An Introduction to Contracts: Types, Consideration, and Formation, Exercises of Law

Download An Introduction to Contracts: Types, Consideration, and Formation and more Exercises Law in PDF only on Docsity! . C THE LAW OF CONTRACTS. CHAPTER 1. DEFINITIONS. SECTION 1. Contract. A contract is a promise or set of promises of which the law seeks to compel the performance or to punish, the non-performance. Cow icd: A contract may consist of a s )hiple promise by one person to another, or mutual promises by two persons to one another; or, there may be, in- deed, any number of peisons or any number of prom- ises. One person may make several promises to one person or to several persons, or several persons may join ini making a sin.'le promise to one or more per- Sols. The essential fact determining that only a sill- gle contract has been formed is that the promises shall all be a part of a single transaction. It has been pointed out that the word contract is often used to express indifferently: 1. The acts which create the legal relations be- tween the parties; 2. A writing which is itself such an act, or which is the evidence of such acts; 3. The legal relations resulting from the operative acts. I, - As here defined, contract is used with a slight modification of the first meaning, for not all the opera- tive acts which are essential to create the legal rela- tions between the parties are included. Consideration is necessary to make a simple contract, but the con- sideration of a unilateral contract is not part of the Corbin's edition of Anson on Contracts, page 13, note 2. Is See Treatise, § I. Jj contract as here defined. Similarly, delivery is neces- sary to make a seaed promise binding, but delivery is not part of the contract. This definition is adopted partly because it is believed that it is, after all, the pre- vailing meaning in ordinary legal speech and writing, but also because it keeps clearly before the mind the essential basis of contractual liability, namely, that promises, if made in due form or if.consideration is given for them, should be kept according to their terms. The expressions contractual rights and con- tractual duties accurately and clearly give the third meaning. As to the second meaning, when a writing is itself the act which creates the legal relation, the first meaning is inclusive enough to cover the situa- tion. If a writing is merely evidence of the promises of the parties, it conduces io clearness-of thinking to call it so. SEcTION 2. Contracts may be classified as express or implied; as formal or simple; as unilateral or bi- lateral. SECTION 3. Express contracts are those in which the promise or promises are stated in express words. whether oral or written. Implied contracts are those in which the promise or promises are i nferred from acts or circumstances which justify the promisee in understanding that the promisor intended to make such promise or promises, although the intention was not manifested in words. Comment: Implied contracts must be distinguished from quasi contracts which have often also gone by the name of implied contracts, or contracts implied in law. Quasi contracts unlike true contracts are not based on the apparent intention of the. parties, but are imposed by law for reasons of justice without JUN 2 1941 "I warrant that this house will never burn down.'' This is in eff eot a promise to be answerable for any proximate damage if the house should burn down and if made for sufficient consideration is a contract. SIcTIoN 5. Formal contracts are those in which the binding force or thp effect of the obligation depends upon the transaction being given a certain form as distingu-,hed from having substantial attributes. Con- tracts of this sort ii English and American Common law are: 1. Promises under seal 2. Recognizances 3. NegotialJe instruments.3 Si c TION 6. A written promise to which the prom- isor attached a seal constituted at common law ti con- tract when delivered by the promisor and this still remains true where the effect of seals has not been ,bolished or altered by local statutes. Comment: Full discussion of sealed contracts is def erred un.1il §§__4 SEcTIO- 7. Recognizances are acknowledgments ii court by the recognizor that lie is bound to mace a cer- tain payment unless a specified condition is performed, and are binding promises to that effect, because of the formalIty of the acknowledgment in court. Comment: Recognizances are in use only to se-- cure the attendance in court at a future day of the per- son giving the recognizance.5 SECTION .8. The instruments which are negotiable by virtue of the custom of merchants, are Bills of Treatise, § 4. 'Treatise, § 5. 'Treatise, § 6. Exchange, and Promissory Notes. The formal requi- sites of such instruments are an unconditional writ- ten and signed order or promise to pay a sum of money, certain in amount, at a fixed or determinable future time, to the bearer or to the order of a named person, without the addition of other orders or promises, ex- cept subsidiary ones intended merely to give the holder of the instrument greater certainty of obtain- ing the principal sum promised. In modern times the custom of merchants has been extended to bonds payable to order or bearer. Such bonds have been held not deprived of negotiability because of being sealed, though in the earlier law no sealed instrument was negotiable. By statute also, in many states, bills of lading and warehouse receipts if running to bearer or the order of a specified person, have been given the attributes of negotiability. CGommet: The foregoing section is inserted for the purpose of definition, but detailed treatment of the instruments referred is out of place here.6 SECTION 9. Simple contracts axe those which de- rive their legal force from the substance of the trans- action rather than from its form. They may be writ. ten or oral, and, except as statutes have made writ- ten evidence of certain contracts essential for their en- forceability, there is no difference in the requisites for the formation of written and oral contracts or in their respective binding force. Comment: A written contract is regarded as a simple contract and, therefore, requires the same ele- ments for validity as an oral contract. Even promis- sory notes and bills of exchange are often called simple ' Treatise, § 7. .contracts though they derive certain peculiar legal in- cidents from their form. They are ordinarily called simple contracts because consideration is essential for the creation of an obligation between immediate parties to such an instrument as maker and payee, indorser and immediate indorsee. By the English statute of frauds enacted in 1677, a. number of contracts were made unenforceable un- less in writing. The major part of this statute has been reenacted in all of the United States, and other contracts besides those enumerated in the English stat- ute have frequently been subjected to the same require- ment. Such statutes are dealt with hereafter in sec- tions .......... Reducing any contract to writing is, however, not without legal consequences because if the so-called parol evidence rule. Where a, contract has not been reduced to a writing, accepted by the parties as a final statement, any evidence showing the intent of the par- ties as expressed to one another is admissible for determining the provisions of the contract. But if the parties have agreed upon a writing as the expression of their intent the terms set forth in the writing con- clusively fix the terms of the contract.7 Moreover, in a number of states by statute a writ- ten promise is presumed to have been made for suf- ficient consideration, though lack of consideration if proved establishes the legal nullity of the promise. In a very few states, the local statutes enact that the written promise, like a sealed contract at common law, shall be binding without consideration.8 SECTiol 10. A unilateral contract is one where one person only or several persons acting as a unit make a promise or promises. A bilateral contract is 'See infra, §§ ...... 