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Archive for February, 2015

On unilateral contracts

In the common law of contracts much significance is attributed to the distinction between bilateral contracts (formed by an exchange of promises) and unilateral contracts (formed by the exchange of a promise for the completion of an act or acts stipulated by the promisor). The distinction is still writ large in the Restatement (Second) of Contracts: see, e.g. § 30 (offer may invite or require acceptance to be made by affirmative answer in words, or by performing or refraining from performing a specified act); § 32 (in case of doubt an offer is interpreted as calling either for acceptance by promise or performance at the offeree’s election); § 45 (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). As a conceptual category, unilateral contracts may have some limited practical value in making enforceable promises that unequivocally require the promisee to engage in acts and, by implication, to incur the associated expenditure of time and resources. The classic example is the “reward” contract: (“I promise to pay $100 to the person who finds my lost dog Fido and returns him to me”). If someone goes to the trouble of searching for Fido and succeeds in finding and returning him to his owner, I guess that most of us would think it only right that the law should compel the promisor to pay up. So the concept does do some useful work.

 

However, to my mind, the common law overemphasizes the importance of unilateral contracts in ways that are unhelpful from both a teaching and learning and a real-world perspective. The binary structural distinction between bilateral and unilateral contracts implies that both concepts have equal practical value. Accordingly, if we’re not careful, students begin to see unilateral contracts everywhere when, in truth, they are outliers. As it happens, contract law is structurally biased in favour of bilateral contracts and this makes sense from a practical perspective. Most parties want to be sure that they are legally bound before they begin performing rather than expend time and resources in performing acts that will only result in formation of a contract at some future point. Even so, I frequently see students confuse “performance” of an act leading to the formation of a unilateral contract after completion of the act with “performance” of a legally binding obligation under a bilateral contract, a much more important and practically significant concept.

 

I suspect that we law teachers remain beguiled by unilateral contracts because much of the case law on the topic is so weird and colourful.  The locus classicus of unilateral contract doctrine involved a late-nineteenth century English flu remedy, the carbolic smoke ball. More recent cases are equally off the wall. Examples include Leonard v. Pepsico, a case in which the plaintiff failed to enforce a Pepsi advert that jokingly suggested that Pepsi reward points could be redeemed for a harrier fighter jet.  Then there is Kolodziej v. Masonin which a law student plaintiff failed in his attempt to use unilateral contract theory to recover a million dollars from a criminal defense attorney having successfully demonstrated that it may have been possible for the attorney’s client, who was on trial for murder, to get from Atlanta airport to a specified hotel in less than half an hour, despite the attorney’s public statements to the contrary.

 

Don’t get me wrong.  Weird and colourful cases have their pedagogical uses.  But, to my mind, outlying cases are usually the product of outlying doctrine.  So I hope my students will forgive me for siding with the famous American scholar and jurist, Karl Llewellyn, who wrote more than seventy years ago in the Yale Law Journal that unilateral contracts are rare and unimportant and should be relegated to the “freak tent”. You won’t be spending too much time on them with me!

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