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RESTATEMENT OF
CONTRACTS
Appendix A, p. 1
copyright by the American Law Institute (1932)
Table of Contents
THE RESTATEMENT OF
CONTRACTS
§20
Requirements of Manifestation of Mutual
Assent.........................................
1
§24
Offer Defined.................................................................................................
2
§31
Presumption That Offer Invites a Bilateral Contract.....................................
2
§32
Requirement of Certainty in Terms of an Offer.............................................
2
§33
When an Indefinite Offer Creates a Contract.................................................
2
§34 Offer Until Terminated May
Be Accepted.....................................................
2
§35
How An Offer May Be Terminated: Effect of Termination..........................
2
§36
What Is a Rejection of an Offer.....................................................................
3
§38
Rejection of an Offer by Counter-Offer.........................................................
3
§40
What Lapse of Time Terminates an Offer......................................................
3
§42
Acquisition by Offeree of Information That Offeror
Has Sold or Contracted to Sell Offered Interest.................................
3
§45
Revocation of Offer for Unilateral Contract;
Effect of Part Performance of
Tender.................................................
3
§52
Acceptance of an Offer Defined.....................................................................
3
§58
Necessity of Unequivocal Acceptance...........................................................
4
§75
Definition of Consideration............................................................................
4
§76
What Acts or Forbearances Are Sufficient Consideration for a
Unilateral Contract 4
§90
Promise Reasonably Inducing Definite and Substantial
Action.....................
4
§178 Classes of Contracts Within the
Statute of Frauds..........................................
4
§207 Sufficiency of a Memorandum.......................................................................
5
§227 What is a Standard of Interpretation...............................................................
5
§228 What is Integration.........................................................................................
5
§230 Standard of Interpretation When There Is Integration....................................
6
§231 When Integrated Agreements Are Subject to the Standard
Applicable to Unintegrated Agreements.................................
6
§237 Parol Evidence Rule; Effect of Integration
on Prior or Contemporaneous Agreements.............................
6
§239 Effect of Partial Integration.............................................................................
6
§240 In What Cases Integration Does Not Affect Prior or
Contemporaneous
Agreements..............................................................................
6
§333 When Damages May Be Measured By Expenditures in Part
Performance.....
7
§346 Damages For Breach of a Construction Contract............................................
7
§406 Discharge of Duties By Agreement of
Parties................................................
8
§20. REQUIREMENT OF MANIFESTATION OF ASSENT
A manifestation of mutual assent by the parties to an informal
contract is essential to its
formation and the acts bywhich such assent is manifested must be
done with the intent to do those
acts; but...neither mental assent to the promises in the contract
nor real or apparent intent that the
RESTATEMENT OF
CONTRACTS
Appendix A, p. 2
promises shall be legally binding is essential.
§24: OFFER DEFINED
An offer is a promise which is in its terms conditional upon an
act, forbearance, or return
promise being given in exchange for the promise or its
performance. An offer is also a contract,
commonly called an option, if the requisites of a formal or an
informal contract exist....
Comment:
a: In an offer for an informal unilateral contractthe promise is
conditional upon an act other
than a promise being given .... In an offer for a bilateral
contract the offeror’s promise is always
conditional upon a return promise being given. The return promise
maybe in the form of assent to
the proposal in the offer .... In order that a promise shall
amount to an offer, performance of the
condition in the promise must appear byits terms to be the price
or exchange for the promise or its
performance....
§31. PRESUMPTION THAT OFFER INVITES A BILATERAL CONTRACT
In case of doubt it is presumed that an offer invites the
formation of a bilateral contract by
an acceptance amounting in effect to a promise by the offeree to
perform what the offer requests,
rather than the formation of one or more
contracts by actual performance on the part of the offeree.
§32. REQUIREMENT OF CERTAINTY IN THE TERMS OF AN OFFER
Anoffermust be so definite in its terms,or require such definite
terms in the acceptance, that
the promises and performances to be rendered by each party are
reasonably certain.
§33. WHEN AN INDEFINITE OFFER CREATES A CONTRACT
An offer which is too indefinite to create a contract if verbally
accepted, may, by entire or
partial performance on the part of the offeree, create a contract.