'Treatise, §218. this is not necessarily the case. An infant for instance is in many jurisdictions allowed to avoid his contract without this qualification. When an infant exercises his privilege, the parties frequently are left in a very different status from that which existed when the contract was made. 1 SECTION 13. Contracts may be unenforceable though not falling within the definition of voidable contracts or of void transactions. A contract may be unenforceable from lack of such evidence as the law re- quires-as in case of contracts within the Statute of Frauds where the statute has not been satisfied. So contracts with the Government are not enforceable in any ordinary sense since even if the Government allows itself to be sued, it does not allow execution to be levied on its property. Yet contracts of both these classes may give rise to legal consequences which are not capable of avoidance. Comm eut: Both voidable and what have been called unenforceable contracts frequently involve a power on the part of one or the other of the parties to the contract to create the full contract,:al rights and duties of an ordinary contract. If this were their only effect the propriety of calling them contracts until the power was exercised might be questioned; but in the transactions .classified under this heading some consequences follow without any further action by either party. In a voidable contract there is rather a power to avoid than a power to create. In an unen- forceable contract the difficulty is usually that the or- dinary procedure for enforcing contracts is not per- mitted but various collateral consequences flowing from the transaction may indicate a recognition by the law of rights and duties arising therefrom22 "Treatise, § 15. Treatise, § I6. ill ustration s: A is indebted to B, but the Statute of Limi- tations has barred the remedy. As will be seen, infra §-A has the power to create an en- forceable simple contract without consideration by making a new promise or part'payment of the debt. But even without such further' acts, legal consequences may flow from the barred debt. If the creditor has security, he may apply it towards payment of the debt. If the creditor becomes ex- ecutor of the debtor lie may retain the amount of the debt in accounting for the estate. If he cai obtain service of process on the debtor in another jurisdiction, the debt may be enforced unless en- forcement is prohibited by the laws of that juris- diction. A has a claim against a foreign government for some injury committed by the citizens of that Government in violation of International law. The only method by which A can obtain compen- sation is through diplomatic negotiations entered into by his own country with the offending gov- ernment, and if the latter Governmient makes a payment on account of the injury, it will be made not to A but to A 's Government, from which A cannot obtain it by any legal remedy. Yet legal consequences flow from the fact that A claims the money as of right rather than as a favor. Any money ultimately obtained by him will be regarded as money to which he was entitled from the time of the injury. Therefore if he becomes bankrupt after the injury, but before the payment, the money will belong to his trustee in bankruptcy and not be dealt with as after-acquired property. CHAPTER II. FORMATION OF SIDIPLE CONTRACTS. A. GENERAL PRINCIPLES. SECTION 14. The requirements of the law for the formation of a simple contract are: 1. One or more promisors and one or more prom- isees having legal capacity to contract. 2. An expression of mutual assent by the parties to a promise or set of promises. 3. An agreed valid consideration, except in cases governed by section 83. It is also essential that an agreement, though satisfying these requirements, shall not be declared void by statute or Common law. Comment: The explanation of these requirements will be given in the following sections.1 SFCTIoN 15. There must be at least two parties to the formation of a contract, but may be any greater number. Comment: It is not possible for a man to make a contract with himself. This rule is one of substance and independent of mere procedural requirements. Even though a man has different capacities, as for instance as trustee, as executor, as partner, as an individual, it is impossible as matter of substance for him by his own individual will or expressions to create a contract. As will be seen under the follow- ing sections, it is another question whether a con- tract may be formed in which the same person is one of several parties on one side of a bargain, when he is either a sole party or one of several parties on the other and the question is also distinct whether a "Treatise, § I8. law had recognized a partnership, a trust, an unicor- porated association a decedent's estate, as legal enti- ties; but this the law never did, though parties to transactions continually act on the assumption that dealings may be made with such interests as if they were separate persons from the individuals who repre- sent them. So vital is it io business interests to recognize the validity of a note given by a partner to a partnership of which he is a member, and the obli- gation of a member of an unincorporated society to pay debts he has incurred to the society, that in spite of the rule of the Common law stated above, such obli- gations have been enforced either in equity or by vir- tue of an assignment, any difficulty in the situation being treated as merely procedural. 15 It seems desirable to recognize that a contract is not impossible merely because the same person is on both sides of the transaction, provided that on one side at least he is acting jointly with others. If A should attempt to contract with A, B and C severally, no legal relations would be created by the attempt of A to contract with himself, though legal relations might arise between him and B and C. The rule stated in section 17 does not touch upon the rightfulness of making such contracts as fall with- in its terms. In a particular case such a contract mighu be voidable for fraud or for other reasons. Illustratios: A is a member of an unincorporated society, and as such has agreed to pay dues to the society. He is bound by a contract. A, a trustee of an estate jointly with B has entered into a, written agreement by which he individually has agreed to buy and A and B as "5 Treatise, § 308. trustees have agreed to sell a piece of land belong- ing to the trust. This is a contract, and though voidable by the beneficiaries if made without either their consent or the authority of a court may at the election of the beneficiaries be enforced by them. SECTION 18. No one can be bound by contract who has not legal capacity to incur at least voidable contractual obligations. Comment: The statement in this section is perhaps a truism, but it should be made. The effect of lack of contractual capacity of one party to a transaction on the promises of the other parties is