GTM says the common law rule of unilateral contracts holds that offers can be revoked at any time prior to completion of the requested performance. I believe there's an alternative rule that calls for enforcement after substantial performance. Is this true? In that case, I have three rules to from which to decide if a unilateral contract shows up on an exam?
The classical approach to a unilateral contract holds that a promise is enforceable only upon completion of the requested performance.
The modern common law rule, if I'm not more confused than I originally thought, holds that a promise is enforceable upon rendering a substantial part of the requested performance.
Restatement (Second) 45 holds that an option contract (which, in this context, is really a unilateral contract) in all practicality is created when the offeree tenders or begins the invited performance or tenders a beginning of it.
Unilateral Contract: Classical, Modern, Restatement 45? Forum
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Learning Hand
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napolnic
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Re: Unilateral Contract: Classical, Modern, Restatement 45?
hold up, are you in law school yet? Getting to Maybe is best for understanding how to think about and write exams, not contracts. The example they use is just an example, it's not supposed to teach you about contracts. That's what a casebook/class is for.Learning Hand wrote:GTM says the common law rule of unilateral contracts holds that offers can be revoked at any time prior to completion of the requested performance. I believe there's an alternative rule that calls for enforcement after substantial performance. Is this true? In that case, I have three rules to from which to decide if a unilateral contract shows up on an exam?
The classical approach to a unilateral contract holds that a promise is enforceable only upon completion of the requested performance.
The modern common law rule, if I'm not more confused than I originally thought, holds that a promise is enforceable upon rendering a substantial part of the requested performance.
Restatement (Second) 45 holds that an option contract (which, in this context, is really a unilateral contract) in all practicality is created when the offeree tenders or begins the invited performance or tenders a beginning of it.
As far as answering your question, I think the correct answer is, all of the above; depending on whether a jurisdiction has accepted the restatement, or ruled on the common law. Notice the title of the book, you might not get a single answer, you might have to say "maybe".
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1474292940502124
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Re: Unilateral Contract: Classical, Modern, Restatement 45?
Isn't one of the issues in that GTM hypo whether it was covered by Article 2?
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crystalhawkeye
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Re: Unilateral Contract: Classical, Modern, Restatement 45?
It certainly should be. That changes everything! I don't even remember mention of Art. 2 in GTM...betasteve wrote:Isn't one of the issues in that GTM hypo whether it was covered by Article 2?
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XxSpyKEx
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Re: Unilateral Contract: Classical, Modern, Restatement 45?
Below is my notes from when I took the class. I don't remember most of this stuff (scary thing is I got the book award in this class).
b) Offer and acceptance in unilateral contract
i) Unilateral contract- Offeror makes an offer and the offeree accepts by rendering performance of the contract instead of a mere promise to perform in the future (e.g. offeror, “I’ll pay you a $100 to drive my car to Chicago,” The offeree accepts by driving the car to Chicago. In a bilateral contract the offeree would give promise to perform (promisee)). In this situation acceptance occurs as complete performance of the contract does and only then is a contract formed.
(1) Only the offeror gives a promise as consideration, the offeree gives performance as CSN.
(2) Offeror only pays once the performance is received (so offer max. protection to him)
(3) Offeree carries risks- the offeror may revoke the offer after it has started but not finished (because the offeror can retract an offer prior to it being accepted and it is not accepted until performance is completed).
(4) The reasoning for this is because the offeree may quit at anytime and decide not to finish the work so why should offeror be bound to pay until it is complete.
ii) But the offeror is bound to pay if the offeree performs and the offeree doesn’t have to do anything.
iii) Unilateral contracts are rare and the solution to section 45 is to create a bilateral contract, which will keep you, the offeror, from getting screwed. In addition, there is a preference for bilateral contracts (promise for a promise) for this very reason and if you don’t get what your guaranteed, you can sue for a breach.
iv) The offeree must give notice of his acceptance after he has done the requested act (in a situation where it wouldn’t be easy for the offeror to know) within a reasonable amount of time for it to be effective.
v) ELEMENTS of unilateral K’s
(1) Traditional rule
(a) The contract is entered into only once performance is completed. The contract is formed at the point of completion because the offeror only wants performance and not a promise and the offer may be revoked at any point until 100% of performance is complete.
