Stat. Supp.*: Rest. 2d Contracts, §§ 17, 22, 24, 26-27, 50, 59, 61, 33
§17 Requirement of a Bargain:
a. Except as stated in Subsection (2), formation of contract requires a bargain which
manifests mutual assent to the exchange and a consideration.
b. Whether or not bargain exists, a contract may be formed under special rules applicable to
formal contracts or under rules in §82-94.
i. Meeting of the minds: Actual & apparent assent  mental reservation of a party to a
bargain doesn’t impair their obligations they purport to undertake.
Manifestation of Assent in General
§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 parties.
2. A manifestation of mutual assent may be made even though neither offer nor
acceptance can be identified and even if moment of formation can’t be determined.
a. Assent by course of conduct – problems with offer & acceptance with K’s
involving advance commitment.
Making of Offers
§24 Offer Defined
- An offer is manifestation of willingness to enter into a bargain, so made as to justify
another person in understanding that their assent to that bargain is invited and will
conclude it.
o Offer as promise  offer itself is a promise, revocable until accepted
o Proposal of gift IS NOT an offer  must be element of EXCHANGE.
 Not an offer unless it specifies a promise or performance by the offeree
(accepting deal) as the price/consideration given by them
§26 Preliminary Negotiations = don’t have offer to be accepted
- Manifestation of willingness to enter into a bargain [Element of an offer] is NOT an offer
if other party knows or has reason to know that the person making the offer doesn’t
INTEND to CONCLUDE a bargain until they have made a further manifestation of
assent
o Interpretation of proposals for exchange: Actor intends to make a bargain in the
future, but only if he makes some further manifestation of assent
 If offeree of a proposal has a reason to know that no offer is intended 
no offer even though offeree understands it to be an offer
o ADVERTISING: Not generally intended or understood as offers to sell. Offer
directed to general public possible  must have language of commitment or
invitation to take action without further communication
 Leonard v. Pepsico
o Quotation of price: commonly understood as inviting an offer rather than making
one even if directed towards a certain customer. But word “quote” can = offer
o Invitation of bids or other offers: Common for one party to request the other to
make an offer.
o Preliminary manifestations as terms of later offer: Preliminary communication
can form part of written contract since it can contain promises or representations
which are incorporated in subsequent offer.
§27 Existence of Contract Where Written Memorial is Contemplated = unless ya doooo
- Manifestation 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.
o Possible to create a contract of terms to include an obligation to execute
subsequently a final writing which will contain certain provisions. If parties have
definitely agreed and final writing shall contain final execution provisions and no
others, they have concluded contract.
o But if either party knows or has a reason to know that the other party regards the
agreement as incomplete then the preliminary negotiations and agreements do not
constitute a contract.
Topic 5. Acceptance of Offers
§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 request that the offeree complete every act essential to the
making of the promise.
a. Mode of acceptance: Assent to same bargain proposed by the offer and comply to
terms of offeror (identity and mode of manifesting acceptance – might be
particular mode of manifesting acceptance)
b. Acceptance by Performance: When the offer requires acceptance by performance
and does not invite a return promise, such as ordinary cases of an offer of a
reward, a contract can be created only by the offeree’s performance
i. Illustrations:
1. 1. A, who is about to leave on a month's vacation, tells B that A
will pay B $50 if B will paint A's porch while A is away. B says he
may not have time, and A says B may decide after A leaves. If B
begins the painting, there is an acceptance by performance which
operates as a promise to complete the job. See §§ 32, 62.
2. 2. In Illustration 1, B also expresses doubt whether he will be able
to finish the job, and it is agreed that B may quit at any time but
will be paid only if he finishes the job during A's vacation. If B
begins the painting, there is an acceptance by performance creating
an option contract. See § 45.
c. Acceptance by Promise: A promissory acceptance may be explicitly required by
the offer or may be the only type of acceptance which is reasonable under the
circumstances, or the offeree may choose to accept by promise an offer which
invites acceptance either by promise or by performance.
