Offer and Acceptance in Unilateral Contracts
A unilateral contract is one where the offeror reserves the right of being bound to a contract until the offeree has completed the task promised in the agreement (i.e. You complete this project before I pay you for it). There is a risk here though. The offeror could revoke the contract at any time prior to the completion of the task and not be found liable for any time or effort already put into it. Therefore, the offeree could find no remedy for the time and energy already put into the task.
Cook v. Coldwell Banker/Frank Lain Realty Co.
Missouri Court of Appeals 967 S.W.2d 654 (1998).
Cook is the plaintiff while Coldwell and Realty is the defendant. Plaintiff won in trial court (damages of $24,748.89) and defendant appealed.
Is the contract binding even though the offer was revoked?
When one party makes an offer that is depending on the performance of another party (unilateral contract), the offeror is bound to that agreement once the oferee has rendered a “substantial part of the requested performance.”
The oferee rendered substantial performance. The evidence is clear, and the Realtor company is liable for breach of contract.
The plaintiff is a former real estate agent for the defendant. In an effort to maintain agents, the defendants created a bonus program that provided bonuses based on the performance of the agents. The bonus initiated when an agent made 15,000; grew between 15,000-25,000; and expanded when commissions reached more than 25,000. The bonus was to be paid at the end of the year. Here, the plaintiff reaches all three levels, but the defendant altered and said that the bonus was contingent on the plaintiff remaining with the company until March the following year. The plaintiff finished the year with the defendant then began employment elsewhere. The defendant failed to pay the commission and the plaintiff filed suit.
The defendant argued that the offer was never accepted by the plaintiff. However, the court refutes this by saying that the plaintiff chose to stay longer because of the bonus. Additionally, the plaintiff reached the tier levels and thus fully intended on collecting the bonus.
Further, the defendant says that it revoked the first offer (it not being accepted), and then offered a new plan contingent on staying until march the following year. Again, the court refutes this claim by saying that the first offer was accepted. How was it accepted? Here, the court says that the plaintiff had already rendered a substantial piece of performance requested by the company. Thus, her performance accepted the initial contract and the company was bound by it.
Why should we care?
Unilateral contracts are when one party offers a promise to another contingent on performance. The offeror is free to remove the contract at anytime as long as there is no performance met. However, if there is a performance met, then the offeror is bound to deliver the promise. Sounds like a risky business to either party involved.
Why would the court make the new rule here? Fairness to the offeree. However, this provides an additional problem for the offeror. See, if several people substantially perform to an extent before the offer is revoked, then the offeror may be liable for several people for one consideration.
Sateriale v. R.J. Reynolds Tobacco Co.
United States Court of Appeals, 697 F.3d 777 (9th Cir. 2012).
*A little disclaimer before getting started. I did not understand this case very well during my reading. These notes will be updated with information from the lecture that will hopefully clear things up.
This is a class action law suite where Sateriale and others are plaintiffs and RJR is the defendant. The trial court dismissed the claim and the plaintiff’s appealed.
There are several questions here because RJR made several arguments that the court addresses 1 by 1. Ultimately however, the court is going to ask if there was a contract and if it was breached.
There was an offer and this was a breach of contract.
RJR had a consumer program where consumers would request a catalog, collect C-Cash certificates, and trade or save those certificates for certain merchandise in the catalog. The program ran for about 15 years. However, RJR suddenly stopped the program but said that they would redeem C-Cash until March of the following year. However, in October of the previous year, RJR stopped accepting redemption requests all together. The plaintiffs claim that this is a breach of contract and several other acts.
The trial court dismissed the case saying that the plaintiff had no claim.
For the purpose of our studies, we will only evaluate whether there was a contract made and a breach of that contract. This is a unilateral case because the promise was made by only one party. RJR argued that there was no offer because the rewards was only an advertisement, citing other jurisdictions. Here, however, RJR promised to render performance in exchange for the rewards. Thus, an offer was made.
Next, the defendant argued that there could be no remedy because the contract was too indefinite to be enforced. The court first determined that there was a breach then went on to address this issue. This is the principle I understand least. From my understanding however, I believe that RJR is still liable because they made financial assumptions and had a financial “safety net” set up for the program.
Why should we care?
I am not 100% certain about why we read this case. We reviewed a lot of principles including making and accepting an offer. However, a new piece that was expanded on was advertisements and offers. Further, we talked about ways that we could enforce a breached contract. This last part is where I was the most confused and will expand on with my lecture notes.
Why is this a unilateral contract? Because there was no promise from RJR until performance (turning in the C-Cash) was made.
Does this constitute a contract? Well, there are some different considerations here. The plaintiffs would want the nicotine (not the merchandise). The defendants just wanted to sell cigarettes. So, the trial court said that there was no claim.
However, the issue here is the cushion that was given by RJR. RJR made a promise that they would have six months.
Why would this be an offer? First, coupons can be considered an offer (unlike an advertisement) because the distributor can control how many coupons and merchandise is available. Here, RJR set a the terms of the coupon which constituted an offer.
Second question was whether it was definite enough to be enforced. To do so, they need to determine whether the terms could be enforceable. Here, the claim was not to specific merchandise, but only that the merchandise would be made available.
The final question concerns whether the defendants had the right to terminate. However, this mutuality of obligation fails because it does not apply to unilateral contracts.
The difference between bilateral contracts and unilateral contracts may seem confusing, but it’s not as bad as we think.
The majority of contracts we have are bilateral. That is, an exchange of promises of future performance. For example, A offers to paint B’s house and B promises to paint the house.
A unilateral contract is an offer of future performance in exchange for actual performance.
Here’s the difference. “I will paint your house, you will pay me 1,000” (bilateral). “I will paint your house, then you will pay me 1,000″ (unilateral).
“Unilateral contracts are a trap”
– Professor Vestal
A good example of a unilateral contract are bounty hunters. It is open to anybody for to attempt to make the performance. The reward is based only on completing the performance.
A offeror would want to keep it unilateral because they can make the offer available to several people. An offeree wants bilateral to ensure that they are made a promise.
- Offeror isn’t helped by partial performance.
- Only one performance is possible.
- Promise of performance is unhelpful (“I will try and look for a fugitive,” you will not be paid for trying or promising).
The content contained in this article may contain inaccuracies and is not intended to reflect the opinions, views, beliefs, or practices of any academic professor or publication. Instead, this content is a reflection on the author’s understanding of the law and legal practices.