2nd Restatement of Contracts

RESTATEMENT(SECOND)OFCONTRACTS
(SelectedSections)
TABLEOFCONTENTS
Chapter1......................................................................................................................................... 5
MEANINGOFTERMS .................................................................................................................. 5
1. ContractDefined..................................................................................................... 5
Chapter2......................................................................................................................................... 5
FORMATIONOFCONTRACTSPARTIESANDCAPACITY ............................................................ 5
15. MentalIllnessorDefect.......................................................................................... 5
Chapter3......................................................................................................................................... 5
FORMATIONOFCONTRACTSMUTUALASSENT ...................................................................... 5
TOPIC2.MANIFESTATIONOFASSENTINGENERAL.............................................................. 5
20. EffectofMisunderstanding .................................................................................... 5
TOPIC3.MAKINGOFOFFERS ................................................................................................. 6
24. OfferDefined .......................................................................................................... 6
25. OptionContracts..................................................................................................... 6
26. PreliminaryNegotiations ........................................................................................ 6
27. ExistenceofContractwhereWrittenMemorialisContemplated ......................... 6
30. FormofAcceptanceInvited.................................................................................... 6
32. InvitationofPromiseorPerformance .................................................................... 6
33. Certainty.................................................................................................................. 7
34. CertaintyandChoiceofTerms;EffectofPerformanceorReliance....................... 7
TOPIC4.DURATIONOFTHEOFFEREESPOWEROFACCEPTANCE ........................................ 7
35. TheOffereesPowerofAcceptance ....................................................................... 7
36. MethodsofTerminationofthePowerofAcceptance ........................................... 7
38. Rejection ................................................................................................................. 7
39. Counteroffers......................................................................................................... 8
40. TimewhenRejectionorCounterofferTerminatesthePowerofAcceptance...... 8
41. LapseofTime .......................................................................................................... 8
42. RevocationbyCommunicationfromOfferorReceivedbyOfferee ....................... 8
43. IndirectCommunicationofRevocation .................................................................. 8
45. OptionContractCreatedbyPartPerformanceorTender ..................................... 8
46. RevocationofGeneralOffer ................................................................................... 9
48. DeathorIncapacityofOfferororOfferee .............................................................. 9
TOPIC5.ACCEPTANCEOFOFFERS.......................................................................................... 9
50. AcceptanceofOfferDefined;AcceptancebyPerformance;Acceptanceby
Promise ............................................................................................................................... 9
51. EffectofPartPerformancewithoutKnowledgeofOffer ....................................... 9
52. WhoMayAcceptanOffer ...................................................................................... 9
53. AcceptancebyPerformance;ManifestationofIntentionnottoAccept ............... 9
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54. AcceptancebyPerformance;NecessityofNotificationtoOfferor ...................... 10
55. AcceptanceofNonPromissoryOffers ................................................................. 10
56. AcceptancebyPromise;NecessityofNotificationtoOfferor.............................. 10
58. NecessityofAcceptanceComplyingwithTermsofOffer .................................... 10
59. PurportedAcceptanceWhichAddsQualifications............................................... 10
60. AcceptanceofOfferWhichStatesPlace,TimeorMannerofAcceptance .......... 10
61. AcceptanceWhichRequestsChangeofTerms .................................................... 11
62. EffectofPerformancebyOffereeWhereOfferInvitesEitherPerformanceor
Promise ............................................................................................................................. 11
63. TimewhenAcceptanceTakesEffect .................................................................... 11
69. AcceptancebySilenceorExerciseofDominion ................................................... 11
Chapter4....................................................................................................................................... 11
FORMATIONOFCONTRACTSCONSIDERATION ..................................................................... 11
TOPIC1.THEREQUIREMENTOFCONSIDERATION............................................................... 11
71. RequirementofExchange;TypesofExchange..................................................... 11
73. PerformanceofLegalDuty ................................................................................... 12
74. SettlementofClaims............................................................................................. 12
77. IllusoryandAlternativePromises ......................................................................... 12
79. AdequacyofConsideration;MutualityofObligation........................................... 12
81. ConsiderationasMotiveorInducingCause ......................................................... 13
TOPIC2.CONTRACTSWITHOUTCONSIDERATION............................................................... 13
82. PromisetoPayIndebtedness;EffectontheStatuteofLimitations..................... 13
83. PromisetoPayIndebtednessDischargedinBankruptcy ..................................... 13
84. PromisetoPerformaDutyinSpiteofNonOccurrenceofaCondition............... 13
86. PromiseforBenefitReceived ............................................................................... 14
87. OptionContract .................................................................................................... 14
89. ModificationofExecutoryContract...................................................................... 14
90. PromiseReasonablyInducingActionorForbearance.......................................... 14
Chapter5....................................................................................................................................... 14
THESTATUTEOFFRAUDS ......................................................................................................... 14
TOPIC8.CONSEQUENCESOFNONCOMPLIANCE................................................................ 14
139. EnforcementbyVirtueofActioninReliance.................................................... 15
Chapter6....................................................................................................................................... 15
MISTAKE .................................................................................................................................... 15
152. WhenMistakeofBothPartiesMakesaContractVoidable ............................. 15
153. WhenMistakeofOnePartyMakesaContractVoidable ................................. 15
154. WhenaPartyBearstheRiskofaMistake........................................................ 15
158. ReliefIncludingRestitution;SupplyingaTerm................................................. 16
Chapter9....................................................................................................................................... 16
THESCOPEOFCONTRACTUALOBLIGATIONS........................................................................... 16
TOPIC1.THEMEANINGOFAGREEMENTS ........................................................................... 16