(i) HYPO: If you were told “I’ll pay you $50 to walk across Brooklyn bridge,” the person may revoke the offer when you walk 99 out of 100 steps across the bridge. But you as the offeree aren’t bound and may quit walking at any point.
(ii) Petterson v. Pattberg -The P paid $780 and agreed to pay quarterly payments of $250 to pay off the rest of the D’s mortgage of over $5k. A day after paying the $780 he came to the D and attempted to pay off the rest of the mortgage in full. He raised the money through selling the property to some third party. The D refused the money stating he had already sold the property. The P sustained a loss of $780 and a contract with someone who paid the full amount of the mortgage. The offer was revoked when he said that they he sold the mortgage and can’t accept the money. This may be done without any formal notice, as is the case here. Reversed- in favor of D… In this case consideration is the full amount and can be revoked prior to performance at any point.
1. Hypo: Would it make any difference in this case if the money was mailed? The tender of payment was acceptance in this case (performance).
a. According to the majority opinion, it wouldn’t make a difference if it was mailed because they are saying that acceptance wouldn’t occur until the offeror take the money to the bank. Thus this makes the offeror the “acceptor” as well (which is idiotic) and he can prevent performance of the unilateral contract.
2. Dissenting opinion- Judge believes that this was a unilateral contract, but disagreed with acceptance and said that acceptance occurred when Pettersen came to his door and tried to perform the contract (tendering payment in this case). He believes the D prevented this payment and that the P can’t be held for not performing the contract and have it revoked when the D prevents it (this makes much more sense than the majority opinion)
(2) Section 32 of restatements
(a) If it is unclear what the offeror wants (a promise-bilateral contract OR performance-unilateral contract), an offeree may accept the offer (promise) by either making a return promise or by rendering performance (i.e. they get to choose either one)—(ambiguous offer)
(i) The exceptions to this are if it is clear that the offeror sought an act for the promise of performance and if the offeree began performance prior to making a return promise.
(ii) EX: In this Pettersen case, section 32 of restatements would have made no difference because it was clear that the owner wanted performance of the contract and not a promise.
(b) Section 62 You can “accept” by either beginning performance or promising and this binds both people
(i) If begin performing then there is a implied promise that you’ll complete the performance—Only applies if offer is ambiguous
1. Tries to balance unfairness of section 45, this way the person is still bound once they begin to perform, otherwise they could just stop at any time (this implies the promise to finish)This binds BOTH people
(ii) Does NOT cover PREPARATIONS
(3) Section 45 of restatements
(a) States that once the offeree has begun performance the offer can’t be revoked as long as the offeree completes the performance.
(i) The offeror is bound to keep offer open, but offeree isn’t bound to complete (section 62 comes in here for ambiguous situation to bind offeree [section 32])
(b) This “option” that is created doesn’t arise until actual performance has begun, merely preparing for performance does not create an option under section 45.
(i) This essentially creates an option contract w/o consideration
(ii) In the traditional rule, the offeror had all the power because the could revoke the offer right before the offeree completed the performance and this put all the risk in the offeree’s hand. ‘
(4) Cook v. Coldwell test
(a) The offeror may not revoke the offer after the offeree had rendered a substantial part of the requested performance.
(b) Policy tries to balance unfairness of binding either party (section 45 v. traditional rule, the middle, section 45—unfair to offeror, traditional rule- unfair to offeree)
(c) Cook v. Coldwell- On 3/91 D offered bonuses based on commissions earned by employees at the end of the year (assuming the employee stays with the company until the end of the year). Then on 9/91 it alleges to have revoked the contract and offered another one where instead of paying the bonuses at the end of the year they would be paid at the banquet the following March (3/92). Laiben said that an employee needed to be employee needed to be with the company to get the bonus at that time. At that time (9/91) the P had already completed a substantial portion of the offer (~95%). The P then left the company in January and did not receive her bonus. The D argued that the original offer was revoked and the second offer was made and that the first offer was not binding because the P hadn’t yet accepted it. But since the D had performed a substantial portion of the original contract before it was revoked (when it was changed in 9/1), it couldn’t be revoked, and the D is eligible for her bonus. Thus the contract was breached.