considered hereafter in section Contractual incapacity may be total or may be only partial. It is only where his contractual in- capacity is total that it can be laid down broadly that a party to a transaction cannot enter into a contract. The particular instances of partial and total incapacity are considered subsequently in sections-." B. EXPRESSTON OF ASSENT. SECTION 19. An expression of mutual assent by the parties to a proposed simple contract is essential to its formation; but neither actual assent thereto nor real or apparent intent that the promises of the parties shall be legally binding is essential. Comment: It is customarily said that mutual assent is essential to the formation of simple con- tracts, but it is dear that such assent is operative only to the extent that it is expressed. Moreover, if the expression is at variance with the mental intent it is the expression which is controlling. It is obvious theref ore that not aetual mutual as 3ent but an expres- " Treatise, § 222, et seq. sion indicating such assent is what the law requires. Nor are the views of the parties as to the legal rela- tionis which their words or acts give rise to, material. 17 Illustrations: A offers to sell B his library at a stated price and B accepts the offer. A had forgotten that his family Bible, which he did not intend to sell, was in the library. B is entitled to have the Bible. A orally promises to sell B a book in return for B's promise to pay $5. A and B both think such promises are not binding unless in writing. Nevertheless, there is a contract. SECTIoN 20. Assent may be expressed by acts. Comment: Words are not the only medium of communication. Acts may often convey as clearly as words a promise or ai assent to a proposed promise," and where no particular requirement of form is made by the law as a condition of the validity or enforce- ability of a contract, there is no distinction in the effect of a contract whether it is expressed (1) in writing, (2) orally, (3) in acts, or partly in one of these ways and partly in others. Illustrations are given under Section 3. SECTION 21. The expression of mutual assent must be made, with exceptions so rare as to be negligible, by an offer or proposal by one party accepted by the other party or parties. Commeli : This rule is rather one of logic or necessity than of law. In the nature of the case one party must ordinarily speak first and announce what he will do before there can be any expression of mutual " Treatise, §§ 2o, 21. Treatise, § 22a. nothing, he does'undertake or"promise that soinething shall come to pass on the performance of the condi- tion stated in the offer. But it may be supposed that the offeror does not undertake that the buyer shall be owner of the.chat- tel; he may say to the bailee, you shall have all the right, title and interest that I may have in the chattel on making me a promise to pay me $5. Is not this a mere revocable power? How does it differ in effect terms of the offer but b6cause, there having been no a revocable power to acquire the ownership, if any, which I possss.'.'? In terms there is even here a promise. The fact that the power is revocable is n6t because of the terms of the offer but because, there having been no consideration, the law treats the offer as revocable even though the offerer says it shall not be. It may fairly be said that an offer lapses in a reasonable time because that is the natural meaning of an offer not expressly limited, but that an offer can be revoked immediately is not due to the natural meaning of its words. It is not a rule of interpretation, it is indeed a contradiction of the natural meaning of the offer. Consequently, an offer which does not in terms state that it is revocable includes a. promise, though not a binding promise, that the power giveii by the offer shall .continue for the period named in the of- fer, or, if no period is named, for a reasonable time. It may ultimately be supposed, however, that an offerer says to one in possession of a chattel belong- ing to the offeror-"I give you a power to acquire such title as I have if you promise to pay me $5, but I reserve the right to revoke this power at any moment." Or, what amounts to the same thing, he may say-'-'I offer you my interest in this chattel in return for your promise of $5 but I may revoke the offer at any moment." Such 'a promise, if it can be called a promise of the offeror, is certainly illusory and the offer gives a bare power to the offeree, revoc- able at any moment. 22 The case tl]us supposed is so unusual that for practical purposes the generality of the statement in this section seems justified. The matter seems worth emphasizing for confusion sometimes is caused by regarding an offer and a contract as antithetical. But since an offer is a promise, and as a promise becomes a contract if con- sideration is given for it or if it is under seal (where the Common-law effect of seals is unchanged) an offer may also be a contract. Illustratioi: A offers Blackacre to B at a stated price in a writing under seal. Subsequently, within a reasonable time for acceptance, A informs D that the offer is revoked. The revocation is ineffectual. SECTIoN 24. If from a promise, or expression of intention, or from the circumstances existing at the time, it should be reasonably apparent to the person to whom the promise or expression is addressed that the person making it does not intend to be bound legally until he has given a further and 'final expression of assent, he has not made an offer. Comment: It is often very difficult to draw an exact line between offers and negotiations preliminary thereto. It is very common for one who wishes to make a bargain to try to induce the other party to the in- tended transaction to make the definite offer, he him- self suggesting with more or less definiteness the nature .of the contract he is willing to enter into. Be- sides any direct language indicating an intent to defer the formation of a contract the definiteness or in- definiteness of the words used in opening the negoti- "Treatise, § 25. ation must be considered, and also the customs of business, and indeed all surrounding circumstances. 23 Illustrations: A, a clothing merchant, advertises a certain kind of overcoats for sale at $50. This is not an offer but an invitation to the public to come and purchase. It is entirely possible to make an of- fer by advertisement, but ordinarily mercantile advertisements are not so construed, partly because it cannot reasonably be supposed that a merchant would subject himself to the chance of an in- definite number of persons accepting his offer and thereby rendering him possibly liable for an amount of goods beyond his supply, and partly because custom has authorized a rather liberal degree of preliminary chaffering before a bargain is considered complete. A writes to B, "I can quote you flour at $5 a barrel in carload lots." This is not an offer. The word "quote" indicates that the writer is simply naming a current price which he is de- manding. A advertises that he will pay $5 for every copy of a certain book that may be sent to him. This is an offer and A is bound to pay $5 for every book sent while the offer is unrevoked. A writes to B, "I am eager to sell my house. I wish to get $20,000 for it." B promptly answers saying, "I will buy your house at the price you name in your letter." There is no contract. A's letter is a mere request or suggestion that an offer be made to him. A corporation or municipality advertises for a bid, or tender, for