Reassessing Unilateral Contracts

11

Reassessing Unilateral Contracts^*

Peter M. Tiersma

Unilateral Contracts Are Not Formed by Offer and Acceptance

Several critical distinctions separate offer/acceptance from promise as vehicles for creating commitment. These differences can be summarized as follows:

The observation that unilateral contracts do not fit comfortably in the offer and acceptance mold is not novel. As Atiyah has put it, “unilateral contracts do not always fit happily into a legal framework devised largely for bilateral contracts.”¹ Simpson has noted that “[t]‌he application of the offer and acceptance analysis to [unilateral] promises has never been [a] happy [one].”² And Stoljar, discussing the distinction between bilateral and unilateral contracts, observed “how much the language of offer and acceptance falsifies the picture.”³ This section takes these thoughts to their logical conclusion: that unilateral contracts do not belong in the offer and acceptance framework at all.

Unilateral Contracts Do Not Require Acceptance

According to the generally accepted view, unilateral contracts, like bilateral contracts, require formation by offer and acceptance. The offeror, who can invite the offeree to accept in any way that pleases him, requires that the offeree accept the offer not by saying “I accept,” but rather by completing a particular act. For example, if I run a restaurant, I might tell a waitress that I will give her a bonus if she sells ten special desserts. In the traditional theory of unilateral contracts, my promise does not become binding until all ten desserts have been sold because this is what I, the “master” of my offer, desire. Before that time I am at least theoretically free to revoke at my pleasure, even after the waitress has sold nine desserts and has said “I accept” a dozen times.⁴

Of course, saying “I accept” is the prototypical way of accepting. The Restatement defines acceptance as a “manifestation of assent” to the terms of the offer.⁵ And it defines an “offer” as inviting “assent” to a proposed bargain; indeed, the offeror intends that “assent” by the offeree will conclude the bargain.⁶ If acceptance is assent to the terms of a bargain, the offeree should be able to accept the offer in any way that is comprehensible to the offeror as assent. She might explicitly say that she accepts. Or she might begin to do the requested performance in such a way that the offeror can infer that she is symbolically communicating assent. All of these manners of acceptance are consistent with viewing an offer as a speech act that commits the speaker to a proposal once the other party—via the speech act of acceptance—also commits herself.⁷

Several commentators have observed that “acceptance” of a unilateral contract is very different from acceptance in the bilateral context. Llewellyn noted that “[a]‌cceptance … as it shuttles and shifts between the unilateral and the bilateral situations, [is] a term with radically divergent legal connotations.”⁸ He continued that bilateral acceptance bars an offeror, on his own motion, from revoking before he has received “an iota” of the ultimate substance of his bargain.⁹ Acceptance in the context of unilateral contracts, on the other hand, refers to obligating an offeror only after he has received the “uttermost jot” of everything he bargained for.¹⁰ Likewise, Stoljar remarked that “acceptance” in the context of bilateral contracts relates to formation of a bargain, while with unilateral contracts it relates to its fulfillment by one party.¹¹

Obviously, “acceptance” of a unilateral offer by completing the requested act is not a “manifestation of assent.” If a unilateral contract must be accepted, saying “I accept” or symbolically assenting by beginning performance in such a way that the offeror will notice would be perfectly sufficient. But a manifestation of assent by itself never suffices to constitute acceptance of a unilateral contract.

Although lawyers have become accustomed to the notion that an offeror “invites” the offeree to “accept” by performance,¹² consider how strange this must sound to the uninitiated: “I offer to pay you $100 to repair my bicycle. I invite you to accept this offer, but do not want your promise to repair my bicycle. You may accept only by completing the job, and I do not consider myself obligated in any way until then.” More natural—and hence more likely to reflect how people actually structure their commercial relations—is the following: “I promise to pay you $100 to repair my bicycle. You don’t need to accept or to promise anything. I just want you to do the work, if possible. I will pay you after you have finished the entire job.”

Requiring the offeree to “accept” a unilateral contract suffers from another flaw. Perhaps the most important rationale for holding parties to an agreement is that they have committed themselves to it by means of a commissive speech act, such as an offer, acceptance, or promise. The other party relies on the commitment and may be injured if it is not enforced. But acceptance of a unilateral contract—in contrast to one that is bilateral—is not an act of commitment. As noted previously, the speech act of acceptance cannot make an offeror’s proposal binding in the traditional theory—only full performance will achieve that goal. The offeree cannot and need not commit herself to a unilateral proposal. Because a unilateral offeree is never bound, an act of commitment by the offeree is superfluous. As a result, the offeree does not logically need to accept the so-called offer. The offeree simply performs the requested act and expects to be paid as promised.

The traditional view of unilateral contracts is quite correct in holding that the unilateral “offeror” does not want words of acceptance. Where it went astray was in presupposing that commitment can only arise by offer and acceptance. Because with unilateral contracts there is no real speech act of acceptance, it was necessary to label some other act or event an “acceptance” if the offer/acceptance model was to remain intact. The traditional theory chose to identify completed performance as “acceptance.” Several commentators subsequently recognized that full performance does not resemble acceptance in any reasonable sense of that word. Unfortunately, rather than question the hegemony of the offer and acceptance model, they strove to find acceptance elsewhere, as in reliance or beginning performance. In reality, the fact that the offeror does not want words of acceptance simply means that no acceptance is necessary to make the promise binding.

We may conclude, therefore, that with respect to not needing acceptance, unilateral contracts resemble promises rather than offers.

Unilateral Contracts Commit the Speaker from the Time the Promise Is Made

The second criterion that distinguishes offers from promises is that offerors commit themselves only after acceptance, and can therefore freely revoke until that time. With a promise, on the other hand, there is no need for acceptance. The promise is an unconditional act of commitment that goes into effect immediately and therefore cannot be freely revoked.¹³

Although the traditional view posits that the unilateral offeror does not wish to be bound until he has obtained full performance and can freely revoke until that time, the modern rule of Restatement section 45 is less clear. Practically speaking, when the offeree commences or tenders performance, revocation is no longer possible. Oddly, however, the Restatement seems to free the offeror from commitment until the offeree finishes performance.¹⁴ Section 45 therefore assumes, like the traditional rule, that the offeror has not committed himself until completed performance, but by imposing an option contract it prevents him from revoking after the offeree begins to do the requested act.