§ 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
counteroffer.
o Qualified Acceptance: Qualified/conditional acceptance proposes an exchange
different from that proposed by the original offeror  counteroffer terminates the
power of acceptance of the original offeree.
 BUT, If acceptance isn’t made to depend on assent to the additional or
different terms, then definite and seasonable expression of acceptance is
operative despite the additional or different terms
 SEE §62 OF UCC 2-207(1)  additional terms are construed as
proposal for modification of the contract.
o Statement of conditions implied in offer: Fact that the offeree makes a conditional
promise is not sufficient to show that his acceptance is conditional.
§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.
o Interpretation of acceptance: Acceptance must be unequivocal but requesting
modification of the proposed terms doesn’t prevent purposed acceptance from
closing the contract. UNLESS, if fairly interpreted, the offeree’s assent depends
on the offerors’ further acquiescence in the modification.
§33 Certainty
1. Even though a manifestation of intention is intended to be understood as an offer, it can’t
be accepted 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.
a. Certainty of terms: Sometimes terms are left open or undefined, but actions of the
parties may show conclusively they intended to conclude a binding agreement. In
such cases, courts will endeavor, if possible, to attach a sufficiently definite meaning
to the bargain
b. Certainty in basis for remedy: See Uniform Commercial Code § 2-204(3) and
Comment.
c. Preliminary negotiations: If the parties to negotiations for sale manifest an intention
not to be bound until the price is fixed or agreed, the law gives effect to that intention.
Uniform Commercial Code § 2-305(4). The more terms the parties leave open, the
less likely it is that they have intended to conclude a binding agreement. See Uniform
Commercial Code § 2-204 and Comment.
d. Uncertain time of performance
e. Indefinite Price: Where the parties manifest an intention not to be bound unless the
amount of money to be paid by one of them is fixed or agreed and it is not fixed or
agreed there is no contract. Uniform Commercial Code § 2-305(4).
i.
Illustrations:
1. A promises to sell and B to buy goods “at cost plus a nice profit.” The
quoted words strongly indicate that the parties have not yet concluded a
bargain.
2. A promises to do a specified piece of work and B promises to pay a price to
be thereafter mutually agreed. The provision for future agreement as to price
strongly indicates that the parties do not intend to be bound. If they manifest
an intent to be bound, the price is a reasonable price at the time for doing the
work.
f. Other indefinite terms: The more important the uncertainty, the stronger the
indication is that the parties do not intend to be bound; minor items are more likely to
be left to the option of one of the parties or to what is customary or reasonable
Uniform Commercial Code (UCC), Article 2, §§ 2- 204(3), 2-305, 2-308 to 2-310
§ 2-204. Formation in General.
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.
a. Subsection 1: recognizes any manner of expression of agreement – oral, written or
otherwise appropriate conduct is sufficient to establish an agreement.
b. Subsection 2: appropriate conduct by the parties may be sufficient to establish an
agreement even though exact point of which deal was closed isn’t clear
c. Open terms  commercial standards on the point of indefiniteness
i. The more terms the parties leave open, the less likely it is that they have
intended to conclude a binding agreement, but their actions may be
frequently conclusive on the matter despite the omissions.
§2-305. Open Price Term
1. The parties, if they so intend, can conclude a contract for sale even though the price isn’t
settled. In such a case, the price is a REASONABLE PRICE AT THE TIME FOR
DELIVERY if:
a. Nothing is said as to price; or
b. The price is left to be agreed by the parties and they fail to agree; or
c. The price is to be fixed in terms of some agree MARKET or other STANDARD
as set or recorded by a third person or agency and it is not so set or recorded.
2. A price to be fixed by the seller or by the buyer means a price for him to fix in GOOD
FAITH.
3. When a price left to be fixed otherwise than by agreement of the parties fails to be fixed
through FAULT of one party, the other may at this option treat the contract as
CANCELLED or themselves FIX A REASONABLE PRICE
4. However, where the parties intend not be bound unless the price be fixed or agreed and it
is not fixed or agreed, there is NO CONTRACT. In such a case, the buyer must return
any goods already received or if unable to do so must pay their reasonable value at the
time of delivery and the seller must return any portion of the price paid on account.