certain work. This is not an offer but a request for offers. If, however, "Treatise, § 27. tract it until the fall of the hammer, it would seem to follow that the auctioneer should be similarly free. If the offeror is not bound to buy, how can the auctioneer be bound to sell? This argument is un- answerable unless the auctioneer by merely announc- ing the proposed sale makes an offer to those who relying on the announcement shall attend the sale. In England it has been decided that such is the proper construction of the facts, and, though the cases in the United "'tes do not go so far, it has been enacted in a majority of the states that if it has been an- nounced that the goods will be sold without reserve, they cannot be withdrawn after the bidding has be- gun. It seems in conformity with justice and not too great a strain on the facts to hold that the reliance of those who attend the aucti on should be sufficient to impose liability on the seller to perform his promise with reference to any article or piece of property actually put up for sale. That is the offer made by fle announcement is conditional-if the goods are sold they will be sold on the terms announced.2-" Illustratiot: A advertises a sale of his household furniture without reserve. An article is put up for sale at the auction and B is the highest boua-fide bidder; but A dissatisfied with the bidding either accepts a higher fictitious bid from an agent employed for the purpose, or openly withdraws the article from sale. Tie also withdraws all the rest of the furniture from the sale. In either case A is bound by contract to B to sell to him the article ol which he was the highest boaa fide bidder, but neither B nor the others at the auction have legal ground for complaint that the remainder of the furniture not yet actually put up for sale is withdrawn from sale. " Treatise, § 30. SECTION 28. The consideration requested in an offer for a unilateral contract must be furnished with the intent of accepting the offer. Conmment: When an offerer requests a certain act or forbearance as the consideration for his promise, the act or forbearance when furnished is ambiguous expression of intent, for acts like words often have more than one meaning. It may mean that the offeree accepts the proposal, but it is possible that the true meaning is that the offeree as a free man has exercised his privilege of acting or forbeaing in the manner requested, without intending thereby to accept the proposal. The only way to determine what his con- duct actually means is to ascertain his intent. The intent is not a contractual element in itself but it is essential in order to determine the meaning of the offeror's act. Illustration: A offers a reward for information leading to the conviction of a criminal. B gives the infor- mation under circumstances justifying the con- clusion that lie did not intend thereby to secure the reward but was wholly induced by motives of fear or public duty. There is no contract. It is not enough, however, to deprive B of the reward that, induced by such motives, he would have given the information in any event, provided lie did intend, when he gave the information, to accept the proposal in the advertisement. SECTION 29. An offer may be made to a specified person or persons, or it may be made to anyone or to everyone who shall perform or refrain from perform- ing a specified act or shall make a specified promiseY.2 2 Treatise, § 32. Illustrations: A makes an offer of reward to whomsoever will give him certain information. B gives this information and afterwards C gives the same in- formation. There is a contract with B but not with C, as the offer properly interpreted is a proposal to the first person only who gives the information, since it is obvious that a repetition of the information can have no value. A bank issues a letter of credit promising to repay anyone who makes advances to the holder of the letter up to a certain amouht. B advances money on the faith of the letter within the speci- fied amount. The bank has contracted with B. A offers $100 to anyone who contracts a cer- tain disease after using a specified medicine as directed. B, C, and D severally use the medicine as directed and contract the disease. A has coil- tracted with each of them to pay him $100. SECTIoN 30. An offer may invite an acceptance to be made by merely an affirmative answer, or by per- forming or refraining from performing a specified act or may contain a choice of terms from which the offeree is given the power to make a selection in his acceptance. Ill1ustration: A offers B one hundred tons of coal at $15 a ton payable in 30 days. B's mere assent creates a bilateral contract. A offers B any amount of coal up to one hundred tons, for which B will promise to pay $15 a ton. In order to accept this offer B must specify the amount of coal he desires. A offers to sell B in monthly instalments the coal which B may require in his business during Promises may be indefinite in time or in place, or in the work or property to be given in exchange for the promise. In dealing with such cases the law en- deavors to give a sufficiently clear meaning to offers and promises where the parties intended to enter into a bargain, but in some cases this is impossible. llustrations: A promises to serve B in a certain capacity, and B promises to pay him at a certain rate. For any services actually rendered under such an offer A is bound by the terms of his promise to pay at the agreed rate, but as to the future no executory obligation is created on either side in the absence of usage fixing the length of service customary in employment of the sort agreed upon. In dealing with personal service the presumption that the performance shall continue a reasonable time is not adopted. A agrees to employ B, and B agrees to serve without stating the full period for which the ser- vice is expected to continue, but stating the price to be paid for the first day, week, month or year of the service. This creates immediately an execu- tory contract for one such period. It is often a difficult question of interpretation to determine whether an agreement specifies merely a rate of compensation, or indicates at least impliedly an understanding that the employment shall contine at least for one of the periods for which the rate is stated, in which case there would be a con- tract for one period and at its expiration an offer for another, in the absence of revocation. A agrees to employ B, and B agrees to serve as long as the employee is able to do the work, or as long as a specified business is carried on. These agreements create contracts as a method is pro- vided for determining the legth of the engagement. A promises to sell and deliver goods to B, and B promises to pay a specified price thorefor. Though no time for performance is fixed, the pre- sumption is that the parties intended performance to be made within a reasonable time. What is a reasonable time is a question of fact in each case depending onl the character of the goods and all surrounding circumstances. A and B agree that certain performances shall be mutually rendered by them "immediately" or "at once," or "promptly," or "as soon as pos- sible," or "in about one month." All these agree- ments are sufficiently definite for enforcement. A agrees to sell and B agrees to buy goods "at cost plus a nice profit." This promise is too indefinite for enforcement. A agrees with B to execute a lease or a con- veyance, and B agrees to pay therefor. These are valid