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RESTATEMENT OF CONTRACTS

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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

POSITION: absolute; TOP: 8621px"> 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