Are all Option Contracts Unilateral Contracts?

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hangnail
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Are all Option Contracts Unilateral Contracts?

Postby hangnail » Sun Dec 08, 2013 10:43 am

Are all option contracts (Rst 25) created by part performance or tender (Rst 45)? In effect, are all option contracts initially "offers for unilateral contracts?"

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Presidentjlh
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Re: Are all Option Contracts Unilateral Contracts?

Postby Presidentjlh » Sun Dec 08, 2013 11:20 am

Sorry, I deleted my prior message as I want to make sure I am giving you the proper statement on law.

hangnail
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Re: Are all Option Contracts Unilateral Contracts?

Postby hangnail » Sun Dec 08, 2013 11:25 am

Thanks Presidentjlh.


Just to get it straight: I might argue that under Rst 45, I did not accept until I actually purchased Crackacre from you. You may counter that under Rst. 45, I accepted once I "performed" by emailing you.

To play with your hypo a bit: suppose you never said anything about leaving the option open for me if I gave you $100. Instead, you just offered me the land and said, "your money or your word will do."

Then, under section 62, the moment I gave you (or rather, dispatched) my "down payment" of $100, we had a contract. That is, if I don't follow through and buy the land, I will have breached.

So in effect, down payments can, depending on the fact pattern, either (a) create an option or (b) seal the deal.

Right?

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Presidentjlh
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Re: Are all Option Contracts Unilateral Contracts?

Postby Presidentjlh » Sun Dec 08, 2013 11:27 am

Now, to an accurate discussion on law.

Restatement of Contracts, Second, is as follows.

Section 45: Option Contract Created by Part Performance or Tender

1) Where an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance, an option contract is created when the offeree tenders or begins the invited performance or tenders a beginning of it.

2) The offeror's duty of perfromance under any option contract so created is conditional on completion or tender of the invited performance in accordance with the terms of the offer.

I was incorrect initially. The option contract is not entirely a unilateral contract, but it is similar. I think the key difference is that with a traditional unilateral contract, the offer cannot be revoked even without consideration, while with an option contract, for the offer to be made irrevocable, there must be consideration.

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Presidentjlh
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Re: Are all Option Contracts Unilateral Contracts?

Postby Presidentjlh » Sun Dec 08, 2013 11:28 am

hangnail wrote:Thanks Presidentjlh.


Just to get it straight: I might argue that under Rst 45, I did not accept until I actually purchased Crackacre from you. You may counter that under Rst. 45, I accepted once I "performed" by emailing you.

To play with your hypo a bit: suppose you never said anything about leaving the option open for me if I gave you $100. Instead, you just offered me the land and said, "your money or your word will do."

Then, under section 62, the moment I gave you (or rather, dispatched) my "down payment" of $100, we had a contract. That is, if I don't follow through and buy the land, I will have breached.

So in effect, down payments can, depending on the fact pattern, either (a) create an option or (b) seal the deal.

Right?


I think so, thus, the option contract isn't necessarily a unilateral contract, but they are similar, I think.

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Presidentjlh
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Re: Are all Option Contracts Unilateral Contracts?

Postby Presidentjlh » Sun Dec 08, 2013 11:33 am

Hopefully we can get someone in here who isn't a complete idiot about the law like I am and can better answer your question.

I think the option contract, in many ways, supplants the traditional unilateral contract, because, in old times, the unilateral contract could only be completed upon complete performance, but the option contract concept allows one, when they have begun to perform, to prevent the offeror from revoking, by saying that the past performance has created an implied option contract that says the offeror will now not revoke the offer, so as to preserve justice, while the offeree may choose to complete or not complete the performance.

iworkforlsac
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Re: Are all Option Contracts Unilateral Contracts?

Postby iworkforlsac » Sun Dec 08, 2013 11:47 am

In our class, we learned that there are 5 ways to create an option K (i.e. an irrevocable offer):

1. When consideration is given (either in unilateral or bilateral K's)
2. Statutes like the UCC 2-205 ("Firm Offer" - for merchants only) or NYGOL, which require a signed writing stating that the offer is binding/irrevocable/etc.
3. Promissory Estoppel
4. Restatement Second (which allows for an option K when there is a signed writing, and consideration is "purportedly given" as long as the agreement involves a fair exchange within a reasonable time)
5. Beginning of Performance (Restatement 1st/2nd)

Details of each are in my head but too lazy to write them out.. just my two cents.

Swimp
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Re: Are all Option Contracts Unilateral Contracts?

Postby Swimp » Sun Dec 08, 2013 2:40 pm

Just to be precise (and someone correct me if I'm wrong, please): I believe that when an offeror makes a promise and invites acceptance by performance, what he's proposing is a unilateral contract. When the offeree begins performance, he creates an option contract. The offeree thereafter has the option to perform or not (for a reasonable time, of course, after which the offer expires).




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