contracts. Although the terms of leases and conveyances vary, the agreement will be regarded as providing for such documents of the sort as are in common local use. A promises IT to give him any one of a num- ber of specified things which A shall choose, and B agrees to pay a specified price. There is a con- tract. A means is provided for determining what A is to give, and though what he gives is subject to his choice, he must give some one of the things specified. If he fails to do so the law will regard him as choosing the least valuable for the pur- pose of assessing damages against him. A promises B to do certain work or transfer certain property and B agrees to pay therefor if it is satisfactory to him. This is a contract since a method is provided for determining B's performance which is not dependent on his mere whim but requires the exercise of honest judg- ment. A promises B to do certain work at a price to be thereafter agreed. As the only method of settling the price is dependent on the future agree- ment of the parties, and as either party may re- fuse to agree, there i,. no contract. A promises B ',o build a certain building according to stated plans and specifications, and B promises to pay $30,000 therefor. But it is also provided that the character of the window fasten- ings shall be subject to further agreement of the parties. The indefiniteness of the agreement with reference to this one minor matter will not in- validate the whole contract. A promises to sell and B promises to buy all the goods of a certain character which B shall need in his business during the ensuing year. This is a contract. SEcTIoN 35. 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, be- come definite and create a unilateral contract.3' illhstration: An offer by A to B in these terms: "I will employ you as long as I like at $10 a day," when accepted by B either orally or in writing will not create a contract; but if B serves one or more days a unilateral contract arises binding B to pay $10 for each day's service. " Treatise, § 49. ceiving the rejection and the acceptance A has changed his position on tlhe supposition that the rejection was effectual. SECTIOx 40. If an offer states the time when it will terminate, or within which acceptance must be made, no effectual acceptance is possible after the ex- piration of that time. If the offer lixes no time for its termination or within which acceptance must. be made, no effectual acceptance is possible after the lapse of a reasonable time. What is a reasonable time is a ques- tion of fact dependent on the nature of the contract proposed, the usages of business and other circum- stances of the case. Comm et: As an offeror may make any proposal that he w'ill, he may, therefore, put any limits on his proposal that, be sees fit. Hence he may fix any time that he wishes as that within which acceptance must be made. le is under no obligation to make Ilhe time a reasonable one. If, however, no time is fixed the offeree is justified in assuming. that a reasonable time is intended, and the law adopts this assumption. Where a bilateral contract is contemplated a rea- sonable time for making the counter-promise requested will generally be brief. In commercial contracts espe- cially this is true. Where offers of this sort are made orally they usually contemplate an immediate answer; where made by mail, they contemplate an answer on the same day that the offer is received; or, if no mail leaves on that day, then before the departure of' the next mail. Where a unilateral contract is contemplated the 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. If, therefore, in the nature of the case what is requested cannot be done without considerable delay, the time within which acceptance may be made will be equally long.a c Illustration: A publishes an offer of reward for informa- tion leading to the arrest and conviction of a murderer. A, intending to accept the reward, gives the requested information a year after the publication of the offer. There is a contract. SECTION 41. The offerer may revoke his offer by a communication made to and received by the offeree be- fore the latter has accepted the offer, if the connuni- cation states or clearly implies that the offeror no longer wishes to enter into the proposed contract. Commentt: What amounts to receipt of revocation within the meaning of the rule is considered in Section 64. Illustration: A makes by mail an offer to B and subse- quently by mail revokes the offer. Before receiv- ing the revocation, however, B has mailed an ac- ceptance, but on receiving the revocation assumes that there is no contract and changes his position in reliance on that assumption. A is not estopped to assert a contract. The case is unlike that stated under Section 38, for here at the time when B changed his position he knew all of the facts and simply made a mistake of law. SEc'rioN, 42. Except as stated in the following see- tion, an offer can be revoked only by a direct com- munication from the offeror, received by the offeree. Comment: This section is opposed to the English decision of Dickinson v. Dodds, 2 Ch. D. 463 (followed ' Treatise, §§ 53, 54. in two or three American cases), which held that in- formation received by the offeree through a third per- son that the offeror no longer wished to make a con- tract in the terms proposed amounted in effect to a revocation of the offer. The case has been criticized and seems objectionable chiefly because of the difficult) of fixing any limit to the doctrine short of the principle that wherever the offeree knows, or ought to know, that the offeror no longer wishes to contract, the offer must be regarded as terminated. Under such a principle a change in the market, a change in the pecuniary con- dition of one party or the other, and, indeed, a variety of circumstances might afford ground for the conten- tion that the offer had come to an end. Certainty is of great importance in the formation of contracts, and it seems better to require the offeror lo give notice di- rectly of his purpose to revoke.3 7 SECTION 43. An offer made by a general notice or advertisement to the public or to a number of persons whose identity is unknown to the offeror may be re- voked by a general notice or advertisement published in the same way as that in which the offer was made.:" illhstration: An offer of reward for the apprehension of a criminal made by posting a notice in a post office, may be revoked by posting a notice in the same place. SEcTION 44. An offer contemplating a series of contracts by separate acceptances may be revoked as to the future, though one or more of the proposed con- tracts ha %e already been formed by the offeree's ac- ceptance 9 "'Treatise, § 57. " Treatise, § 59. "Treatise, § 58. effect specifically enforced by the law by denying the offeror the power to revoke. 