§34. OFFER UNTIL TERMINATED MAY BE ACCEPTED
An offer until terminated gives to the offeree a continuing power
to create a contract by
acceptance of the offer.
§35. HOW AN OFFER MAY BE TERMINATED: EFFECT OF TERMINATION
(1) An offer maybe terminated by rejection by the offeree, or
lapse oftime, or the happening
ofa condition stated in the offer as causing termination,or death
or destruction ofthe person or thing
essentialfor the performance of the proposed contract...or, except
as stated in §§45-47, byrevocation
by the offeror, or the offeror’s death or insanity....
(2) Where an offer is terminated in one of these ways a contract
cannot be created by sub-
sequent acceptance.
RESTATEMENT OF
CONTRACTS
Appendix A, p. 3
§36: WHAT IS A REJECTION OF AN OFFER
An offer is rejected when the offeror is justified in inferring
from the words orconduct ofthe
offeree that the offeree intends not to accept the offer or to
take it under further advisement.
§38: REJECTION OF AN OFFER BY COUNTER-OFFER
A counter-offer bythe offeree, relatingto the same matter as the
original offer, is arejection
of the original offer, unless the offeror in his offer, or the
offeree in his counter-offer states that in
spite of the counter-offer the original offer shall not be
terminated.
§40. WHAT LAPSE OF TIME TERMINATES AN OFFER
(1) The power to create a contract byacceptance of anoffer
terminates at the time specified
in the offer, or, if no time is specified, at the end of a
reasonable time....
(3) In the absence ofusage or a provision in the offer tothe
contrary....an offer sent bymail
is seasonably accepted if an acceptance is mailed at any time
during the day on which the offer is
received.
Comments:
b.Wherea bilateral contract is contemplated a reasonabletime for
making the return promise
requested is generally brief. Especially this is true in regard to
commercial contracts.
c. Where a unilateral promise is contemplated, assent to the
proposition is manifested by
performing or refraining from performing an act, and a reasonable
time for so doing is necessarily
a reasonable time for acceptance.
§42. ACQUISITION BY OFFEREE OF INFORMATION THAT OFFEROR HAS
SOLD
OR CONTRACTED TO SELL OFFERED INTEREST.
Where an offer is for the sale of an interest in land or in other
things, if the offeror, after
making the offer, sells or contracts
to sell the interest to another person, and the offeree acquires
reliable information of that fact, before he has exercised his
power of creating a contract by
acceptance of the offer, the offer is revoked.
§45. REVOCATION OF OFFER FOR UNILATERAL CONTRACT; EFFECT OF
PART
PERFORMANCE OR TENDER
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.
§52. ACCEPTANCE OF AN OFFER DEFINED
Acceptance of an offer is an expression of assent to the terms
thereof or authorized by the
offereein a manner requested or authorized bythe offeror. If
anything except a promise is requested
RESTATEMENT OF
CONTRACTS
Appendix A, p. 4
as consideration no contract exists until part of what is
requested is performed or tendered. If a
promiseis requested, no contract exists, except as statedin
Section 63, until thatpromise isexpressly
or impliedly given.
§58. NECESSITY OF UNEQUIVOCAL ACCEPTANCE
Acceptance must be unequivocal to create a contract.
§75. DEFINITION OF CONSIDERATION
(1) Consideration for a promise is an act other than a promise, or
a forbearance, or the
creation,modification, or destruction of a legalrelation,or a
return promise, bargained for and given
in exchange for the promise.
Comments:
a. No dutyis generallyimposed onone who makes an informal promise
unless the promise
is supported by sufficient consideration. The fact that the
promisee relies on the promise to his
injury, orthe promisor gains someadvantage therefrom, does not
establish consideration without the
element of bargain or agreed exchange; but some informal promises
are enforceable without the
element of bargain...
§76. WHAT ACTS OR FORBEARANCES ARE SUFFICIENT CONSIDERATION FOR
A UNILATERAL CONTRACT
Any consideration that is not a promise is sufficient to satisfy
the requirement of §19(c),
except the following:
(a) An act or forbearance required by a legal duty that is neither
doubtful nor the subject of
honest and reasonable dispute if the duty is owed either to the
promisor or to the public....
(b) The surrender of...an invalid claim or defense by one who has
not an honest and reason-
able belief in its possible validity.....
