Options and Rejections

1. Options and Rejections Contracts – Prof Merges 2.15.2011

2. Ragosta v. Wilder

5. Ragosta v. Wilder • Facts • Procedural History • Holding

6. Ragosta • What was the effect of π’s letter in “1987” in which he mailed the check for $2000?

7. Ragosta • What was the effect of π’s letter in “1987” in which he mailed the check for $2000?  What was the significance of Δ returning the check?

8. $ 2000 payment • Is it clear this was a payment to keep the offer open? • Or was it a down payment, showing an intent to form a contract (an offer with built-in down payment)?

9. Wilder, 9/28: “I will sell you the fork shop . . . For $88,000, at any time up until the 1st of November 1987 that you appear with me [at the bank] with said sum. . . . [P]roviding said property has not been sold.”

10. Legal effect of the 9/28 Writing? • Was it an offer?

11. Legal effect of the 9/28 Writing? • Was it an offer?  What kind of offer?

12. Legal effect of the 9/28 Writing? • Was it an offer? • What kind of offer? • How could it be accepted?

13. Why did π actually go the bank in October?

14. Effect of π’s financing expenditure: $ 7500 • According to trial court -- ? • According to Supreme Court -- ?

15. Contrast trial court and Supreme Court • On the expenditure of the $ 7500 • What are the respective views of the 2 courts?

16. Unilateral Contract • “If you do X, I will do Y.” • Bargaining for FULL PERFORMANCE, a complete act

17. Brooklyn Bridge Hypothetical

18. Brooklyn Bridge Hypothetocal Merges

19. Merges

20. I revoke! Merges

21. What a/an ______!! I revoke! Merges

22. Reliace on an offer instead of a promise – R2 § 45 “Where an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance, an option K is created when the offeree tenders or begins or tenders a beginning of it . . .”

23. § 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.

24. Does the Supreme Court agree?

25. Does the Supreme Court agree? • NO!

26. Rest. 2d, § 71: Requirement Of Exchange; Types Of Exchange (1) To constitute consideration, a performance or a return promise must be bargained for. (2) A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise AND is given by the promisee in exchange for that promise.

27. What performance did Wilder bargain for? • Tender of full purchase price – NOT obtaining of financing • How does Supreme Court characterize the obtaining of financing?

28. What performance did Wilder bargain for? • Tender of full purchase price – NOT obtaining of financing • How does Supreme Court characterize the obtaining of financing?  Preparation to perform, not performance

29. Compare Ever-tite Roofing • BILATERAL K offer, NOT unilateral • Court said loading of trucks was part of performance, not preparation to perform • ??

30. Equitable estoppel (reliance) • What is Plaintiff/Ragosta’a argument here?

31. Equitable estoppel (reliance) • What is Plaintiff/Ragosta’a argument here?

32. Court’s analysis • Gobbledygook!

33. R2 § 90: Reliance • Does it apply? • Is it consistent with Court’s treatment of “equitable estoppel” under VT law?

34. § 90. Promise Reasonably Inducing Action Or Forbearance (1) A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires.

35. Reliance and VT Law: P. 180 • “No assurance that defendant would definitely convey the property” • “thus [plaintiffs] were assuming a risk that they would be unable to purchase the property” even after acquiring financing

36. § 87. Option Contract: Not often invoked! (1) An offer is binding as an option contract if it (a) is in writing and signed by the offeror, recites a purported consideration for the making of the offer, and proposes an exchange on fair terms within a reasonable time; or (b) is made irrevocable by statute. (2) An offer which the offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice.

37. P. 181 – advising Earle • Enforceability – the law • Ethics

38. Mirror Image Rule • Ardente v. Horan • Compare to Fairmount Glass – why different? • “Last shot rule” • MPS v Dresser-Rand p. 183

39. Mailbox Rule • Adams v. Lindell – p. 185

40. 1 tod = 28 pounds

41. Options and UCC • P. 187 • UCC 2-205: the commercial “firm offer”