Contracts question

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perfunctory

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Contracts question

Postby perfunctory » Sat Dec 03, 2016 7:59 pm

I tell you: you build me a chair and I'll pay you $50. You start building and when you're about 85% done, I say "nah, nvm." What happens here? You didn't build me the chair so the contract isn't completed but I can't just renege right? I have in my notes something about an option contract.

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cdotson2

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Re: Contracts question

Postby cdotson2 » Sat Dec 03, 2016 8:14 pm

perfunctory wrote:I tell you: you build me a chair and I'll pay you $50. You start building and when you're about 85% done, I say "nah, nvm." What happens here? You didn't build me the chair so the contract isn't completed but I can't just renege right? I have in my notes something about an option contract.

Rest 45. when performance has commenced on a unilateral contract it becomes an option contract, and the performer gets a reasonable amount of time to complete performance (Marchiondo v. Scheck)
Last edited by cdotson2 on Sat Dec 03, 2016 8:42 pm, edited 2 times in total.

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pancakes3

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Re: Contracts question

Postby pancakes3 » Sat Dec 03, 2016 8:21 pm

You argue both ways - either it's unilateral and you didn't breach or it's bilateral and you breached.

If bilateral: You offered $50 in exchange for a chair. They agreed. Offer + Acceptance + Consideration (money for chair) makes a contract and you breached.

If bilateral: You offered $50 in exchange for the chair. They accept by presenting a chair. They have not presented the chair yet, so contract may be rescinded at any time.

An option contract is where you agree that in the future you'll be able to purchase a chair from someone else for the price of $50. That does not appear to be the case, but if it was, you have the right to not exercise your option and did not breach.

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2807

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Re: Contracts question

Postby 2807 » Sat Dec 03, 2016 8:30 pm

Remember, with a contract issue you will argue the same facts every time, you just pivot on the remedy based on what occurred.

if the contract was completed (he built the chair) ... then he would argue for the contracted price..and he is limited to that. The contract is King.

However, since the contract was not completed, he then shows what made him build it in the first place (the contract), but cannot argue for the contracted price because he/it is not done.....so he argues for reasonable pay for what he did -- because of the contract.

Notice... in a bad contract, he could actually come out ahead if reasonable pay was more than what he contracted for. However, the other side would argue the contract serves as a cap..

An option contract is totally different.

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tedofsandimas

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Re: Contracts question

Postby tedofsandimas » Sat Dec 03, 2016 8:56 pm

perfunctory wrote:I tell you: you build me a chair and I'll pay you $50. You start building and when you're about 85% done, I say "nah, nvm." What happens here? You didn't build me the chair so the contract isn't completed but I can't just renege right? I have in my notes something about an option contract.


The old rule about part performance on a unilateral K was that the offer could be revoked at any point prior to complete performance (Petterson v. Pattberg). The new rule (rest. 2d section 45) is that beginning performance on a unilateral K converts it to an option contract and protects against revocation (what cdotson2 said).

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Re: Contracts question

Postby cavalier1138 » Sat Dec 03, 2016 9:39 pm

pancakes3 wrote:You argue both ways - either it's unilateral and you didn't breach or it's bilateral and you breached.

If bilateral: You offered $50 in exchange for a chair. They agreed. Offer + Acceptance + Consideration (money for chair) makes a contract and you breached.

If bilateral: You offered $50 in exchange for the chair. They accept by presenting a chair. They have not presented the chair yet, so contract may be rescinded at any time.

An option contract is where you agree that in the future you'll be able to purchase a chair from someone else for the price of $50. That does not appear to be the case, but if it was, you have the right to not exercise your option and did not breach.


Just to clarify, under Restatement 2nd 45, an option contract is also created when the offeror says that performance is considered acceptance and the offeree begins performance. As others already pointed out, that means that the offeror is locked in until the offeree has had a reasonable opportunity to complete performance.

But yeah, the fun here is with the argument over whether acceptance via performance was ever possible. The offeror will want to establish that it wasn't, and that in the absence of a chair or formal acceptance, they can still revoke.

Edit: Totally missed the extra bonus fun argument. This is potentially a contract for goods, not services. If you read it that way, then UCC standards govern, not restatement standards.

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cdotson2

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Re: Contracts question

Postby cdotson2 » Sat Dec 03, 2016 10:07 pm

cavalier1138 wrote:
Edit: Totally missed the extra bonus fun argument. This is potentially a contract for goods, not services. If you read it that way, then UCC standards govern, not restatement standards.


and in that case it would be covered under comment 3 of section 2-206?