§90. PROMISE REASONABLY INDUCING DEFINITE AND SUBSTANTIAL
ACTION
A promise which the promisor should reasonably expect to induce
action or forbearance of
a definite and substantial character on the part of the promisee
and which does induce such action
or forbearance is binding if injustice can be avoided only by
enforcement of the promise.
§178. CLASSES OF CONTRACTS WITHIN
THE STATUTE OF FRAUDS
(1) The following classes of informal
contracts are by statute unenforceable unless there is
a written memorandum thereof signed by the party against whom
enforcement is sought....:
Class IV: Contracts for the sale of an
interest in land;
Class V: Bilateral contracts, so long
as they are not fully performed by either party, which
are not capable of performance within a year from the time of
their formation....
RESTATEMENT OF
CONTRACTS
Appendix A, p. 5
Comment:
f. Though there has been no satisfaction of the Statute, an
estoppel may preclude objection
on that ground in the same waythat objection to the non-existence
of other facts...maybe precluded.
A misrepresentation that there has been such satisfaction if
substantial action is taken in reliance on
the representation, precludes proof by the party who made the
representation that it was false; and
a promise to make a memorandum, if similarly relied on, may give
rise to an effective promissory
estoppel if the Statute would otherwise operate to defraud.
§207. SUFFICIENCY OF A MEMORANDUM
A memorandum, in order to make enforceable a contract within the
Statute, may be any
document or writing, formal or informal, signed by the party to be
charged or by his agent actually
or apparently authorized thereunto, which states with reasonable
certainty,
(a) each party to the contract....
(b) the land...or other subject matter to which the contract
relates, and
(c) the terms and conditions of all the promises constituting the
contract and by whom and
to whom the promises are made.
§227. WHAT IS A STANDARD OF INTERPRETATION
Astandard of interpretation is the test applied bythe lawto words
and toother manifestations
of intention in order to determine the meaning to be given to
them.
Comment:
a. [This comment lists six ‘conceivable standards of
interpretation,’ as follows:]
1. The standard of general usage;
2. A standard of limited usage, which would attach the meaning
given to language
in a particular locality, or by...those engaged in a particular
occupation...(the distinction between 1
and 2 is a difference in degree, since generality of usage does
not necessarily imply universality);
3. A mutual standard, which would allow only such meanings as
conform to an
intention common to both or all the parties, and would attach this
meaning although it violates the
usage of all other persons;
4. An individual standard, which would attach to words or other
manifestations of
intention whatever meaning the personemploying them intended them
to express, or that the person
receiving the communication understood from it;
5. A standard of reasonable expectation, which would attach to
words or other
manifestations of intention the meaning which the party employing
them should reasonably have
apprehended that they would convey to the other party;
6. A standard of reasonable understanding, which would attach to
words or other
manifestationsof intention the meaning which the person to whom
the manifestations are addressed
might reasonably give to them.
§228. WHAT IS INTEGRATION
An agreement is integrated where the parties thereto adopt a
writing or writings as the final
RESTATEMENT OF
CONTRACTS
Appendix A, p. 6
and complete expression of the agreement. An integration is the
writing or writings so adopted.
§230. STANDARD OF INTERPRETATION WHERE THERE IS INTEGRATION
The standard of interpretation of an integration, except where it
produces an ambiguous
result, or is excluded by rule of law...is the meaning that would
be attached to the integration by a
reasonably intelligent person acquainted with all the operative
usages and knowing all the circum-
stances prior to and contemporaneous with themaking of the
integration, other than oral statements
by the parties of what they intended it to mean.
§231. WHEN INTEGRATED AGREEMENTS ARE SUBJECT TO THE STANDARD
APPLICABLE TO UNINTEGRATED AGREEMENTS
Illustration 2: A and B are engaged in buying and selling shares
of stock from one another
and agree orally for the purpose of concealing the nature of their
dealings that in transactions
between them the word ‘buy’ shall be used to mean ‘sell,’ and that
the word ‘sell’ shall be used to
mean ‘buy.’ A sends a written offer to B to ‘sell’ certain shares
of stock. B, having in mind the oral
agreement, accepts the offer and tenders the shares to A. On A’s
refusal to accept the tender, B
brings an action against him. B cannot recover, unless reformation
is had of the writings.’ The
private oral agreement cannot make ‘buy’ mean ‘sell,’ though a
private agreement may give to a
word which has no inconsistent meaning, a meaning in accordance
with the agreement.