201. WhoseMeaningPrevails .................................................................................. 16
204. SupplyinganOmittedEssentialTerm............................................................... 16
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TOPIC2.CONSIDERATIONSOFFAIRNESSANDTHEPUBLICINTEREST ................................ 16
205. DutyofGoodFaithandFairDealing................................................................. 16
208. UnconscionableContractorTerm.................................................................... 17
TOPIC3.EFFECTOFADOPTIONOFAWRITING .................................................................... 17
209. IntegratedAgreements..................................................................................... 17
210. CompletelyandPartiallyIntegratedAgreements ............................................ 17
211. StandardizedAgreements................................................................................. 17
213. EffectofIntegratedAgreementonPriorAgreements(ParolEvidenceRule) .. 17
214. EvidenceofPriororContemporaneousAgreementsandNegotiations .......... 18
215. ContradictionofIntegratedTerms ................................................................... 18
216. ConsistentAdditionalTerms............................................................................. 18
217. IntegratedAgreementSubjecttoOralRequirementofaCondition ............... 18
TOPIC5.CONDITIONSANDSIMILAREVENTS ....................................................................... 18
224. ConditionDefined ............................................................................................. 18
225. EffectsoftheNonOccurrenceofaCondition.................................................. 19
229. ExcuseofaConditiontoAvoidForfeiture ........................................................ 19
Chapter10..................................................................................................................................... 19
PERFORMANCEANDNONPERFORMANCE.............................................................................. 19
TOPIC1.PERFORMANCESTOBEEXCHANGEDUNDERANEXCHANGEOFPROMISES ........ 19
234. OrderofPerformances ..................................................................................... 19
TOPIC2.EFFECTOFPERFORMANCEANDNONPERFORMANCE ......................................... 19
236. ClaimsforDamagesforTotalandforPartialBreach ....................................... 19
237. EffectonOtherPartysDutiesofaFailuretoRenderPerformance ................ 19
238. EffectonOtherPartysDutiesofaFailuretoOfferPerformance.................... 20
210. PartPerformancesasAgreedEquivalents........................................................ 20
241. CircumstancesSignificantinDeterminingWhetheraFailureisMaterial........ 20
242. CircumstancesSignificantinDeterminingWhenRemainingDutiesare
Discharged ........................................................................................................................ 20
243. EffectofaBreachbyNonPerformanceasGivingRisetoaClaimforDamages
forTotalBreach ................................................................................................................ 20
TOPIC3.EFFECTOFPROSPECTIVENONPERFORMANCE .................................................. 21
250. WhenaStatementoranActisaRepudiation.................................................. 21
251. WhenaFailuretoGiveAssuranceMaybeTreatedasaRepudiation ............. 21
253. EffectofaRepudiationasaBreachandonOtherPartysDuties .................... 21
256. NullificationofRepudiationorBasisforRepudiation ...................................... 21
Chapter11..................................................................................................................................... 22
IMPRACTICABILITYOFPERFORMANCEANDFRUSTRATIONOFPURPOSE............................... 22
261. DischargebySuperveningImpracticability....................................................... 22
265. DischargebySuperveningFrustration.............................................................. 22
266. ExistingImpracticabilityorFrustration............................................................. 22
272. ReliefIncludingRestitution;SupplyingaTerm................................................. 22
Chapter14..................................................................................................................................... 23
CONTRACTBENEFICIARIES........................................................................................................ 23
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302. IntendedandIncidentalBeneficiaries .............................................................. 23
309. DefensesAgainsttheBeneficiary ..................................................................... 23
311. VariationofaDutytoaBeneficiary.................................................................. 23
313. GovernmentContracts ..................................................................................... 24
Chapter15..................................................................................................................................... 24
ASSIGNMENTANDDELEGATION .............................................................................................. 24
TOPIC1.WHATCANBEASSIGNEDORDELEGATED ............................................................. 24
317. AssignmentofaRight ....................................................................................... 24
318. DelegationofPerformanceofDuty.................................................................. 24
321. AssignmentofFutureRights............................................................................. 24
322. ContractualProhibitionofAssignment ............................................................ 25
TOPIC2.MODEOFASSIGNMENTORDELEGATION ............................................................. 25
328. InterpretationofWordsofAssignment;EffectofAcceptanceofAssignment 25
TOPIC3.EFFECTBETWEENASSIGNORANDASSIGNEE ........................................................ 25
332. RevocabilityofGratuitousAssignments ........................................................... 25
333. WarrantiesofanAssignor................................................................................. 26
TOPIC4.EFFECTONTHEOBLIGORSDUTY .......................................................................... 26
336. DefensesAgainstanAssignee........................................................................... 26
338. DischargeofanObligorafterAssignment........................................................ 27
Chapter16..................................................................................................................................... 27
REMEDIES.................................................................................................................................. 27
TOPIC2.ENFORCEMENTBYAWARDOFDAMAGES............................................................. 27
317. MeasureofDamagesinGeneral ...................................................................... 27
348. AlternativestoLossinValueofPerformance .................................................. 27
349. DamagesBasedonRelianceInterest................................................................ 28
350. AvoidabilityasaLimitationonDamages.......................................................... 28
351. UnforeseeabilityandRelatedLimitationsonDamages ................................... 28
352. UncertaintyasaLimitationonDamages.......................................................... 28
353. LossDuetoEmotionalDisturbance.................................................................. 28
335. PunitiveDamages ............................................................................................. 28
TOPIC4.RESTITUTION .......................................................................................................... 29
371. MeasureofRestitutionInterest ....................................................................... 29
373. RestitutionWhenOtherPartyisinBreach....................................................... 29
371. RestitutioninFavorofPartyinBreach ............................................................. 29
376. RestitutionWhenContractisVoidable ............................................................ 29
377. RestitutioninCasesofImpracticability,Frustration,NonOccurrenceof
ConditionorDisclaimerbyBeneficiary............................................................................. 29
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Chapter1
MEANINGOFTERMS
1.