- Rejects “an agreement to agree is unenforceable and rejects defeating agreements on the
ground of “indefiniteness”  Recognizes dominant intention of the parties to have the
deal continue to be binding upon both.
- Good faith: observance of reasonable commercia standards of fair dealing in the trade if
the party is a merchant.
o “Posted price, given price, price in effect, market price  satisfies good faith
requirement.
§ 2-308. Absence of Specified Place for Delivery
Unless otherwise agreed:
(a) The place for delivery is the seller’s place of business or if he has none his residence;
but
(b) In a contract for sale of identified goods which to the knowledge of the parties at the time
of contracting are in some other place, that place is the place of their delivery;
(c) Document of title may be delivered through customary banking channels.
- Rules of this section apply only “unless otherwise agreed”!
§2-309. Absence of Specific Time Provisions; Notice of Termination
1. The time for shipment or delivery or any other action under a contract if not provided
in this Article or agreed upon shall be a reasonable time.
2. Where the contract provides for successive performances but is indefinite in duration
it is valid for a reasonable time but unless otherwise agreed may be terminated at
any time by either party.
3. Termination of a contract by one party except on the happening of an agreed event
requires that reasonable notification be received by the other party and an agreement
dispensing with notification is invalid if its operation would unconscionable.
- Reasonable time  good faith and commercial standards in Sections 1-304, 1-205 and 1201
- Basic principles upheld: avoid surprises, good faith judgement protected, notice or
negotiation to reduce uncertainty is favored.
§2-312. Open Time for Payment or Running of Credit
Unless otherwise agreed
(a) Payment is due at the time and place at which the buyer is to receive the goods even
though the place of shipment is the place of delivery.
UCC §2-305. Open Price Term
The parties if they so intend can conclude a contract for sale even though the price is not settled.
In such a case the price is a reasonable price at the time for delivery if
a) nothing is said as to price; or
b) the price is left to be agreed by the parties and they fail to agree; or
c) the price is to be fixed in terms of some agreed market or other standard as set or
recorded by a third person or agency and it is not so set or recorded.
UCC § 2-308. Absence of Specified Place for Delivery
Unless otherwise agreed
- the place for delivery of goods is the seller's place of business or if he has none his
residence; but
UCC § 2-310. Open Time for Payment…
Unless otherwise agreed
a) payment is due at the time and place at which the buyer is to receive the goods even
though the place of shipment is the place of delivery; and
b) if the seller is authorized to send the goods he may ship them under reservation, and may
tender the documents of title, but the buyer may inspect the goods after their arrival
before payment is due unless such inspection is inconsistent with the terms of the contract
(Section 2-513); . . .
Topic 4. Duration of the Offeree’s Power of Acceptance
§ 36 Methods of Termination of the Power of Acceptance
1. An offeree’s power of acceptance may be terminated by:
a. Rejection or counteroffer 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 non-occurrence of any
condition of acceptance under the terms of the offer
§ 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 counteroffer, by revocation, or by death or incapacity of the offeror, unless the
requirements are met for the discharge of contractual duty.
- Option contract: Promise which meets the requisites of a contract but limits the
promisor’s power to revoke an offer  different from specific particulars of performance
because the offeree can choose not to undertake any contractual duties at all (protects
offeree from an offeror’s ability to revoke their offer to engage in a contract)
o Under an option contract, bargained away power to revoke
§38 Rejection
1. An offeree’s power of acceptance is terminated by his rejection of the offer unless the
offeror has manifested a contrary intention.
2. A manifestation of intention not to accept an offer is rejection unless the offeree
manifests an intention to take it under further advisement.
- RELIANCE: Probable legal consequential effect on the offeror.
o Failure to prepare or failure to send notice of revocation  difficult to prove so
power of acceptance is terminated without proof of reliance.
 Illustrations:

-
A makes an offer to B and adds: “This offer will remain open for a
week.” B rejects the offer the following day, but later in the week
purports to accept it. There is no contract unless the offer was itself
a contract. B's purported acceptance is itself a new offer.