§ 237. PAROL EVIDENCE RULE; EFFECT OF INTEGRATION ON PRIOR OR
CON-
TEMPORANEOUS AGREEMENTS
Except as stated in [§ 240] the integration of an agreement makes
inoperative to add to or to
varythe agreement all contemporaneous oralagreements relating
tothe samesubject-matter; and all
prior oral or written agreements relating thereto. . . .
§239. EFFECT OF PARTIAL INTEGRATION
Where there is integration of part of the terms of a contract
prior written agreements and
contemporaneous oral agreements are operative to vary these terms
only to the same extent as if
the whole contract had been integrated.
§240. IN WHAT CASES DOES INTEGRATION NOT AFFECT PRIOR OR
CONTEMP-
ORANEOUS AGREEMENTS
(1) An oral agreement is not superseded or invalidated bya
subsequent or contemporaneous
integration,nor a written agreement bya subsequent integration
relating to the same subject-matter,
if the agreement is not inconsistent with the integrated contract,
and
(a) is made for separate consideration, or
(b) is such an agreement as might naturally be made as a separate
agreement by
parties situated as were the parties to the written contract. . .
.
RESTATEMENT OF
CONTRACTS
Appendix A, p. 7
§333. WHEN DAMAGES MAY BE MEASURED BY EXPENDITURES IN PART PER-
FORMANCE
The amount of the plaintiff’s expenditure, reasonably made in
performance of the
contract or in necessary preparation therefor, is included in
compensatory damages, with the
following limitations:
(a) Such expenditures are not recoverable in excess of the full
contract price promised by
the defendant....
(c) Instalments of the contract price already received and the
value of the materials on
hand that would have been consumed in completion must be deducted.
(d) If full performance would have resulted in a net loss to the
plaintiff, the amount of this
loss must be deducted, the burden of proof being on the defendant.
§346. DAMAGES FOR BREACH OF A CONSTRUCTION CONTRACT
(1) For a breach byone who has contracted to construct a specified
product, the other party
can get judgment for compensatorydamages for all unavoidable harm
that the builder hadreason to
foresee when the contract was made, less such part of the contract
price as has not been paid and is
still payable, determined as follows:
(a) For defective or unfinished construction he can get judgment
for either
(i)the reasonable cost of construction and completionin accordance
withthe
contract, if this is possible and does not involve unreasonable
economic waste; or
(ii) the difference between the value that the product contracted
for would
have had and the value of the performance that has been received
by
the plaintiff, if construction and completion in accordance with
the
contract would involve unreasonable economic waste....
(2) For a breach byone who has promised to payfor construction, if
it is a partial breach the
builder can get judgment for the instalment due, with interest;
and if it is a total breach he can get
judgment ... for either
(a) the entire contract price ... less instalments already paid
and the cost of
completion that the builder can reasonablysave by notcompleting
the work;
or
(b) the amount of his expenditure in part performance of the
contract ......
Comments:
b. The purpose of moneydamages is to put the injured partyin as
good a position as that in
which full performance would have put him; but this does not mean
that he is to be put in the same
specific physical position....
h. Another common form of stating the measure of recovery is as
follows: Damages,
measured by the builder’s actual expenditure to date of breach
less the value of materials on hand,
plus the profit that he can prove with reasonable certainty would
have been realized from full
performance. This...is in fact that equivalent of the rule stated
in Clause (a) of this Subsection....
RESTATEMENT OF
CONTRACTS
Appendix A, p. 8
§406. DISCHARGE OF DUTIES BY AGREEMENT OF THE PARTIES
Except in the case of contracts for
the benefit of third persons an agreement by the parties
to a contract to rescind their contractual duties....discharges
such duties if the agreement...is based
on sufficient consideration....
Illustration:
1. A contracts to build a house forB
for which B contracts to pay $25,000. A does
aportion
of the work, but finding that he will lose more moneyby completing
the contract than by giving up
at once make B an offer to rescind. B accepts. Both parties are
discharged. B is under no duty to
pay A for what he has done.
______________________________________________________________________________
THE RESTATEMENT OF
CONTRACTS
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