ContractDefined
A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the
performanceofwhichthelawinsomewayrecognizesasaduty.
Chapter2
FORMATIONOFCONTRACTSPARTIESANDCAPACITY
15. MentalIllnessorDefect
(1) A person incurs only voidable contractual duties by entering into a transaction if by reason of mental
illnessordefect
(a)heisunabletounderstandinareasonablemannerthenatureandconsequencesofthetransaction,or
(b)heisunabletoactinareasonablemannerinrelationtothetransactionandtheotherpartyhasreasonto
knowofhiscondition.
(2)Wherethecontractismadeonfairtermsandtheotherpartyiswithoutknowledgeofthementalillness
or defect, the power of avoidance under Subsection (1) terminates to the extent that the contract has been so
performed inwhole or inpart or the circumstanceshave so changed that avoidancewould be unjust. In such a
caseacourtmaygrantreliefonsuchequitabletermsasjusticerequires.
Chapter3
FORMATIONOFCONTRACTSMUTUALASSENT
TOPIC2.MANIFESTATIONOFASSENTINGENERAL
20. EffectofMisunderstanding
(1) There is no manifestation of mutual assent to an exchange if the parties attach materially different
meaningstotheirmanifestationsand
(a)neitherpartyknowsorhasreasontoknowthemeaningattachedbytheother;or
(b)eachpartyknowsoreachpartyhasreasontoknowthemeaningattachedbytheother.
(2)Themanifestationsofthepartiesareoperativeinaccordancewiththemeaningattachedtothembyone
ofthepartiesif
(a) that party does not know of any different meaning attached by the other, and the other knows the
meaningattachedbythefirstparty;or
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(b) that party has no reason to know of any different meaning attached by the other, and the other has
reasontoknowthemeaningattachedbythefirstparty.
TOPIC3.MAKINGOFOFFERS
24. OfferDefined
An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in
understandingthathisassenttothatbargainisinvitedandwillconcludeit.
25. OptionContracts
Anoptioncontractisapromisewhichmeetstherequirementsfortheformationofacontractandlimitsthe
promisorspowertorevokeanoffer.
26. PreliminaryNegotiations
A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed
knowsorhasreasontoknowthatthepersonmakingitdoesnotintendtoconcludeabargainuntilhehasmadea
furthermanifestationofassent.
27. ExistenceofContractwhereWrittenMemorialisContemplated
Manifestationsofassentthatareinthemselvessufficienttoconcludeacontractwillnotbepreventedfromso
operatingbythefactthatthepartiesalsomanifestanintentiontoprepareandadoptawrittenmemorialthereof;
butthecircumstancesmayshowthattheagreementsarepreliminarynegotiations.
30. FormofAcceptanceInvited
(1) Anoffermayinviteorrequireacceptancetobemadebyanaffirmativeanswerinwords,orbyperforming
or refraining from performing a specified act, or may empower the offeree to make a selection of terms in his
acceptance.
(2) Unless otherwise indicated by the language or the circumstances, an offer invites acceptance in any
mannerandbyanymediumreasonableinthecircumstances.
32. InvitationofPromiseorPerformance
Incaseofdoubtanofferisinterpretedasinvitingtheoffereetoaccepteitherbypromisingtoperformwhat
theofferrequestsorbyrenderingtheperformance,astheoffereechooses.
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33. Certainty
(1)Eventhoughamanifestationofintentionisintendedtobeunderstoodasanoffer,itcannotbeaccepted
soastoformacontractunlessthetermsofthecontractarereasonablycertain.
(2) Thetermsofacontractarereasonablycertainiftheyprovideabasisfordeterminingtheexistenceofa
breachandforgivinganappropriateremedy.
(3) The fact that one or more terms of a proposed bargain are left open or uncertain may show that a
manifestationofintentionisnotintendedtobeunderstoodasanofferorasanacceptance.
34. CertaintyandChoiceofTerms;EffectofPerformanceorReliance
(1)Thetermsofacontractmaybereasonablycertaineventhoughitempowersoneorbothpartiestomake
aselectionoftermsinthecourseofperformance.
(2)Partperformanceunderanagreementmayremoveuncertaintyandestablishthatacontractenforceable
asabargainhasbeenformed.