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Re: Contracts question

Postby cavalier1138 » Sat Dec 03, 2016 10:15 pm

cdotson2 wrote:
cavalier1138 wrote:
Edit: Totally missed the extra bonus fun argument. This is potentially a contract for goods, not services. If you read it that way, then UCC standards govern, not restatement standards.


and in that case it would be covered under comment 3 of section 2-206?


I think that's the on-point comment, and it seems like notice would be the key element here.

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pancakes3

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Re: Contracts question

Postby pancakes3 » Sat Dec 03, 2016 10:42 pm

gotta be a merchant for UCC to apply

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Re: Contracts question

Postby cavalier1138 » Sat Dec 03, 2016 10:56 pm

pancakes3 wrote:gotta be a merchant for UCC to apply


UCC applies to any sale of movable goods in a commercial setting. So without further detail, it's something that I'd guess a prof would want to see discussed on an exam. Otherwise, they'd specify that the parties were neighbors or specify that the offeree was a professional artisan (although if they were the latter, it's still debatable whether we apply UCC or common law).

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splitterfromhell

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Re: Contracts question

Postby splitterfromhell » Sun Dec 04, 2016 12:34 am

What is the argument to interpret this as a bilateral K?

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The Abyss

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Re: Contracts question

Postby The Abyss » Sun Dec 04, 2016 1:39 am

splitterfromhell wrote:What is the argument to interpret this as a bilateral K?


I suppose you could say that the offer isn't explicit on the method of acceptance and use §62 of the Restatement. Starting performance works as an implied promise to render complete peformance -> promise as acceptance -> bilateral. Idk though I'm really tired and I could be way off.

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perfunctory

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Re: Contracts question

Postby perfunctory » Sun Dec 04, 2016 2:01 am

I agree with what cdotson said. But just noticed the ucc thing. would it be different?

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Re: Contracts question

Postby B90 » Sun Dec 04, 2016 3:42 am

It's not bilateral. Bilateral would be:
A promises to pay $50 if B PROMISES to build him a chair. Here , A's offer is inducing a return promise, so it's bilateral.

In OP's hypo, it's unilateral because A offers to pay $50 if B builds a chair. There is no return promise, so it's unilateral.

The first step in any contracts question is to determine whether the UCC or Common law controls. If it is a contract for the sale of goods, the UCC controls. If it is a contract for services or real property (real estate), common law controls. Here we have an offer to pay $50 for a chair. A chair is a good because it is a tangible, movable item. UCC controls.

I think the word "build" is making people think B is a builder or contractor being hired to work on a project. A has $50, and he just wants a chair.

Also, remember the offer or is the master of the offer. A gets to decide how he wants B to accept. He wants a chair. B has not given him a chair. An offer can be revoked at any time before acceptance. A revoked and B never accepted, so no contract was formed.

B may have a remedy in promissory estoppel because he detrimentally relied on A's promise to pay $50 if B can show A's promise could reasonably be expected to induce reliance and injustice can only be avoided by enforcing it (i.e. B can't sell the chair to someone else). The deciding factor would be whether A knew or should have known B would make the chair and perhaps how much time has passed.

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Re: Contracts question

Postby Gunner19 » Sun Dec 04, 2016 12:34 pm

Bruh. B90, you're leaving some seriously easy points on the table. The fact that offeror didn't clearly specify any procedural terms means that acceptance can likely be made by any means which are reasonable given the circumstances, which leads to another major issue here: if the offer didn't specify exclusively bilateral, if acceptance by performance (unilateral) would be reasonable under the circumstances. You say because it doesn't seem to specify, acceptance by performance would likely be a reasonable means of acceptance and that an option contract is formed, which leads you to the issue of whether the old rule which states that the offer may be revoked at any time applies, or whether the newer restatement rule applies, which means the offeree has a reasonable time to perform.
The name of the game is not to conclude that acceptance by performance isn't the right answer, because this effectively shuts you off from half the points you could've received talking about the other possibilities. You should be thankful for your professor creating such ambiguity. You should revel in the ambiguity and discuss it all, as thats the way to score easy points. Don't come to any conclusion too soon, just discuss how it could come out under either scenario and then at the end throw in a little policy and decide which way the court may decide in light of everything.
Last edited by Gunner19 on Sun Dec 04, 2016 12:41 pm, edited 1 time in total.

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lymenheimer

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Re: Contracts question

Postby lymenheimer » Sun Dec 04, 2016 12:41 pm

Of course, if your prof is like mine and wants a single page analysis per Q focusing on the main issue, you may want to hit the correct target the first time. And i think the discussion of the option contract would be the correct analysis, according to my prof.

Tldr: it varies by your prof's teaching of the material.

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Re: Contracts question

Postby B90 » Sun Dec 04, 2016 1:10 pm

This is a contract for a good, under the UCC. The "performance" you speak of would be tendering the good. B did not do that. B could also have accepted by telling A he accepted. He did not do that either.