 A makes an offer to sell water rights to B, and states, “You may
accept this offer by applying to the appropriate authority for a
permit to use the water.” B rejects the offer, obtains water rights
elsewhere, and later applies for the permit contemplated by the
offer. There is no contract. Even if A's offer was a binding option,
B has not exercised it.
Contrary statement of offeror or offeree: If the offeree states that he rejects the offer for
the present but will reconsider it at a future time, there is no basis for a change of position
by the offeror in reliance on a rejection, and under Subsection (2) there is no rejection.
§39 Counteroffers
1. A counteroffer 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 counteroffer unless the
offeror has manifested a contrary intention or unless the counteroffer manifests a contrary
intention of the offeree.
- Counteroffer as rejection: Said to be same as rejection because it has the same effect in
terminating the offeree’s power of acceptance. But different from rejection because
counteroffer must be capable of being accepted  carries off negotiations rather than
breaking them off.
o Illustration:
 A offers B to sell him a parcel of land for $5,000, stating that the offer will
remain open for thirty days. B replies, “I will pay $4,800 for the parcel,”
and on A's declining that, B writes, within the thirty day period, “I accept
your offer to sell for $5,000.” There is no contract unless A's offer was
itself a contract (see § 37), or unless A's reply to the counteroffer
manifested an intention to renew his original offer.
- Qualified acceptance inquiry or separate offer: Type of counter which purports to accept
the original offer but makes acceptance expressly condition on assent to addition or
different terms
o DIFFERENT from an unqualified acceptance that’s accompanied by a proposal
for modification of the agreement or for a separate agreement.
 Mere inquiry ≠ counteroffer because too tentative, indefinite, deals with
new matters rather than a substitution for the original offer, language may
manifest intention to keep original offer.
o Illustration:
 A makes the same offer to B as that stated in Illustration 1, and B replies,
“Won't you take less?” A answers, “No.” An acceptance thereafter by B
within the thirty-day period is effective. B's inquiry was not a
counteroffer, and A's original offer stands.
-
Contrary statement of offeror or offeree: An offeror may state in his offer that it shall
continue for a stated time in any event and that in the meanwhile he will be glad to
receive counteroffers. Likewise, an offeree may state that he is holding the offer under
advisement, but that if the offeror desires to close a bargain at once the offeree makes a
specific counteroffer. Such an answer will not extend the time that the original offer
remains open but will not cut that time short.
o Illustration:
 A makes the same offer to B as that stated in Illustration 1. B replies, “I
am keeping your offer under advisement, but if you wish to close the
matter at once I will give you $4,800.” A does not reply, and within the
thirty-day period B accepts the original offer. B's acceptance is effective.
§40 Time When Rejection or Counteroffer Terminates the Power of Acceptance
- Rejection or counteroffer by mail or telegram doesn’t 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 is only a
counteroffer unless the acceptance is received by the offeror before he receives the
rejection or counteroffer.
o Receipt essential: A rejection terminates the offeree’s power of acceptance
because of the probability of reliance by the offeror and there is no possibility of
reliance until the rejection is received. Therefore, power continues until receipt.
o Subsequent acceptance: Since a rejection or counteroffer isn’t effective until
received, it may until that time be superseded by an acceptance. However, this
rule only applies to a rejection or counteroffer which is otherwise effective.
 Illustration:
 A makes B an offer by mail. B immediately after receiving the
offer mails a letter of rejection. Within the time permitted by the
offer B accepts. This acceptance creates a contract only if received
before the rejection, or if the power of acceptance continues under
§§ 37- 39.
§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 offer is received.
a. Specified time: Offer can prescribe identify of the offeree or form of acceptance
 can also prescribe time limit for acceptance.
b. Reasonable Time: In absence of contrary indication, just as acceptance may be
made in any manner and by any medium which is reasonable in the
circumstances, so it may be made at any time which is reasonable in the
circumstances.
i. Generally, question is what time would be thought satisfactory to the
offeror by a reasonable person in the position of the offeree, but
circumstances not known to the offeree may be relevant to show that the
time actually taken by the offeree was satisfactory to the offeror.
c. Direct negotiations: When parties bargain face to face or over the phone, time for
acceptance doesn’t ordinarily extend beyond the end of the conversation unless a
contrary intention is indicated either by express words by the circumstances.
i. Illustration:
1. While A and B are engaged in conversation, A makes B an offer to
which B then makes no reply, but on meeting A again a few hours
later B states that he accepts the offer. There is no contract unless
the offer or the circumstances indicate that the offer is intended to
continue beyond the immediate conversation.