(3)Actioninrelianceonanagreementmaymakeacontractualremedyappropriateeventhoughuncertainty
isnotremoved.
TOPIC4.DURATIONOFTHEOFFEREESPOWEROFACCEPTANCE
35. TheOffereesPowerofAcceptance
(1) An offer gives to the offeree a continuing power to complete the manifestation of mutual assent by
acceptanceoftheoffer.
(2) A contract cannot be created by acceptance of an offer after the power of acceptance has been
terminatedinoneofthewayslistedin36.
36. MethodsofTerminationofthePowerofAcceptance
(1) Anoffereespowerofacceptancemaybeterminatedby
(a) rejectionorcounterofferbytheofferee,or
(b) lapseoftime,or
(c) revocationbytheofferor,or
(d) deathorincapacityoftheofferororofferee.
(2) In addition, an offerees power of acceptance is terminated by the nonoccurrence of any condition of
acceptanceunderthetermsoftheoffer.
38. Rejection
(1) An offerees power of acceptance is terminated by his rejection of the offer, unless the offeror has
manifestedacontraryintention.
(2) Amanifestationofintentionnottoacceptanofferisarejectionunlesstheoffereemanifestsanintention
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totakeitunderfurtheradvisement.
39. Counteroffers
(1) Acounterofferisanoffermadebyanoffereetohisofferorrelatingtothesamematterastheoriginal
offerandproposingasubstitutedbargaindifferingfromthatproposedbytheoriginaloffer.
(2) Anoffereespowerofacceptanceisterminatedbyhismakingofacounteroffer,unlesstheofferorhas
manifestedacontraryintentionorunlessthecounteroffermanifestsacontraryintentionoftheofferee.
40. TimewhenRejectionorCounterofferTerminatesthePowerofAcceptance
Rejectionorcounterofferbymailortelegramdoesnotterminatethepowerofacceptanceuntilreceivedby
the offeror, but limits the power so that a letter or telegram of acceptance started after the sending of an
otherwise effective rejection or counteroffer is only a counteroffer unless the acceptance is received by the
offerorbeforehereceivestherejectionorcounteroffer.
41. LapseofTime
(1) An offerees power of acceptance is terminated at the time specified in the offer, or, if no time is
specified,attheendofareasonabletime.
(2) What is a reasonable time is a question of fact, depending on all the circumstances existing when the
offerandattemptedacceptancearemade.
(3) Unlessotherwiseindicatedbythelanguageorthecircumstances,andsubjecttotherulestatedin49,
anoffersentbymailisseasonablyacceptedifanacceptanceismailedatanytimebeforemidnightonthedayon
whichtheofferisreceived.
42. RevocationbyCommunicationfromOfferorReceivedbyOfferee
Anoffereespowerofacceptanceisterminatedwhentheoffereereceivesfromtheofferoramanifestationof
anintentionnottoenterintotheproposedcontract.
43. IndirectCommunicationofRevocation
An offerees power of acceptance is terminated when the offeror takes definite action inconsistent with an
intentiontoenterintotheproposedcontractandtheoffereeacquiresreliableinformationtothateffect.
45. OptionContractCreatedbyPartPerformanceorTender
(1) Whereanofferinvitesanoffereetoacceptbyrenderingaperformanceanddoesnotinviteapromissory
acceptance,anoptioncontractiscreatedwhentheoffereetendersorbeginstheinvitedperformanceortendersa
beginningofit.
(2) The offerors duty of performance under any option contract socreated isconditional on completion or
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tenderoftheinvitedperformanceinaccordancewiththetermsoftheoffer.
46. RevocationofGeneralOffer
Whereanofferismadebyadvertisementinanewspaperorothergeneralnotificationtothepublicortoa
number of persons whose identity is unknown to the offeror, the offerees power of acceptance is terminated
whenanoticeofterminationisgivenpublicitybyadvertisementorothergeneralnotificationequaltothatgiven
totheofferandnobettermeansofnotificationisreasonablyavailable.
48. DeathorIncapacityofOfferororOfferee
An offerees power of acceptance is terminated when the offeree or offeror dies or is deprived of legal
capacitytoenterintotheproposedcontract.
TOPIC5.ACCEPTANCEOFOFFERS
50. AcceptanceofOfferDefined;AcceptancebyPerformance;AcceptancebyPromise
(1) Acceptanceofanofferisamanifestationofassenttothetermsthereofmadebytheoffereeinamanner
invitedorrequiredbytheoffer.
(2) Acceptance by performance requires that at least part of what the offer requests be performed or
tenderedandincludesacceptancebyaperformancewhichoperatesasareturnpromise.
(3) Acceptance by a promise requires that the offeree complete every act essential to the making of the
promise.
51. EffectofPartPerformancewithoutKnowledgeofOffer
Unlesstheofferormanifestsacontraryintention,anoffereewholearnsofanofferafterhehasrenderedpart
oftheperformancerequestedbytheoffermayacceptbycompletingtherequestedperformance.
52. WhoMayAcceptanOffer
Anoffercanbeacceptedonlybyapersonwhomitinvitestofurnishtheconsideration.
53. AcceptancebyPerformance;ManifestationofIntentionnottoAccept
(1) Anoffercanbeacceptedbytherenderingofaperformanceonlyiftheofferinvitessuchanacceptance.
