Contracts
Class Notes
Sarah
Hodgkin is a mean old lady. Sarah wrote
a letter to her daughter and son-in-law.
She’s in
What
kind of acceptance is Hodgkin seeking?
She is seeking performance: the acting of their moving in and taking
care of her. Do they give her the
acceptance she’s seeking? Not the whole
acceptance in some respects. First off,
they don’t complete their performance: the dispute arose while Sarah was still
alive. They started rendering performance,
but they haven’t completed it at the time of this case. Second, she contends that their performance
was half-baked and unpleasant and that therefore they aren’t holding up their
end of the bargain. Sarah decides to repudiate
her offer.
What
would Professor Wormser say? He would
say that the Brackenburys have a loser and Sarah has a winner in this
case. But that’s not what the Supreme
Court of Maine does. What’s one lesson
about this case? It’s a precursor for Restatement
§ 45:
§ 45. Option Contract Created By Part Performance Or
Tender
(1) Where an offer invites an offeree to accept by
rendering a performance and does not invite a promissory acceptance, an option
contract is created when the offeree tenders or begins the invited performance
or tenders a beginning of it.
(2) The offeror's duty of performance under any
option contract so created is conditional on completion or tender of the
invited performance in accordance with the terms of the offer.
If
you have a unilateral contract and the offeree starts performing, the offeror
can’t revoke the offer. The offeree must
complete performance to get the benefit of the offer, but the offer can’t be
revoked while the offeree is working on getting it done. This is what is done in the present case. This is contrary to the position taken by Wormser
in 1916.
Wormser’s
hypothetical is silly by nature. When
you start with a silly hypothetical, you may well come out with a silly answer. Crossing a bridge is no big deal. But the performance done by the Brackenburys is
significant. It makes sense as a matter
of fairness that the court should give them specific performance.
Note
the distinction between this case and Boone v. Coe. In Boone v. Coe,
suit was barred by the statute of frauds.
In this case, Sarah actually wrote down the offer.
What
would the Brackenburys get if they sued for damages? We would protect their expectation interest,
though it would be tricky to find out just how much that would be. Equity probably provided a better avenue of
relief for the Brackenburys.
The
Brackenburys feared that Sarah would convey her land to Walter, who would evict
them. The court comes in and gives
preliminary relief that will keep Walter from doing that. That means that if the Brackenburys continue
to perform and fully “pay the price”, they’ll get the stuff they were
promised. They’ll have to keep taking
care of Sarah as long as she’s alive. If
and when they fully perform, they’ll get their deal.
Recall
that in Fitzpatrick v. Michael, we
would not force obnoxious personal contact.
That seems to be the case here.
After the decree, Brackenbury really did misbehave. He was not a nice guy. How much do you fault the court for the
obnoxious association that resulted from this decree?
What
could we say in the court’s favor? The court
would say: “What we did is make an equitable order or decree, maintaining jurisdiction. What we were telling the parties is that they
should behave themselves and try to make it work. The Brackenburys deserve a chance to earn
their way to their expectancy. If it
doesn’t work out, Hodgkin can come back to try to work something else out.” Hodgkin never did come back to tell the court
it wasn’t working. If they really couldn’t
get along, the court might have tried something else. Today, maybe the court would have Hodgkin put
into a retirement home at the Brackenbury’s expense.
When
you think equity, think “discretion and flexibility”.
The
Brackenburys have a lot of reliance here and a lot of expectation interest. A remedy at common law would be severe on
Sarah because it would probably leave her homeless. Courts will scramble around to find a just
solution. A lot of cases aren’t thought
through very carefully at the outset. If
the parties had a thoughtful advisor, they might have been told that there was
no way they were going to get along.
Hypotheticals
on
Suppose
that last Thursday V gave you a piece of paper written and signed in which he
offered to sell you Greenacre for $350,000.
In that writing, he promised to hold that offer open until
What
kind of acceptance is V seeking? Is he
seeking an acceptance by performance or acceptance by promise? He’s asking for an acceptance in
writing. That would be a paper that says
“I accept” with your name signed. That
would mean that you promise to pay $350,000 for Greenacre. If the offeree promises to buy, they you have
a bilateral contract to be performed on December 15th. You would have an executory promise,
unperformed, with a promise for a promise, until the date of closing.
In
significant sales of land or goods, we will usually see bilateral contracts
rather than unilateral contracts. Where
would the $350,000 be coming from in this situation? Often, it would be coming from a bank or
other lender lending against the land to be purchase. For that reason and others, in any
significant sales situation, the parties first want to be bound to each other
by promises and then get their respective acts together so they can perform
those promises.