§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.
o Revocability of offers: Most offers are revocable.
 Some may rest on the express or implied terms of the offer ex. bids at
an auction
 Offer is revocable even though it expressly states the contrary because of
doctrine that an informal agreement is binding as a bargain only if
supported by consideration.
§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.
§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.
§ 30 Form of Acceptance Invited
1. An offer may invite or require acceptance to be made by an affirmative answer in
words, or by performing or refraining from performing a specified act, or may
empower the offeree to make a selection of term in his acceptance.
2. Unless otherwise indicated by the language or the circumstances, an offer invites
acceptance in any manner and by any medium reasonable in the circumstances.
a. Required form: Offeror is master of the offer. Form of acceptance is often quite
immaterial in relation to identity of the offeree. But offeror is entitled to insist on
a particular mode of manifestation of assent; may limit acceptance to a particular
mode.
i. Illustration:
1. A sends a letter to B stating the terms of a proposed contract. At
the end he writes, “You can accept this offer only by signing on the
dotted line below my own signature.” A replies by telegram, “I
accept your offer.” There is no contract.
b. Invited Form: Insistence on a particular form of acceptance is unusual. Language
referring to a particular mode of acceptance is often intended and understood as
suggestion rather than limitation  suggested mode is authorized but other modes
aren’t precluded.
§32 Invitation of Promise or Performance
- In case of doubt an offer is interpreted as inviting the offeree to accept either by promises
to perform what the offer requests or by rendering the performance, as the offeree
chooses.
o Promise or performance: Unless the language or the circumstances indicate that one
party is to have an option, the usual offer invites an acceptance which either
amounts to performance or constitutes a promise. Rule is particular application of
the rule stated in §30(2).
 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.
o Offer limited to acceptance by performance only: Language or circumstances
sometimes makes it clear that the offeree is not to bind themselves in advance of
performance. In such cases, the offer doesn’t invite a promissory acceptance and a
promise is ineffective as an acceptance.
 Separate question  undertakes any responsibility to complete
performance once begun
 Quality of the performance when complete
 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.
§45 Option Contract Created by Part Performance or Tender
1. Where an offer invites an offeree to accept by rendering a performance 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.
a.
Offer limited to acceptance by performance only: This section is limited to cases
where the offer doesn’t invite a promissory acceptance  Instead, referred to as an
“offer for a unilateral contract”
i.
Ex: Offers of rewards, prizes, non-commercial arrangements among relatives
and friends.
b.
Manifestation of contrary intention: This rule is designed to protect the offeree in
justifiable reliance on the offeror’s promise. Yield to a manifestation of intention
which makes reliance unjustified.
c.
Beginning to perform: If the invited performance takes time, then the invitation to
perform necessarily includes an invitation to BEGIN performance. In most such
cases, the beginning of performance carries with it an express or implied promise
to complete performance.
i. In the less common case where the offer doesn’t contemplate or invite a
promise by the offeree, the beginning of a performance nevertheless completes
the manifestation of mutual assent and furnishes consideration for an option
contract.
ii. Illustrations:
1. A offers a reward for the return of lost property. In response to the offer, B
searches for the property and finds it. A then notifies B that the offer is
revoked. B makes a tender of the property to A conditional on payment of
the reward, and A refuses. There is a breach of contract by A.
2. A, a magazine, offers prizes in a subscription contest. At a time when B has
submitted the largest number of subscriptions, A cancels the contest. A has
broken its contract with B.