(2) Except as stated in 69, the rendering of a performance does not constitute an acceptance if within a
reasonabletimetheoffereeexercisesreasonablediligencetonotifytheofferorofnonacceptance.
(3) Where an offer of a promise invites acceptance by performance and does not invite a promissory
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acceptance, the rendering of the invited performance does not constitute an acceptance if before the offeror
performshispromisetheoffereemanifestsanintentionnottoaccept.
54. AcceptancebyPerformance;NecessityofNotificationtoOfferor
(1) Whereanofferinvitesanoffereetoacceptbyrenderingaperformance,nonotificationisnecessaryto
makesuchanacceptanceeffectiveunlesstheofferrequestssuchanotification.
(2) If an offeree who accepts by rendering a performance has reason to know that the offeror has no
adequatemeansoflearningoftheperformancewithreasonablepromptnessandcertainty,thecontractualdutyof
theofferorisdischargedunless
(a) theoffereeexercisesreasonablediligencetonotifytheofferorofacceptance,or
(b) theofferorlearnsoftheperformancewithinareasonabletime,or
(c) theofferindicatesthatnotificationofacceptanceisnotrequired.
55. AcceptanceofNonPromissoryOffers
Acceptance by promise may create a contract in which the offerors performance is completed when the
offereespromiseismade.
56. AcceptancebyPromise;NecessityofNotificationtoOfferor
Exceptasstatedin69orwheretheoffermanifestsacontraryintention,itisessentialtoanacceptanceby
promiseeitherthattheoffereeexercisereasonablediligencetonotifytheofferorofacceptanceorthattheofferor
receivetheacceptanceseasonably.
58. NecessityofAcceptanceComplyingwithTermsofOffer
An acceptance must comply with the requirements of the offer as to the promise to be made or the
performancetoberendered.
59. PurportedAcceptanceWhichAddsQualifications
Areplytoanofferwhichpurportstoacceptitbutisconditionalontheofferorsassenttotermsadditionalto
ordifferentfromthoseofferedisnotanacceptancebutisacounteroffer.
60. AcceptanceofOfferWhichStatesPlace,TimeorMannerofAcceptance
Ifanofferprescribestheplace,timeormannerofacceptanceitstermsinthisrespectmustbecompliedwith
inordertocreateacontract.Ifanoffermerelysuggestsapermittedplace,timeormannerofacceptance,another
methodofacceptanceisnotprecluded.
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61. AcceptanceWhichRequestsChangeofTerms
Anacceptancewhichrequestsachangeoradditiontothetermsoftheofferisnottherebyinvalidatedunless
theacceptanceismadetodependonanassenttothechangedoraddedterms.
62. EffectofPerformancebyOffereeWhereOfferInvitesEitherPerformanceorPromise
(1) Where an offer invites an offeree to choose between acceptance by promise and acceptance by
performance,thetenderorbeginningoftheinvitedperformanceoratenderofabeginningofitisanacceptance
byperformance.
(2) Suchanacceptanceoperatesasapromisetorendercompleteperformance.
63. TimewhenAcceptanceTakesEffect
Unlesstheofferprovidesotherwise,
(a) an acceptance made in a manner and by a medium invited by an offer is operative and completes the
manifestationofmutualassentassoonasputoutoftheoffereespossession,withoutregardtowhether
iteverreachestheofferor;but
(b) anacceptanceunderanoptioncontractisnotoperativeuntilreceivedbytheofferor.
69. AcceptancebySilenceorExerciseofDominion
(1) Where an offeree fails to reply to an offer, his silence and inaction operate as an acceptance in the
followingcasesonly:
(a) Where an offeree takes thebenefit of offered services with reasonable opportunity to reject themand
reasontoknowthattheywereofferedwiththeexpectationofcompensation.
(b) Wheretheofferorhasstatedorgiventheoffereereasontounderstandthatassentmaybemanifestedby
silenceorinaction,andtheoffereeinremainingsilentandinactiveintendstoaccepttheoffer.
(c) Where because of previous dealings or otherwise, it is reasonable that the offeree should notify the
offerorifhedoesnotintendtoaccept.
(2) An offeree who does any act inconsistent with the offerors ownership of offered property is bound in
accordancewiththeofferedtermsunlesstheyaremanifestlyunreasonable.Butiftheactiswrongfulasagainst
theofferoritisanacceptanceonlyifratifiedbyhim.
Chapter4
FORMATIONOFCONTRACTSCONSIDERATION
TOPIC1.THEREQUIREMENTOFCONSIDERATION
71. RequirementofExchange;TypesofExchange
(1) Toconstituteconsideration,aperformanceorareturnpromisemustbebargainedfor.
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(2) A performance or return promise is bargained for if it is sought by the promisor in exchange for his
promiseandisgivenbythepromiseeinexchangeforthatpromise.
(3) Theperformancemayconsistof
(a) anactotherthanapromise,or
(b) aforbearance,or
(c) thecreation,modification,ordestructionofalegalrelation.
(4) The performance or return promise may be given to the promisor or to some other person. It may be
givenbythepromiseeorbysomeotherperson.