(i) Note: in the traditional offer, could revoke until it was completed, which in this case was the end of the year, and under the traditional rule she would’ve done 95% of the work but would be allowed to collect nothing (cuz didn’t stick around till March).
(ii) Hypo: If she had left in November she would get nothing.
c) Remedies for breach
i) monetary damages equivalent to the net expectations under the contract.
ii) specific performance is an option but is a exception to the norm
d) Other methods of reaching mutual assent (UCC 2-204)
b) Offer and acceptance in unilateral contract
i) Unilateral contract- Offeror makes an offer and the offeree accepts by rendering performance of the contract instead of a mere promise to perform in the future (e.g. offeror, “I’ll pay you a $100 to drive my car to Chicago,” The offeree accepts by driving the car to Chicago. In a bilateral contract the offeree would give promise to perform (promisee)). In this situation acceptance occurs as complete performance of the contract does and only then is a contract formed.
(1) Only the offeror gives a promise as consideration, the offeree gives performance as CSN.
(2) Offeror only pays once the performance is received (so offer max. protection to him)
(3) Offeree carries risks- the offeror may revoke the offer after it has started but not finished (because the offeror can retract an offer prior to it being accepted and it is not accepted until performance is completed).
(4) The reasoning for this is because the offeree may quit at anytime and decide not to finish the work so why should offeror be bound to pay until it is complete.
ii) But the offeror is bound to pay if the offeree performs and the offeree doesn’t have to do anything.
iii) Unilateral contracts are rare and the solution to section 45 is to create a bilateral contract, which will keep you, the offeror, from getting screwed. In addition, there is a preference for bilateral contracts (promise for a promise) for this very reason and if you don’t get what your guaranteed, you can sue for a breach.
iv) The offeree must give notice of his acceptance after he has done the requested act (in a situation where it wouldn’t be easy for the offeror to know) within a reasonable amount of time for it to be effective.
v) ELEMENTS of unilateral K’s
(1) Traditional rule
(a) The contract is entered into only once performance is completed. The contract is formed at the point of completion because the offeror only wants performance and not a promise and the offer may be revoked at any point until 100% of performance is complete.
(i) HYPO: If you were told “I’ll pay you $50 to walk across Brooklyn bridge,” the person may revoke the offer when you walk 99 out of 100 steps across the bridge. But you as the offeree aren’t bound and may quit walking at any point.
(ii) Petterson v. Pattberg -The P paid $780 and agreed to pay quarterly payments of $250 to pay off the rest of the D’s mortgage of over $5k. A day after paying the $780 he came to the D and attempted to pay off the rest of the mortgage in full. He raised the money through selling the property to some third party. The D refused the money stating he had already sold the property. The P sustained a loss of $780 and a contract with someone who paid the full amount of the mortgage. The offer was revoked when he said that they he sold the mortgage and can’t accept the money. This may be done without any formal notice, as is the case here. Reversed- in favor of D… In this case consideration is the full amount and can be revoked prior to performance at any point.
1. Hypo: Would it make any difference in this case if the money was mailed? The tender of payment was acceptance in this case (performance).
a. According to the majority opinion, it wouldn’t make a difference if it was mailed because they are saying that acceptance wouldn’t occur until the offeror take the money to the bank. Thus this makes the offeror the “acceptor” as well (which is idiotic) and he can prevent performance of the unilateral contract.