You are analyzing this as if it's a service contract, under common law. If it were, then once B began performance, A could no longer revoke.
Incidentally, if A gave B a written order for a chair for $750 instead of $50, the statute of frauds would apply, because it's over $500. Then since the chair is a custom good, once B began making the chair, A could not revoke.

There is no contract, because there is no acceptance. B would need to sue under promissory estoppel.

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kellyfrost

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Re: Contracts question

Postby kellyfrost » Sun Dec 04, 2016 1:27 pm

Thank god I'm not in law school anymore.

In the real world, this contract would be in writing and have much more of the details and specifics set forth in the document. It would likely even include a mandatory arbitration clause.
Last edited by kellyfrost on Sat Jan 27, 2018 3:21 pm, edited 1 time in total.

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Re: Contracts question

Postby cavalier1138 » Sun Dec 04, 2016 2:09 pm

B90 wrote:This is a contract for a good, under the UCC. The "performance" you speak of would be tendering the good. B did not do that. B could also have accepted by telling A he accepted. He did not do that either.

You are analyzing this as if it's a service contract, under common law. If it were, then once B began performance, A could no longer revoke.
Incidentally, if A gave B a written order for a chair for $750 instead of $50, the statute of frauds would apply, because it's over $500. Then since the chair is a custom good, once B began making the chair, A could not revoke.

There is no contract, because there is no acceptance. B would need to sue under promissory estoppel.


The point isn't who is right (because the scenario is too vague for anyone to be "right" about it). The point is that you're ignoring huge opportunities for analysis by concluding that this is a unilateral contract for a good without even bothering to analyze the point.

Just to take one issue and show how you can double up on your points:
This can be viewed as either a contract for the sale of goods or a contract for services to be performed. On the one hand, A is contracting for a chair, which can be viewed as a simple good. On the other hand, A specifically contracted for B to build A a chair, which could be viewed as a service.

A will want to argue that this was a contract for sale of goods, because under UCC standards, B would have had to inform A that B had begun performance in order to form an option contract. Since B did not inform A of anything or manifest acceptance in any other form, A can revoke the offer at any time.

B will want to argue that this was a contract for services, because then common law standards (Restatement Second) will apply, and when B began performance, that was a manifestation of acceptance of A's offer. Under B's theory of the case, B's performance created an option contract under Restatement Second Section 45, and A is bound to give B enough time to finish the chair and pay for B's services if the chair is completed and delivered. The initial offer was a little vague, but given A's request for B to build A a chair, not just send A one, I would favor the common law standards for interpreting this as an option contract and award damages to B.

Even if the court does not find that there was an option contract, B still has an argument under promissory estoppel if B can show they reasonably relied on A's promise. Given the fairly blunt phrasing of the offer, "Build me a chair, and I'll pay you $50," a court could find that B reasonably relied on A's promise. On the other hand, A will argue that they had no reason to know B would rely on such a vague statement, having given no details about the size of the chair, the type of material to be used, etc. Without those details, it is doubtful that a court would find B's reliance to be reasonable under the circumstances.


If this is an exam, I get waaaayyyy more points than you for this answer, because you only explained one possible argument with each possible issue you identified. I argued BOTH SIDES and then offered my own opinion on what a court would do.

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Re: Contracts question

Postby Op_Diom » Sun Dec 04, 2016 3:12 pm

The UCC and Second Restatement both take the view that a bilateral contract is formed when (a) the offer does not specify the particular manner of acceptance and (b) performance begins. However, the UCC adds a further qualification: beginning performance must unambiguously express the offeree's intention to engage himself [See UCC § 2-206, comment 3]. That is, the offeree's performance must be directly relatable to the terms of the offer: otherwise, it's not performance, but mere preparation; and, if the offeree expressed any doubt as to whether he would complete performance in constructing the chair, then there would not be an implied promise to complete performance.

Furthermore, the UCC and Restatement both take the view that the default offer is an offer indifferent as to the manner of acceptance [See UCC 2-206 (1)(a) & Rest. 2d 30(2)]. Therefore, the issue here is whether the offeror would reasonably believe that beginning work on the chair constituted an implied promise to complete the entire chair. If the offeror had reason to know that the offeree had not started work on the chair [i.e. the offeree expressing doubt about his ability to perform] then no implied promise to complete the chair. Yet, there is no reason to believe that the offeror had evidence negating an implied promise. Rather, here, the offeror, as "master of the offer," was indifferent as to the manner of acceptance; hence, without evidence to the contrary, the offeree accepted the offer by beginning performance, which created a bilateral contract to complete performance. The offeror's offer is otherwise irrevocable. [This subject is covered in Murray, On Contracts § 46 I believe]



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