44 SECTIoN 48. An offer is terminated by the offeree's knowledge of the death or insanity of the offeror, but not by such death or insanity when unknown by the offeree. Comment: The rule stated in this section is in ac- cordance with the general principle adopted throughout this work that outward indication or expression of assent is the basis of contractual liability. Under the view of the formation of contracts which prevailed formerly, requiring actual mental assent of the parties (though indeed an indication of assent by outward acts was also necessary), it is obvious that death or insanity of the offeror, precluding as it does any real assent, terminated the offer. This result, however, may lead to injustice and the civil law which las had the same rule as the common law was changed by the German Code (Section 153). It seems desirable to establish the rule stated in this section though the weight of au- thority is unquestionably in favor of the old rule. 4 SECTIoN 49. If communication of an offer to the offeree is delayed, the period within which it can be accepted is not thereby extended if the offeree knew o1 had reason to know of the delay, even though it was due to the fault of the offeror; but if the delay was due to the fault of the offeror or of the means of trans- mission adopted by him, and the offeror neither knew nor had reason to know that there had been delay, the offer may be accepted within the period which would have been permissible if the offer had been despatched at the time that its arrival seemed to indicate. "Treatise, §61. 'Treatise, § 62. f 41 Illustration: A misdirected offer is delayed in delivery, as is apparent from the date of the letter or the post- mark on the envelope, so that the offeree does not receive it until some time later than would nor- really have been the case. The offeree cannot ac- cept the offer unless he can do so within the time which would have been permissible had the offer arrived seasonably.4 0 SECTION 50. Acceptance of an offer must indicate assent to the termas thereof. If an act (other than a promise) or forbearance is requested, no contract ex- ists until at least part of what is requested is per- formed or tendered. If a promise is requested, no contract exists until that promise is expressly or im- pliedly given. Conmmenl: In a. unilateral contract the act re- quested and performed ,s consideration for the con- tract ordinarily indicates acceptance as well as fur- nishing the consideration; and, under Section 44, per- forming or tendering part of what was requested may both indicate assent and furnish consideration. In a proposal for a bilateral contract the mere expressed assent of the offeree is by implication the promise re- quested wud therefore here also mutual assent and con- sideration are indicated by the offeree at one and the same time.47 A bilateral contract by definition consists of mu- tual promises. It is therefore essential that the offeree shril give the promise requested by the offeror and do- ing this clearly indicates acceptance of the offer. This is the logical method of statement, but the form the transaction usually takes is a mere assent by the "Treatise, § 63. "Treatise, § 65. offeree which necessarily implies the giving of the promise requested. SECTION 51. Where the offeror requests an act olher than a promise or forbearance as the considera- tion for his promise, no notification that the act or for- bearance has been given is necessary to complete the contract. But if the offeror has not the means of as- certaining with reasonable promptness and certainty that the act or forbearance has been given, the contract will be discharged unless within a reasonable time after acting or forbearing' as requested, the offeree notifies the offeror thereof. Cumment: in the formation of a unilateral con- tiact where the offeror is the party making the prom- ise, as is almost invariably the case, a compliance with the request in the offer fulfills the double func- lion of a manifestation of acceptance and of perfor- manco of the consideration. It is only in the excep- tional case where the offeror has no convenient means of ascertaining whether the requested act has been done that notice is requisite. Even then, it is not the notice which creates the contract, but lack of the notice which ends it, as by a condition subsequent.'46 l lns/ rations: A writes to B: "Let C have $100. and I guarantee its repayment." Immediately on receiv- ing this communication, B lets C have $100. but fails to notify A of the fact. B cannot enforce the guaranty if C fails to pay the debt. The case may be altered by supposing that an hour after advancing the money B receives a letter from A revoking the offer of guaranty, and that B then notified A of the advance and insisted "Treatise, §§ 68, 69a. offer requests but one giving of all the informa- tion and promises the reward to the first person who gives it. A. publishes an offer of £100 to any person who contracts influenza, after using A's remedy according to directions. 13, C, and D all use the remedy according to directions, and each contracts influenza. Each one is entitled to the amount of the promised payment for in this case there is no implied limitation in fhe offer to the first per- son who fulfills the terms of the proposal. SECTio-N 55. A reply to an offer which purports to accept it, but adds qualifications or conditions is a rejection of the original offer and is itself a counter- offer. Comment: As to the effect of a counter-offer to reject an original offer. See supra, section, 37 and comment thereon. That a qualified or conditional ac- ceptance is a counter-offer is evident when it is con- sidered that it is necessarily a statement of what the person making it is willing to do in exchange for what the original offeror proplosed to give. It should be observed, .however, that a condition in an acceptance which merely states in express terms what would be implied from the offer, though not expressed therein, is a valid acceptance.52 illustrations: A makes a written offer to B to sell him Blackacre. B replies "I accept your offer if you can convey me a good title." A contract has been formed. A makes an offer to B, and B in terms accepts but adds "prompt acknowledgment must be made "Treatise, §§ 73-75, 78. of receipt of this letter." There is no contract, but, a counter-offer, rejecting the original offer. SECTloN 56. If an offer prescribes the place, time or manner of acceptance its terms in this respect must be complied with in order to create a contract. But if an offer merely suggests the place, time or manner of acceptance, this will not preclude acceptance in some other way. Commeiit: For the reasons stated under the pre- ceding section, the offeror may prescribe the only way in which his offer may be accepted. But frequently in regard to the details of methods of acceptance, the offeror's language, if fairly construed, amounts merely to a statement of the best possible means of acceptance without a positive requirement that these means shall be followed." Illustrations: A writes an offer to B in which A says "I must receive your acceptance by return mail." An acceptance sent by any other means which, reaches A as soon as a letter sent by return mail would normally arrive, creates a contract. A makes 'n offer to B and adds "send your office boy around with an answer to this by 12 o'clock." The offeree comes himself before 12 o'clock and accepts. This is a contract. A makes an offer to B and adds "My address is 53 State Street." B sends an acceptance to A's house which A receives promptly. There is prob- ably a contract, but it is a question of construc- tion whether A has made a positive requirement of the place where the acceptance must be sent. SECTIO. 57. An acceptance which requests a change or addition to the terms of the offer is not thereby in- "Treatise, § 76. validated unless the acceptance is in terms dependent on the changed or added terms. 