73. PerformanceofLegalDuty
Performanceofalegaldutyowedtoapromisorwhichisneitherdoubtfulnorthesubjectofhonestdisputeis
notconsideration;butasimilarperformanceisconsiderationifitdiffersfromwhatwasrequiredbythedutyina
waywhichreflectsmorethanapretenseofbargain.
74. SettlementofClaims
(1) Forbearance to assert or the surrender of a claim or defense which proves to be invalid is not
considerationunless
(a) theclaimordefenseisinfactdoubtfulbecauseofuncertaintyastothefactsorthelaw,or
(b) the forbearing or surrenderingparty believes thattheclaim or defense maybe fairly determinedto be
valid.
(2) Theexecutionofawritteninstrumentsurrenderingaclaimordefensebyonewhoisundernodutyto
execute it is consideration if the execution of the written instrument is bargained for even though he is not
assertingtheclaimordefenseandbelievesthatnovalidclaimordefenseexists.
77. IllusoryandAlternativePromises
A promise or apparent promise is not consideration if by its terms the promisor or purported promisor
reservesachoiceofalternativeperformancesunless
(a) eachofthealternativeperformanceswouldhavebeenconsiderationifitalonehadbeenbargainedfor;
or
(b) oneofthealternativeperformanceswouldhavebeenconsiderationandthereisorappearstotheparties
tobeasubstantialpossibilitythatbeforethepromisorexerciseshischoiceeventsmayeliminatethealternatives
whichwouldnothavebeenconsideration.
79. AdequacyofConsideration;MutualityofObligation
Iftherequirementofconsiderationismet,thereisnoadditional
requirementof
(a) again,advantage,orbenefittothepromisororaloss,disadvantage,ordetrimenttothepromisee;or
(b) equivalenceinthevaluesexchanged;or
(c) mutualityofobligation.
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81. ConsiderationasMotiveorInducingCause
(1) Thefactthatwhatisbargainedfordoesnotofitselfinducethemakingofapromisedoesnotpreventit
frombeingconsiderationforthepromise.
(2) Thefactthatapromisedoesnotofitselfinduceaperformanceorreturnpromisedoesnotpreventthe
performanceorreturnpromisefrombeingconsiderationforthepromise.
TOPIC2.CONTRACTSWITHOUTCONSIDERATION
82. PromisetoPayIndebtedness;EffectontheStatuteofLimitations
(1) Apromisetopayallorpartofanantecedentcontractualorquasicontractualindebtednessowedbythe
promisor is binding if the indebtedness is still enforceable or would be except for the effect of a statute of
limitations.
(2) Thefollowingfactsoperateassuchapromiseunlessotherfactsindicateadifferentintention:
(a) A voluntary acknowledgment to the obligee, admitting the present existence of the antecedent
indebtedness;or
(b) Avoluntarytransferofmoney,anegotiableinstrument,orotherthingbytheobligortotheobligee,made
asinterestonorpartpaymentoforcollateralsecurityfortheantecedentindebtedness;or
(c) Astatementtotheobligeethatthestatuteoflimitationswillnotbepleadedasadefense.
83. PromisetoPayIndebtednessDischargedinBankruptcy
An express promise to pay all or part of an indebtedness of the promisor, discharged or dischargeable in
bankruptcyproceedingsbegunbeforethepromiseismade,isbinding.
84. PromisetoPerformaDutyinSpiteofNonOccurrenceofaCondition
(1) Except as stated in Subsection (2), a promise to perform all or part of a conditional duty under an
antecedent contract in spite of the nonoccurrence of the condition is binding, whether the promise is made
beforeorafterthetimefortheconditiontooccur,unless
(a) occurrenceoftheconditionwasamaterialpartoftheagreedexchangefortheperformanceoftheduty
andthepromisewasundernodutythatitoccur;or
(b) uncertaintyoftheoccurrenceoftheconditionwasanelementoftheriskassumedbythepromisor.
(2) If such a promise is made before the time for the occurrence of the condition has expired and the
conditioniswithinthecontrolofthepromiseeorabeneficiary,thepromisorcanmakehisdutyagainsubjectto
theconditionbynotifyingthepromiseeorbeneficiaryofhisintentiontodosoif
(a) thenotificationisreceivedwhilethereisstillareasonabletimetocausetheconditiontooccurunderthe
antecedenttermsoranextensiongivenbythepromisor;and
(b) reinstatementoftherequirementoftheconditionisnotunjustbecauseofamaterialchangeofposition
bythepromiseeorbeneficiary;and
(c) thepromiseisnotbindingapartfromtherulestatedinSubsection(1).
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86. PromiseforBenefitReceived
(1) A promise made in recognition of a benefit previously received by the promisor from the promisee is
bindingtotheextentnecessarytopreventinjustice.
(2) ApromiseisnotbindingunderSubsection(1)
(a) ifthepromiseeconferredthebenefitasa giftorforother reasonsthepromisorhasnotbeenunjustly
enriched;or
(b) totheextentthatitsvalueisdisproportionatetothebenefit.
87. OptionContract
(1) Anofferisbindingasanoptioncontractifit
(a) isinwritingandsignedbytheofferor,recitesapurportedconsideration.forthemakingoftheoffer,and
proposesanexchangeonfairtermswithinareasonabletime;or
(b) ismadeirrevocablebystatute.
(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
bindingasanoptioncontracttotheextentnecessarytoavoidinjustice.
