Contracts - Class 8: Bilateral vs. Unilateral Contract

Restatement § 45: Option Contract Created by 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.

Sigrist v. Century 21

Century 21 owned and operated a racing track. Sigrist is the owner and driver of a racecar. Century 21 offered a cash bonus of $2,000 to the point leader at the end of the racing season in each division. The length or duration of the racing season was not specified. After six faces, Century 21 terminated the Figure 8 races, but continued to hold races for the other divisions. At the end of racing season, Sigrist was publicly acknowledged as the champion for the Figure 8 division and given a trophy, but no bonus. In this case, the court found that Sigrist had more than substantially performed his part of the performance. Especially since Century 21 had control over what constituted as a "season" and did not define the minimum number of races that the drivers had to participate in, Sigrist is entitled to his cash bonus as the lower court found that "season" constituted the only six races that were put on by Century 21. 1 A. Corbin, Contracts §49: "where one party makes a promissory offer in such form that it can be accepted by the rendition of the performance that is requested in exchange, without any express return promise or notice of acceptance in words, the offeror is bound by a contract just as soon as the offeree has rendered a substantial part of that requested performance.

Restatement § 205

Every contract imposes upon each party a duty of good faith and fair dealing in its performance and in its enforcement.

Offers to enter into bilateral or unilateral contracts may not be revoked after acceptance.

For a unilateral contract, the offer is accepted when substantial performance has been rendered by the offeree.

Petterson v. Pattberg

The plaintiff is the executor of the estate of John Petterson and the defendant is Pattberg. Pattberg had offered a repayment plan to Petterson in order for Petterson to pay off the mortgage against Petterson's property, with two separate dates of payment that Petterson had to meet. On the date of the first payment, Petterson went to Pattberg's house and tried to pay off the whole debt at one time. Pattberg refused to accept the payment and said that he had sold off the bond and mortgage to a third party. The court held that the offeror could revoke the offer, even in the face of imminent completion of the promise by the offeree. The court argues that it's up to Pattberg to set up the terms of the offer as offeror and it is within his rights, as part of a unilateral agreement, to revoke the offer at any point up until the completion of the promise on the part of the offeree, even in this case where completion of payment revolved around an act by the offeror himself. Judge Lehman dissents, stating that it's ludicrous that part of the promise involves an act by the offeror himself. That there is no way to uphold the promise on behalf of the offeree with the offeror and this is problematic if the offeree is supposed to trust the word of the offeror and if the offeror meant to act in good faith. Williston on Contracts, §60b: the offeror may see the approach of the offeree and know that an acceptance is contemplated. If the offeror can say "I revoke" before the offeree accepts, however brief the interval of time between the two acts, there is no escape from the conclusion that the offer is terminated. (old definition)

Marchiondo

the defendant in writing offered to sell real estate to a specified prospective buyer and agreed to pay a percentage to the broker, who is the plaintiff in this case. The offer had a six-day time limit for acceptance and the defendant revoked his offer on the sixth day. The prospective buyer offered their acceptance a little later on in the day. They hold the purpose of an option contract is to avoid hardship to the offeree and yet not hold the offeror beyond the terms of his promise. Part performance by the offeree of an offer of a unilateral contract results in a contract with a condition. The condition is full performance by the offeree. The defendant's right to revoke his offer depends on whether the plaintiff had partially performed before he received the defendant's revocation. Restatement § 45, In Marchiondo, when defendant offered to sell real estate to the buyer and agreed to pay a percentage to the broker, then withdrew it on the sixth and final day the offer was valid, the court held that there would be a case for partial performance that would not allow revocation of the offer.