4 Illustrations: A offers to sell B 100 tons of steel at a cer- tain price. B' replies "I accept your offer. I hope that if you can arrange to deliver the steel in weekly instalments of 25 tons you will do so." there is a contract, but A is not bound to deliver in instalments. SECTION 58. An offer can be accepted only by the person or persons to whom it is made. Comment: One of the essential elements of any proposed contract is the person with whom it is to be made. After the formation of a contract, rights under it may often be assigned and duties delegated, but in the formation of contracts the choice of persons is vitall. 5 Illustrations: A sends an order for goods to B, B hands the offer over to C who fills the order without disclosing to A that the performance does not come from B. There is no contract. If B, before using the goods, discovers that they have come from C, this retention or use is an acceptance rf what amounts to an offer from C. and the contract then arises. SECTION 59. If an offer requests a promise from the offeree, and the offeree without making the prom- ise actually does what he was requested to promise to do, there is a contract, provided that such perfor- mance is completed or tendered within the time al- lowable for accepting by making a promise. "4 Treatise, § 79. " Treatise, § 8o. 50 possession of the peison addressed, or, of some person authorized by him to receive it for him, or is deposited in some place which he has indicated as the place for this or similar communications to be deposited for him. Comment: It is the general rule of law that revo- cations when sent from a distance must be received in order to be effectual. ANcceptance from a distance need not be received if started on its way in a, method au- thorized, but receipt may be made a condition of the offer. So even if there is no such condition, an accept- ance sent in an unauthorized way for any reason, may, nevertheless, create a contract when received by the offeror. It becomes vital, therefore, to define what is receipt. Must a letter be actually read? Must it even necessarily reach the hands of the person addressed? Such inquiries make it necessary to lay down the rule in the present section. llusiratiows: A sends by mail an offer to B and states as a condition of the offer that an acceptance must be received within three days. B mails an acceptance which reaches A's house and is delivered to a servant or is deposited at a mail box at the door within three days; but A has been called away from home and does not actually receive the letter for a week. There is a contract. A sends an offer by mail to B, but later de- sires to revoke the offer and telegraphs a revoca- tion. The messenger boy carrying the telegram from the receiving office, meets a neighbor of B's who volunteers to carry the telegram to B, and ac- cordingly takes it from the messenger boy, but forgets to deliver it to B until the following morn- ing. An acceptance by B mailed just prior to this time creates a valid, contract. SECT10N 65. An offeree who signs a document, or who accepts a document which he should reasonably understand to be a contract or evidence of one, is bound by the terms of the document though ignorant of them, in the absence of such fraud or mistake as justifies relief."1 Illustration: A signs a document presented to him suppos- ing it to be a. receipt. It is in fact a promissory note which is transferred to an innocent purchaser. A is liable to the purchaser unless he was guilty of no negligence in supposing the document to be a receipt. A carrier, receiving a shipment of goods de- livers to the shipper a bill of lading. The terms of the bill of lading form part of the contract be-' tween the carrier and shipper unless they are op- posed to public policy. A orders goods from B, and B ships the goods with a label plainly reading "no warranty of kind or quality is given by the seller." Though, apart from this notice a warranty might be implied, the acceptance of the goods bearing this label plainly printed excludes a warranty. A makes B an offer on a. sheet of paper having on the letterhead plainly printed-''All our con- tracts are subject to strikes." B accepts the offeli and a strike subsequently closes A's factory. A is not liable for failing to perform. the contract. SECTION 66. The intention of the offeror to offer and of the offeree to accept and their understanding of the meaning of their words is immaterial unless ex- pressed. If, however, the expression of either party is in fact ambiguous but he has no reason to suppose that 'Treatise, §§ goa-goe. it may bear a different meaning to the other party than that which he himself had in mind, his intent may be shown in order to determine the meaning of his am- biguous words or acts. Such actual intention may also be shown if both parties knew or had reason to know of the ambiguity. Corn ment: It is fundamental in the law of con- tracts as here stated, and as established by the great weight of modern authority, that the actual mental assent of the parties is not a' requisite for the forma- tion of a contract. If words or acts could have but one possible meaning, evidence of intention would never be admissible. Unfortunately, however, both words and acts may have more than one meaning, and where this is the case it has to be determined which of the possible meaningsis to be taken. If either party has reason to know that the other will understand the words or acts in a particular seiise, he should be respoisible for the consequences of the other's misunderstanding. On the other hand, if a party has no reason to suppose that there is any ambiguity, lie should be justified in assert- ing that his words or acts bore the meaning that lie in- tended theni to, that being one of their legitimate meanings.62 Illust ration: A offers B to to sell goods shipped from Bombay ex steamer Peerless. B expresses assent to the proposition. There are, however, two steamers of the name Peerless. It may be sup- posed, (1) that A knew, or ought to know this fact, and B neither knew or ought to know it. (2) Con- versely, it may be supposed that B knew or ought to know it and that A did not, or (3) it may be supposed that both knew, or ought to know of the ambiguity, and (4) it may be supposed that nei- "Treatise, §§ 66, 67. Illustrations: This rule is applicable to negotiable instru- ments in any action between immediate parties. Therefore, if a note was delivered by the maker to the payee as a gift, he cannot enforce it, nor can an indorsee sue his immediate indorser unless the indorser received consideration or the indor- see gave value. A recital of consideration which was not in fact given does not validate a written promise."' SECTrox 71. Consideration is legally sufficient for the formation of a unilateral contract only if the act or forbearance constituting the consideration involves a detriment to the promisee or a benefit to the prom- isor. Consideration is legally sufficient for the forma- tion of a bilateral contract only if in each of the mutual promises the act or forbearance undertaken will be, or apparently may be, detrimental to the maker of the promise or beneficial to the promisee. 