Contracts I


Restatement Second of Contracts § 24

Offer Defined

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An offer is the manifestation of 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.

Offer needs specificity of terms and specificity of intent. All the offeree should have to do is accept. Failure to meet these means that it is mere preliminary negotiations.

Preliminary Negotiations
Restatement Second of Contracts § 26

Preliminary Negotiations

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A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent.

Offers can terminate by:

  1. Lapse of Time
    Restatement Second of Contracts § 41

    Lapse of Time

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    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 [R2C § 49], an offer sent by mail is seasonably accepted if an acceptance is mailed at any time before midnight on the day on which the offer is received.

    If an offer is made face-to-face, it lapses when they part ways.

  2. Rejection
    Restatement Second of Contracts § 38


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    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 a rejection unless the offeree manifests an intention to take it under further advisement.
    Restatement Second of Contracts § 39


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    1. A counter-offer 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 counter-offer, unless the offeror has manifested a contrary intention or unless the counter-offer manifests a contrary intention of the offeree.
  3. Death or incapacity of either party
  4. Revocation
    Restatement Second of Contracts § 42

    Revocation by Communication From Offeror Received by Offeree

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    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.

    Restatement Second of Contracts § 43

    Indirect Communication of Revocation

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    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.

    Restatement Second of Contracts § 46

    Revocation of General Offer

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    Where an offer is made by advertisement in a newspaper or other general notification to the public or to a number of persons whose identity is unknown to the offeror, the offeree's power of acceptance is terminated when a notice of termination is given publicity by advertisement or other general notification equal to that given to the offer and no better means of notification is reasonably available.

Option contracts cannot be revoked or terminated by rejection or counter-offer. It lapses according to the terms of the option contract.

Option Contract

Five ways to get an option contract:

  1. Restatement Second of Contracts § 25

    Option Contracts

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    An option contract is a promise which meets the requirements for the formation of a contract and limits the promisor's power to revoke an offer.

  2. Restatement Second of Contracts § 45

    Option Contract Created by Part Performance or Tender

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    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 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.
    • Only applies when inviting a unilateral contract.
  3. Restatement Second of Contracts § 87(1)

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    1. An offer is binding as an option contract if it
      1. 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
      2. is made irrevocable by statute.
  4. Restatement Second of Contracts § 87(2)

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    1. 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 as an option contract to the extent necessary to avoid injustice.
  5. UCC § 2-205

    Firm Offers.

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    An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.

Offers can be for either a unilateral contract or a bilateral contract or can be ambiguous. An ambiguous offer is understood as being an offer for a bilateral contract, i.e. unless the offer makes it very clear that a unilateral contract is desired.

Restatement Second of Contracts § 32

Invitation of Promise or Performance

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In case of doubt an offer is interpreted as inviting the offeree to accept either by promising to perform what the offer requests or by rendering the performance, as the offeree chooses.

Restatement Second of Contracts § 62

Effect of Performance by Offeree Where Offer Invites Either Performance or Promise

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  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 an acceptance operates as a promise to render complete performance.