The
offeror is clear that they’re looking for a written promissory
acceptance.
Suppose
that the offer says it will be held open until
1. In the
Anglo-American legal system, offers are revocable even though the offeror has
promised to hold the offer open because there is no consideration for the
promise to hold the offer open, therefore that promise is unenforceable. Is this a good idea?
2. Revocations,
when they are communicated, mean that it’s too late to accept. Here, the revocation was clearly communicated
before there was any effort to accept.
When I tried to accept on Wednesday, I already knew that the other party
had changed his mind. My understood
meaning of the contract was not reasonable.
You
can’t rely before you accept.
Reliance before acceptance won’t get you into the seller’s pocket.
Suppose
that on Monday, V sells the land to A, but doesn’t tell me. On Wednesday, I hand V a written letter
accepting the offer. In this case, I do
get a contract and a cause of action against V.
Now my meaning of contract is quite reasonable. It’s true that there’s no subjective mutual
assent, since V has contracted to sell to another guy. However, I get the benefit of the deal
because I accepted before I knew that the offer was revoked.
§ 42. Revocation By Communication From Offeror
Received By Offeree
An offeree's power of acceptance is terminated when
the offeree receives from the offeror a manifestation of an intention not to
enter into the proposed contract.
In
the hypo we just discussed, the buyer gets a contract.
Suppose
that the offer to sell is promised to be held open until Friday, but it is a
revocable offer. Say B comes to me and
tells me that V sold the land. On
Wednesday, having heard nothing from V but knowing V already sold the land, I deliver
a letter of acceptance to V. Do I get a contract? Not if the information from B was reliable.
§ 43. Indirect Communication Of Revocation
An offeree's power of acceptance is terminated when
the offeror takes definite action inconsistent with an intention to enter into
the proposed contract and the offeree acquires reliable information to that
effect.
If I
get an indirect communication of a revocation, and the information I get is
reliable, then I can’t accept anymore.
You
get a different answer in the hypo above depending on whether B is a reliable source
of information or not.
The
businesslike way of revoking an offer is to do it directly.
Say
instead of getting news from B, I pick up a newspaper and I find that V is
advertising the land for sale. I drive
by Greenacre and see a “For Sale” sign.
Is my power of acceptance destroyed, or can I still accept the offer?
Just
because V has made me an offer doesn’t mean he can’t look for other potential
buyers. That’s not actually inconsistent
with the continued life of the offer made to me. I have reliable information, but it’s not
reliable information inconsistent with continuing the offer.
What
if V offers the same asset to two people at the same time? It’s kind of like playing Russian Roulette,
where you may have to make one contract and breach another and have to pay damages.
It’s
troublesome to think that an offer that’s supposed to be held open until a
certain date can actually be revoked.
What if the offeree wants a guaranteed period of time to use to think
about whether or not to take the offer?
Guaranteed
offers serve lots of business purposes.
For example, you might be trying to buy up a whole bunch of land. You might try to get option contracts, offers
to sell that are irrevocable, from the owners of the various tracts of land you
want to cobble together. If you can get
offers from all the owners, then you can accept the whole lot.
Suppose
that my uncle in
In Woodall
v. Prevatt, the answer was given as no.
It “shocks the conscience” of a court of equity for a party to convey a
$350,000 property in exchange for a blob of wax. Basically, what you’re trying to do is
enforce a gratuitous promise. This won’t
work at equity, and probably not at law either.
On
the other hand, in Thomason, you have an offer to sell the property for
$6,000. There is a promise under seal (in
a state where the seal is still effective at common law) to hold the offer open
until a certain date. The seal turns out
to be an effective way to enforce the promise to hold the offer open.
The
big is lesson is: when we’re validating a promise to hold an offer open,
seals have one aspect when you’re talking about a deal, but they don’t hold up
when you’re asking to have a merely gratuitous promise enforced. How come?
If
you’re in a jurisdiction that fully recognizes the seal, you can get an
irrevocable offer by putting it under seal.
But this doesn’t do you any good in a majority of the country (by
population). This is interesting, but it
won’t help you unless you’re in
So
how do I get a viable option? What would
you do if you were a professional lawyer who wanted to get options in
Look
at Restatement § 87 and UCC § 2-205 for next time.
§ 2-205. Firm Offers
An offer by a merchant to buy or sell goods in a
signed writing which by its terms give assurance that it will be held open is
not revocable, for lack of consideration, during the time stated or if no time
is stated for a reasonable time, but in no event may such period of
irrevocability exceed three months; but any such term of assurance on a form
supplied by the offeree must be separately signed by the offeror.