the plaintiff)