3. A writes to her daughter B, living in another state, an offer to leave A's
farm to B if B gives up her home and cares for A during A's life, B
remaining free to terminate the arrangement at any time. B gives up her
home, moves to A's farm, and begins caring for A. A is bound by an option
contract.
d. Completion of performance: Where part performance or tender by the offeree
creates an option contract, the offeree is not bound to complete performance. The
offeror alone is bound, but his duty of performance is conditional on completion of
the offeree's performance. If the offeree abandons performance, the offeror's duty
to perform never arises
e. Preparations for performance. What is begun or tendered must be part of the
actual performance invited in order to preclude revocation under this Section.
Beginning preparations, though they may be essential to carrying out the contract
or to accepting the offer, is not enough
i. Preparations to perform may constitute justifiable reliance sufficient to make the
offeror’s promise binding.
ii. Illustration:
1. A makes a written promise to pay $5000 to B, a hospital, “to aid B in its
humanitarian work.” Relying upon this and other like promises, B proceeds
in its humanitarian work, expending large sums of money and incurring
large liabilities. Performance by B has begun, and A's offer is irrevocable.
§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.
§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 – commercially reasonable.
§ 62 Effect of Performance by Offeree Where Offer Invites Either Performance or Promise
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 a acceptance operates as a promise to render complete performance.
a. The offeree's power to choose: The offeror normally invites a promise by the offeree
for the purpose of obtaining performance of the promise. Full performance fulfills
that purpose more directly than the promise invited, and hence constitutes a
reasonable mode of acceptance. The offeror can insist on any mode of acceptance, but
ordinarily he invites acceptance in any reasonable manner; in case of doubt, an offer
is interpreted as inviting the offeree to choose between acceptance by promise and
acceptance by performance. See §§ 30, 32, 58.
b. Part performance or tender:. Where acceptance by performance is invited and no
promise is invited, the beginning of performance or the tender of part performance
creates an option contract and renders the offer irrevocable. See §§ 37, 45. Under
Subsection (1) of this Section the offer is similarly rendered irrevocable where it
invites the offeree to choose between acceptance by promise and acceptance by
performance. In both types of cases, if the invited performance takes time, the
invitation to perform necessarily includes an invitation to begin performance; if
performance requires cooperation by the offeror, there is an offer only if acceptance
can be completed by tender of performance. But unless an option contract is
contemplated, the offeree is expected to be bound as well as the offeror, and
Subsection (2) of this Section states the implication of promise which results from
that expectation. See Illustration 5 to § 32. In such standard cases as the shipment of
goods in response to an order, the acceptance will come to the offeror's attention in
normal course; in other cases, the rule of § 54(2) ordinarily requires prompt
notification.
d. Preparations for performance: As under § 45, what is begun or tendered must be part
of the actual performance invited, rather than preparation for performance, in order to
make the rule of this Section applicable. See Comment f to § 45. But preparations to
perform may bring the case within § 87(2) on justifiable reliance. . . .
§ 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.
a. Rationale. It is often said that an offeror who makes an offer by mail makes the post
office his agent to receive the acceptance, or that the mailing of a letter of acceptance
puts it irrevocably out of the offeree's control. Under United States postal regulations,
however, the sender of a letter has long had the power to stop delivery and reclaim the
letter. A better explanation of the rule that the acceptance takes effect on dispatch is that
the offeree needs a dependable basis for his decision whether to accept. In many legal
systems such a basis is provided by a general rule that an offer is irrevocable unless it
provides otherwise. The common law provides such a basis through the rule that a
revocation of an offer is ineffective if received after an acceptance has been properly
dispatched. See Comment c to § 42. Acceptance by telegram is governed in this respect
by the same considerations as acceptance by mail.
b. Loss or delay in transit. In the interest of simplicity and clarity, the rule has been
extended to cases where an acceptance is lost or delayed in the course of transmission.