89. ModificationofExecutoryContract
Apromisemodifyingadutyunderacontractnotfullyperformedoneithersideisbinding
(a) ifthemodificationisfairandequitableinviewofcircumstancesnotanticipatedbythepartieswhenthe
contractwasmade;or
(b) totheextentprovidedbystatute;or
(c) totheextentthatjusticerequiresenforcementinviewofmaterialchangeofpositioninrelianceonthe
promise.
90. PromiseReasonablyInducingActionorForbearance
(1) Apromisewhichthepromisorshouldreasonablyexpecttoinduceactionorforbearanceonthepartof
the promisee or a third person and which does induce such action or forbearance is binding if injustice can be
avoidedonlybyenforcementofthepromise.Theremedygrantedforbreachmaybelimitedasjusticerequires.
(2) AcharitablesubscriptionoramarriagesettlementisbindingunderSubsection(1)withoutproofthatthe
promiseinducedactionorforbearance.
Chapter5
THESTATUTEOFFRAUDS
TOPIC8.CONSEQUENCESOFNONCOMPLIANCE
Page14of30
139. EnforcementbyVirtueofActioninReliance
(1) Apromisewhichthepromisorshouldreasonablyexpecttoinduceactionorforbearanceonthepartof
thepromiseeorathirdpersonandwhichdoesinducetheactionorforbearanceisenforceablenotwithstanding
the Statute of Frauds if injustice can be avoided only by enforcement of the promise. The remedy granted for
breachistobelimitedasjusticerequires.
(2) In determining whether injustice can be avoided only by enforcement of the promise, the following
circumstancesaresignificant:
(a) theavailabilityandadequacyofotherremedies,particularlycancellationandrestitution;
(b) thedefiniteandsubstantialcharacteroftheactionorforbearanceinrelationtotheremedysought;
(c) the extent to which the action or forbearance corroborates evidence of the making and terms of the
promise,orthemakingandtermsareotherwiseestablishedbyclearandconvincingevidence;
(d) thereasonablenessoftheactionorforbearance;
(e) theextenttowhichtheactionorforbearancewasforeseeablebythepromisor.
Chapter6
MISTAKE
152.WhenMistakeofBothPartiesMakesaContractVoidable
(1)Whereamistakeofbothpartiesatthetimeacontractwasmadeastoabasicassumptiononwhichthe
contractwasmadehasamaterialeffectontheagreedexchangeofperformances,thecontractisvoidablebythe
adverselyaffectedpartyunlesshebearstheriskofthemistakeundertherulestatedin154.
(2) In determining whether the mistake has a material effect on the agreed exchange of performances,
accountistakenofanyreliefbywayofreformation,restitution,orotherwise.
153.WhenMistakeofOnePartyMakesaContractVoidable
Whereamistakeofonepartyatthetimeacontractwasmadeastoabasicassumptiononwhichhemadethe
contract has a material effect on the agreed exchange of performances that is adverse to him, the contract is
voidablebyhimifhedoesnotbeartheriskofthemistakeundertherulestatedin154,and
(a) theeffectofthemistakeissuchthatenforcementofthecontractwouldbeunconscionable,or
(b) theotherpartyhadreasontoknowofthemistakeorhisfaultcausedthemistake.
154.WhenaPartyBearstheRiskofaMistake
Apartybearstheriskofamistakewhen
(a) Theriskisallocatedtohimbyagreementoftheparties,or
(b) heisaware,atthetimethecontractismade,thathehasonlylimitedknowledgewithrespecttothefacts
towhichthemistakerelatesbuttreatshislimitedknowledgeassufficient,or
(c) theriskisallocatedtohimbythecourtonthegroundthatitisreasonableinthecircumstancestodoso.
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158.ReliefIncludingRestitution;SupplyingaTerm
(1) InanycasegovernedbytherulesstatedinthisChapter,eitherpartymayhaveaclaimforreliefincluding
restitutionundertherulesstatedin240and376.
(2) InanycasegovernedbytherulesstatedinthisChapter,ifthoserulestogetherwiththerulesstatedin
Chapter16willnotavoidinjustice,thecourtmaygrantreliefonsuchtermsasjusticerequiresincludingprotection
ofthepartiesrelianceinterest.
Chapter9
THESCOPEOFCONTRACTUALOBLIGATIONS
TOPIC1.THEMEANINGOFAGREEMENTS
201.WhoseMeaningPrevails
(1) Wherethepartieshaveattachedthesamemeaningtoapromiseoragreementoratermthereof,itis
interpretedinaccordancewiththatmeaning.
(2) Wherethepartieshaveattacheddifferentmeaningstoapromiseoragreementoratermthereof,itis
interpretedinaccordancewiththemeaningattachedbyoneofthemifatthetimetheagreementwasmade
(a) thatpartydidnotknowofanydifferentmeaningattachedbytheother,andtheotherknewthemeaning
attachedbythefirstparty;or
(b) that party had no reason to know of any different meaning attached by the other, and the other had
reasontoknowthemeaningattachedbythefirstparty.
(3) ExceptasstatedinthisSection,neitherpartyisboundbythemeaningattachedbytheother,eventhough
theresultmaybeafailureofmutualassent.