2. Dissenting opinion- Judge believes that this was a unilateral contract, but disagreed with acceptance and said that acceptance occurred when Pettersen came to his door and tried to perform the contract (tendering payment in this case). He believes the D prevented this payment and that the P can’t be held for not performing the contract and have it revoked when the D prevents it (this makes much more sense than the majority opinion)
(2) Section 32 of restatements
(a) If it is unclear what the offeror wants (a promise-bilateral contract OR performance-unilateral contract), an offeree may accept the offer (promise) by either making a return promise or by rendering performance (i.e. they get to choose either one)—(ambiguous offer)
(i) The exceptions to this are if it is clear that the offeror sought an act for the promise of performance and if the offeree began performance prior to making a return promise.
(ii) EX: In this Pettersen case, section 32 of restatements would have made no difference because it was clear that the owner wanted performance of the contract and not a promise.
(b) Section 62 You can “accept” by either beginning performance or promising and this binds both people
(i) If begin performing then there is a implied promise that you’ll complete the performance—Only applies if offer is ambiguous
1. Tries to balance unfairness of section 45, this way the person is still bound once they begin to perform, otherwise they could just stop at any time (this implies the promise to finish)This binds BOTH people
(ii) Does NOT cover PREPARATIONS
(3) Section 45 of restatements
(a) States that once the offeree has begun performance the offer can’t be revoked as long as the offeree completes the performance.
(i) The offeror is bound to keep offer open, but offeree isn’t bound to complete (section 62 comes in here for ambiguous situation to bind offeree [section 32])
(b) This “option” that is created doesn’t arise until actual performance has begun, merely preparing for performance does not create an option under section 45.
(i) This essentially creates an option contract w/o consideration
(ii) In the traditional rule, the offeror had all the power because the could revoke the offer right before the offeree completed the performance and this put all the risk in the offeree’s hand. ‘
(4) Cook v. Coldwell test
(a) The offeror may not revoke the offer after the offeree had rendered a substantial part of the requested performance.
(b) Policy tries to balance unfairness of binding either party (section 45 v. traditional rule, the middle, section 45—unfair to offeror, traditional rule- unfair to offeree)
(c) Cook v. Coldwell- On 3/91 D offered bonuses based on commissions earned by employees at the end of the year (assuming the employee stays with the company until the end of the year). Then on 9/91 it alleges to have revoked the contract and offered another one where instead of paying the bonuses at the end of the year they would be paid at the banquet the following March (3/92). Laiben said that an employee needed to be employee needed to be with the company to get the bonus at that time. At that time (9/91) the P had already completed a substantial portion of the offer (~95%). The P then left the company in January and did not receive her bonus. The D argued that the original offer was revoked and the second offer was made and that the first offer was not binding because the P hadn’t yet accepted it. But since the D had performed a substantial portion of the original contract before it was revoked (when it was changed in 9/1), it couldn’t be revoked, and the D is eligible for her bonus. Thus the contract was breached.
(i) Note: in the traditional offer, could revoke until it was completed, which in this case was the end of the year, and under the traditional rule she would’ve done 95% of the work but would be allowed to collect nothing (cuz didn’t stick around till March).
(ii) Hypo: If she had left in November she would get nothing.
c) Remedies for breach
i) monetary damages equivalent to the net expectations under the contract.
ii) specific performance is an option but is a exception to the norm
d) Other methods of reaching mutual assent (UCC 2-204)
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crystalhawkeye
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Learning Hand
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Re: Unilateral Contract: Classical, Modern, Restatement 45?
That's an excellent piece to look over for guidance. Thanks!
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mikeytwoshoes
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Re: Unilateral Contract: Classical, Modern, Restatement 45?
Yeah, shit your professor might not even cover ftw!Learning Hand wrote:That's an excellent piece to look over for guidance. Thanks!
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Learning Hand
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Re: Unilateral Contract: Classical, Modern, Restatement 45?
Facetious? It actually lines up rather flush with my notes, although this is much easier to scan. So, yes, thank you.mikeytwoshoes wrote:Yeah, shit your professor might not even cover ftw!Learning Hand wrote:That's an excellent piece to look over for guidance. Thanks!
