1. BILATERAL CONTRACTS Painting House subject matter of Contract I will pay you $3,00, if you agree to paint my house I agree to paint your house

2. BILATERAL CONTRACTS Painting House subject matter of Contract

3. Reaching Agreement: The Process of Contract Formation B. Offer and Acceptance: Unilateral Contracts 1.Unlike bilateral contracts, unilateral contracts involve a promise by one party (offeror) which is given in exchanged for the actual performance by the other (offeree). a.The offeror does not seek a return promise but the actual rendering of the performance. Acceptance of the offeree in a unilateral contract would be the rendering of performance. a.In a unilateral contract it is the offeror who has maximum protection. 1.The offeror is not bound unless and until he receives the performance sought. 2.The offeree, however, bears a greater risk: that revocation will occur before completion of performance (acceptance).

4. Reaching Agreement: The Process of Contract Formation B. Offer and Acceptance: Unilateral Contracts c.The classical illustration of the consequences of the unilateral contract is seen in Professor Wormser's Brooklyn bridge hypothetical. 1.The offeror promises to pay the offeree $100 if the offeree walks across the bridge. 2.Before the offeree begins to walk across the bridge, he is not bound to walk across the bridge, but the offeror is bound to pay $100 if the offeree walks across the bridge. 3.The offeror can withdraw the offer before completion of acceptance: that is walking across the bridge by the offeree, because what constitutes acceptance is full performance; walking across the bridge.

5. UNLATERAL CONTRACTS Painting House subject matter of contract If you paint my house, I will pay you $3,000 To accept, must complete Painting House Is a promise requested?

6. UNLATERAL CONTRACTS Painting House subject matter of contract Mary communicates her revocation of the offer When performance ½ completed Tom begins painting,

7. Reaching Agreement: The Process of Contract Formation B. Offer and Acceptance: Unilateral Contracts 2.Under classical contract law, the offer for an unilateral contract remains revocable until the offerees full performance of the act called for in the offer. When the performance is rendered a.That performance furnishes the acceptance of the offer; and b.The consideration necessary to bind the offeror to the promise 3.To ameliorate the harshness of the classical approach, the First Restatement of Contracts declared that in all doubtful cases, the presumption should be that the offeror solicited acceptance by promise. a.This approached showed the preference for bilateral contracts. b.This meant that the offeror would be bound at an earlier time in the contract formation process. c.This would be so because the beginning of performance by the offeree would imply a promise to complete the performance called or in the offer.

8. UNLATERAL CONTRACTS Painting House subject matter of contract In doubtful cases offeror presumed to invite acceptance by promise Tom begins painting, Implied Promise to Complete Performance

9. Reaching Agreement: The Process of Contract Formation B. Offer and Acceptance: Unilateral Contracts 4.Restatement (2 nd ) § 32, continues the same approach as the First Restatement. a.In case of doubt, an offer is interpreted as inviting the offeree to accept either by promising to perform what the offer requested or by rendering the performance, as the offeree chooses. 5.The Second Restatement follows UCC § 2-206(1)(b). According to that provision a.Unless otherwise unambiguously indicated by the language or the circumstances … 1.an order or other offer to buy goods for prompt or current shipment shall be construed as inviting 2.acceptance either by a prompt promise to ship or 3.by the prompt current shipment of confirming or nonconfirming goods. 4.However, shipment of nonconfirming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer.

10. Reaching Agreement: The Process of Contract Formation B. Offer and Acceptance: Unilateral Contracts 6.Injustice would still occur if the offeror was sufficiently clear that she wanted acceptance by performance only. 7.The First Restatement also limited the offerors untrampled right to revoke the offer, by giving the offeree an option contract under section 45. a.Section 45 under the First Restatement provided: 1.If an offer for a unilateral contract is made, and part of the consideration requested in the offer is given or tendered by the offeree in response thereto, the offeror is bound by a contract, the duty of immediate performance of which is conditional on the full consideration being given or tendered within the time stated in the offer, or, if no time is stated therein, within a reasonable time.

11. Reaching Agreement: The Process of Contract Formation B. Offer and Acceptance: Unilateral Contracts b.Section 45 of the Second Restatement substantially repeats the language of the First Restatement, but eliminates any reference to unilateral contracts. 1.Where an offer invites an offeree to accept by rendering a performance and does not invite promissory acceptance, an option contract is created when the offeree tenders or begins the invited performance or tenders a beginning of it. 2.The offerors duty of performance under any option contract so created is conditional on completion of tender of the invited performance in accordance with the terms of the offer.

12. Reaching Agreement: The Process of Contract Formation B. Offer and Acceptance: Unilateral Contracts c.What is an option contract? 1.Section 25, Restatement (2 nd ) Contracts defines an option contract as: a.a promise which meets the requirements for the formation of a contact and limits the promisors power to revoke an offer. 2.Under what circumstances would a promise meet the requirements of a contract? a.When consideration is given. 3.What effect does the option contract have on the offerors power to revoke the offer? a.Limits to power to revoke, making the offer irrevocable. 4.If under Restatement (2 nd ) section 45 an option contract is created, what is the consideration for this option contract? a.What action provides the consideration for the irrevocability of the offer?

13. UNLATERAL CONTRACTS Painting House subject matter of contract If you paint my house, I will pay you $3,000 Beginning painting that offeror will not revoke. Creates Subsidiary promise Implied The beginning performance Provides the consideration for Implied promise not to revoke