The convenience of the rule is less clear in such cases than in cases of attempted
revocation of the offer, however, and the language of the offer is often properly
interpreted as making the offeror's duty of performance conditional upon receipt of the
acceptance. Indeed, where the receipt of notice is essential to enable the offeror to
perform, such a condition is normally implied. See Comment c to § 226.
c. Revocation of acceptance. The fact that the offeree has power to reclaim his acceptance
from the post office or telegraph company does not prevent the acceptance from taking
effect on dispatch. Nor, in the absence of additional circumstances, does the actual
recapture of the acceptance deprive it of legal effect, though as a practical matter the
offeror cannot assert his rights unless he learns of them. An attempt to revoke the
acceptance by an overtaking communication is similarly ineffective, even though the
revocation is received before the acceptance is received. After mailing an acceptance of a
revocable offer, the offeree is not permitted to speculate at the offeror's expense during
the time required for the letter to arrive.
d. A purported revocation of acceptance may, however, affect the rights of the parties. It
may amount to an offer to rescind the contract or to a repudiation of it, or it may bar the
offeree by estoppel from enforcing it. In some cases it may be justified as an exercise of a
right of stoppage in transit or a demand for assurance of performance. Compare Uniform
Commercial Code §§ 2-609, 2-702, 2-705. Or the contract may be voidable for mistake
or misrepresentation, §§ 151- 54, 164. See particularly the provisions of § 153 on
unilateral mistake.
f. Option contracts. An option contract provides a dependable basis for decision whether to
exercise the option, and removes the primary reason for the rule of Subsection (1).
Moreover, there is no objection to speculation at the expense of a party who has
irrevocably assumed that risk. Option contracts are commonly subject to a definite time
limit, and the usual understanding is that the notification that the option has been
exercised must be received by the offeror before that time. Whether or not there is such a
time limit, in the absence of a contrary provision in the option contract, the offeree takes
the risk of loss or delay in the transmission of the acceptance and remains free to revoke
the acceptance until it arrives. Similarly, if there is such a mistake on the part of the
offeror as justifies the rescission of his unilateral obligation, the right to rescind is not lost
merely because a letter of acceptance is posted. See §§ 151- 54.
a. Illustrations:
i. A, for consideration, gives B an option to buy property, written notice to
be given on or before a specified date. Notice dispatched before but not
received until after that date is not effective to exercise the option.
ii. A submits a bid to supply goods to the Government, which becomes
irrevocable when bids are opened. Within a reasonable time the
Government mails a notice of award of the contract to A. Until A receives
the notice, there is no contract binding on the Government.
§ 66 Acceptance Must Be Properly Dispatched
- An acceptance sent by mail or otherwise from a distance is not operative when
dispatched, unless it is properly addressed and such other precautions taken as are
ordinarily observed to insure safe transmission of similar messages.
o Rationale. Under § 50, acceptance by promise is not effective until the offeree has
completed every act essential to the making of the promise. Reasonable diligence
to notify is essential under § 56, except as stated in § 69. It follows that,
notwithstanding § 63, acceptance by mail or telegram is not effective on dispatch
unless the acceptor exercises reasonable diligence to notify the offeror. Compare
the rules as to acceptance by performance stated in § 54. This Section specifies
what constitutes reasonable diligence: it would be most unusual for an offer to
invite acceptance by the sending, for example, of a misdirected letter or telegram.
o Proper address. The offeree may fulfill the requirement that an acceptance be
properly addressed by using a return address indicated in the offer, whether in a
letterhead or otherwise. But any other place held out by the offeror as the place
for receipt of such communications will do as well. . . . Whether a reply to an
offer may properly be sent to a residential address not specified in the
negotiations depends on the circumstances. If the acceptance is duly received
despite misdirection, the rule of § 67 may apply.
§ 67 Effect of Receipt of Acceptance Improperly Dispatched
- Where an acceptance is seasonably dispatched but the offeree uses means of transmission
not invited by the offer or fails to exercise reasonable diligence to insure safe
transmission, it is treated as operative upon dispatch if received within the time in which
a properly dispatched acceptance would normally have arrived.
§ 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.