7 SECTION 72. An act or forbearance is a detriment to the person acting or forbearing, as that word is used in defining the sufficiency of consideration, only if at the time of acting or forbearing he was under no legal duty so to do; but may be a detriment though it in- volve no pecuniary loss or material disadvantage. Sim- ilarly, an act or forbearance is a benefit to the prom- isor, us that word is used in defining the sufficiency of consideration, only if at the time of such act or for- bearance lie had no legal right thereto; but may be a benefit though it give him no pecuniary gain or ma- terial advantage. Commeut: It is sometimes urged that the use of the words detriment and benefit as here defined is ",Treatise, §§99-1O2, io8, nIIb. "Treatise, § 102. .rtificial. It is doubtless technical in that it narrows -the meaning that the words usually bear; but detri- ment may be of various sorts-pecuniary, moral, legal; ;and it is essential to find some words to express the effect of parting wxith something of which the law authorized the retention, and of gaining something without prior legal right thereto. It seems better to continue the use of words which have been habitually used by judges and text writers for many years than to attempt the invention of new ones."' Illustration: A, entirely from motives of pity for animal suffering, promises B $10 for a worthless, broken- legged horse which B would have gladly given $10 to have A remove. The transfer of the horse to A is, within the meaning of the above definition, a detriment to B and a. benefit to A. SECTiox 73. Consideration may be furnished to the promisor or to some other person. Comment: The rule of this section is a necessary consequence of the general definition of sufficient con- sideration. It is as detrimental to the promisee to furnish consideration to a third person as to the promisor.09 Illustrations: A promises B to guarantee payment for a bill of goods if B will sell the goods to C. Selling the goods to C is a sufficient consideration for A's promise. For consideration received from B, C draws a bill of exchange on A, who accepts the bill for C's accommodation. A is liable to B. Treatise, § 102a. "Treatise, §§ 1O8, 113. SECTIOx 74. Consideration may be furnished by the promisee or by some other person. CommeWt: The rule of this section has been the subject of controversy, but the American cases favor it, and since the act or promise requested by the promisor has been given, the promise should be binding. 70 Ilustration: In consideration of $1 paid by A to B, B prom- ises C a book. The promise is binding. SECTIoN 75. Consideration must be given and re- ceived with the express or implied assent that it shall be the price or exchange for the promise. Commend: It is essential for the idea of considera- tion as here defined that it shall be bargained for as such. That is, the consideration must be agreed upon as the price or exchange of the promise. The mere fact that the promisee incurs a detriment or the promisor receives a. benefit without this element of bargain or agreed exchange, will not establish con- sideration for a promise. Though as seen in section 83 some promises are enforceable without the element of bargain it promotes clearness of thought to keep them in a separate category.7' Ilustratiois: A requests B to give him a book, promising B $10 therefor; or B offers the book if A will promise $10 therefor. In either case if the book is given or received A's promise is binding. A promises B $100 when B goes to college. If the promise is not made as an inducement to A to go to collge but is reasonably to be undertood "Treatise, § 114. " Treatise, §§ ioo, 112. Illustration: A's promise, though the contract is voidable by him because of his own infancy, or because of B's fraud, is sufficient consideration for B's prom- ise if in other respects fulfilling the requirements of the law. SECTIoN 79. One legally sufficient consideration may support several promises. 5 Illustration: A's payment or promise of $5, not then owed by him, will support any number of promises then made by B. SECTION 80. Consideration is not insufficient be- cause part of it does not fulfill the requirements of legal sufficiency, but if part of the consideration is illegal thc whole agreement may thereby become in- valid, as stated in sections- Comment: This like the preceding section is a. necessary consequence of the definition of sufficient consideration in sections 70 and 71. If something detrimental to the promisee or beneficial to the prom- isor is given, it matters not how worthless other things also given as consiideration may be or how large the exchange the promisor undertakes to give in return.7" Illustration: A promises B a book if B will pay A $5 which B owes A, and $1 in addition. B does so. A's promise is binding. SECTION 81. Consideration is insufficient (a) if the party furnishing it is then bound by public obligation or by a legal duty to the promisor to perform the act or forbearance given or promised; " Treatise, § 14I. " Treatise, § 134. (b) If the consideration is or purports to be a promise of some act or forbearance, but expressly or impliedly reserves to the promisor the privilege of re- fusing to give the act of forbearance promised, and such refusal will not itself involve a detriment to the promisor or a benlefit to the promisee. Comnments: There is in neither case a detriment to the promisee or. a benefit to the promisor as those words have been defined. Illusrations of (a): A's payment or promising" payment of a debt to B, his performance or promise to perform an existing contractual duty to B, his performance or his promise to perform his official duty, his refraining or promising to refrain from commit- ing a tort against B or against a third person, are all insufficient considerations, even though A would not otherwise have fulfilled his previous ob- ligation. 77 Illusirations of (b): A agrees with B' to act as his agent for three years on certain terms, and B agrees that A shall so act, but reserves the right to cancel the agree- ment at any time. There is no contract. Aliter if B reserves the right to cancel on thirty days notice. A promise of A to sell, or of B to buy, such quantities of goods as A may desire to sell, or as B may desire to buy, is insufficient considera- tion.78 SECTION 82. Consideration may be sufficient. (a) Even though far inferior in value to what is promised in return; 7 " Treatise, §§ 120, 130, 13oa, 132, 133. Cf. § 82(c). "Treatise, § 104. "Treatise, § 115. (b) Even though the consideration is a promise of some act or forbearance and reserves to the promisor the privilege of refusing to give the act or forbear- ance, provided that the exercise of the reservation will itself involve a detriment to the promisor or a benefit to the promisee; 8 ) (c) Even though the party furnishing it is then bound by a public duty or by an obligation to the prom- isor to render some performance analogous to that given or promised, provided that the act or forbear- ance given or promised as consideration differs in any degree from what was previously due; or provided, in case of a prior legal obligation to the promisor, that there was an honest and reasonable dispute whether the prior legal duty existed or fully covered the act or forbearance given or promised; 81 (d) Even though the party furnishing it is then bound by a legal duty to a third person to perform the act or forbearance given or promised as considera- tion; 8.2 (e) Even though it is a promise by the terims of which the act or forbearance promised is performable only on a condition, or will be detrimental to the party performing or beneficial to the other party only upon a condition, provided that the condition is (1) a fortuitous future event, (2) a past event unknown to the promisor, (3) a future event the happening of which may be caused or prevented by the promisor, if its failure to happen will itself involve a detriment to him or a benefit to the other party."3 "Treatise, § io4. "'Treatise, §§ 121-129. Treatise, §§ 131-131b. "Treatise, § 119.