§ 69 Acceptance by Silence or Exercise of Dominion
1. Where an offeree fails to reply to an offer, his silence and inaction operate as an
acceptance in the following cases only:
a. Where an offeree takes the benefit of offered services with reasonable opportunity
to reject them and reason to know that they were offered with expectation of
compensation.
b. Where the offeror has stated or given the offeree reason to understand that assent
may be manifested by silence or inaction, and the offeree in remaining silence and
inactive tends to accept the offer. [Offeror needs to get in the head to the offeree
of “intent”]
c. Where because of previous dealings or otherwise, it is reasonable that the offeree
should notify the offeror if he does not intent to accept.
2. An offeree who does any act inconsistent with the offeror’s ownership of offered
property is bound in accordance with the offered terms unless they are manifestly
unreasonable. But if the act is wrongful as against the offeror is an acceptance only if
ratified by him.
a. Acceptance by silence is exceptional. Ordinarily an offeror does not have power
to cause the silence of the offeree to operate as acceptance. See Comment b to §
53. The usual requirement of notification is stated in § 54 on acceptance by
performance and § 56 on acceptance by promise. The mere receipt of an
unsolicited offer does not impair the offeree's freedom of action or inaction or
impose on him any duty to speak. The exceptional cases where silence is
acceptance fall into two main classes: those where the offeree silently takes
offered benefits, and those where one party relies on the other party's
manifestation of intention that silence may operate as acceptance. Even in those
cases the contract may be unenforceable under the Statute of Frauds.
b. Acceptance of offered services. Services rendered cannot be recovered in specie,
and there is in general no right to restitution of the value of services rendered
officiously or gratuitously. Even where services are rendered by mistake, the right
to restitution is limited. See Restatement of Restitution §§ 40-42, 56. But when
the recipient knows or has reason to know that the services are being rendered
with an expectation of compensation, and by a word could prevent the mistake,
his privilege of inaction gives way; under Subsection (1)(a) he is held to an
acceptance if he fails to speak. The resulting duty is not merely a duty to pay fair
value, but a duty to pay or perform according to the terms of the offer.
i. Illustration:
1. A gives several lessons on the violin to B's child, intending to give
the child a course of twenty lessons, and to charge B the price. B
never requested A to give this instruction but silently allows the
lessons to be continued to their end, having reason to know A's
intention. B is bound to pay the price of the course.
c. Intent to accept. The mere fact that an offeror states that silence will constitute
acceptance does not deprive the offeree of his privilege to remain silent without
accepting. But the offeree is entitled to rely on such a statement if he chooses. The
case for acceptance is strongest when the reliance is definite and substantial or
when the intent to accept is objectively manifested though not communicated to
the offeror. Compare §§ 54, 87(2). Even though the intent to accept is manifested
only by silent inaction, however, the offeror who has invited such an acceptance
cannot complain of the resulting uncertainty in his position.
i. Illustrations:
1. A offers by mail to sell to B a horse already in B's possession for
$250, saying: “I am so sure that you will accept that you need not
trouble to write me. Your silence alone will operate as
acceptance.” B makes no reply, but he does not intend to accept.
There is no contract.
2. The facts being otherwise as stated in Illustration 2, B replies by
return mail, saying: “I accept your offer.” There is a contract.
3. The facts being otherwise as stated in Illustration 2, B makes no
reply and remains inactive with the intention of thereby expressing
his acceptance. There is a contract
d. Prior conduct of the offeree. Explicit statement by the offeree, usage of trade, or a
course of dealing between the parties may give the offeror reason to understand
that silence will constitute acceptance. In such a situation the offer may tacitly
incorporate that understanding, and if the offeree intends to accept the case then
falls within Subsection (1)(b). Under Subsection (1)(c) the offeree's silence is
acceptance, regardless of his actual intent, unless both parties understand that no
acceptance is intended. . . .
3. Exercise of dominion. An offeree in possession of offered property commonly has a duty
or privilege to hold it for the offeror, or, if storage is inconvenient or hazardous, to return
it, sell it for the offeror's account, or otherwise dispose of it. … But the offeree's privilege
to remain silent without accepting does not extend to acts of ownership not assented to by
the offeror. Hence exercise of dominion, even though not intended as acceptance under
Subsection (1) (b) and not given meaning by prior conduct under Subsection (2).