204.SupplyinganOmittedEssentialTerm
When the parties to a bargain sufficiently defined to be a contract have not agreed with respect to a term
whichisessentialtoadeterminationoftheirrightsandduties,atermwhichisi~asonab1einthecircumstancesis
suppliedbythecourt.
TOPIC2.CONSIDERATIONSOFFAIRNESSANDTHEPUBLICINTEREST
205.DutyofGoodFaithandFairDealing
Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its
enforcement.
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208.UnconscionableContractorTerm
Ifacontractortermthereofisunconscionableatthetimethecontractismadeacourtmayrefusetoenforce
thecontract,ormayenforcetheremainderofthecontractwithouttheunconscionableterm,ormaysolimitthe
applicationofanyunconscionabletermastoavoidanyunconscionableresult.
TOPIC3.EFFECTOFADOPTIONOFAWRITING
209.IntegratedAgreements
(1) Anintegratedagreementisawritingorwritingsconstitutingafinalexpressionofoneormoretermsofan
agreement.
(2) Whetherthereisanintegratedagreementistobedeterminedbythecourtasaquestionpreliminaryto
determinationofaquestionofinterpretationortoapplicationoftheparolevidencerule.
(3) Where the parties reduce an agreement to a writing which in view of its completeness and specificity
reasonablyappearstobeacompleteagreement,itistakentobeanintegratedagreementunlessitisestablished
byotherevidencethatthewritingdidnotconstituteafinalexpression.
210.CompletelyandPartiallyIntegratedAgreements
(1) Acompletelyintegratedagreementisanintegratedagreementadoptedbythepartiesasacompleteand
exclusivestatementofthetermsoftheagreement.
(2) A partially integrated agreement is an integrated agreement other than a completely integrated
agreement.
(3) Whetheranagreementiscompletelyorpartiallyintegratedistobedeterminedbythecourtasaquestion
preliminarytodeterminationofaquestionofinterpretationortoapplicationoftheparolevidencerule.
211.StandardizedAgreements
(1) ExceptasstatedinSubsection(3),whereapartytoanagreementsignsorotherwisemanifestsassenttoa
writingandhasreasontobelievethatlikewritingsareregularlyusedtoembodytermsofagreementsofthesame
type,headoptsthewritingasanintegratedagreementwithrespecttothetermsincludedinthewriting.
(2) Such a writing is interpreted wherever reasonable as treating alike all those similarly situated, without
regardtotheirknowledgeorunderstandingofthestandardtermsofthewriting.
(3) Wheretheotherpartyhasreasontobelievethatthepartymanifestingsuchassentwouldnotdosoifhe
knewthatthewritingcontainedaparticularterm,thetermisnotpartoftheagreement.
213. EffectofIntegratedAgreementonPriorAgreements(ParolEvidenceRule)
(1) A binding integrated agreement discharges prior agreements to the extent that it is inconsistent with
them.
(2) A binding completely integrated agreement discharges prior agreements to the extent that they are
withinitsscope.
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(3) An integratedagreementthat is not binding or that is voidable and avoided doesnotdischarge a prior
agreement.Butanintegratedagreement,eventhoughnotbinding,maybeeffectivetorenderinoperativeaterm
whichwouldhavebeenpartoftheagreementifithadnotbeenintegrated.
214.EvidenceofPriororContemporaneousAgreementsandNegotiations
Agreements andnegotiations prior to orcontemporaneous withthe adoption of a writing are admissible in

evidencetoestablish
(a) thatthewritingisorisnotanintegratedagreement;
(b) thattheintegratedagreement,ifany,iscompletelyorpartiallyintegrated;
(c) themeaningofthewriting,whetherornotintegrated;
(d) illegality,fraud,duress,mistake,lackofconsideration,orotherinvalidatingcause;
(e) groundforgrantingordenyingrescission,reformation,specificperformance,orotherremedy.
215.ContradictionofIntegratedTerms
ExceptasstatedintheprecedingSection,wherethereisabindingagreement,eithercompletelyorpartially
integrated, evidence of prior or contemporaneous agreements or negotiations is not admissible in evidence to
contradictatermofthewriting.
216.ConsistentAdditionalTerms
(1) Evidenceofaconsistentadditionaltermisadmissibletosupplementanintegratedagreementunlessthe
courtfindsthattheagreementwascompletelyintegrated.
(2) Anagreementisnotcompletelyintegratedifthewritingomitsaconsistentadditionalagreedtermwhich
is
(a) agreedtoforseparateconsideration,or
(b) suchatermasinthecircumstancesmightnaturallybeomittedfromthewriting.
217.IntegratedAgreementSubjecttoOralRequirementofaCondition
Wherethepartiestoawrittenagreementagreeorallythatperformanceoftheagreementissubjecttothe
occurrenceofastatedcondition,theagreementisnotintegratedwithrespecttotheoralcondition.
TOPIC5.CONDITIONSANDSIMILAREVENTS
224.ConditionDefined
Aconditionisanevent,notcertaintooccur,whichmustoccur,unlessitsnonoccurrenceisexcused,before
performanceunderacontractbecomesdue.
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225.EffectsoftheNonOccurrenceofaCondition
(1) Performanceofadutysubjecttoaconditioncannotbecomedueunlesstheconditionoccursoritsnon
occurrenceisexcused.
(2)Unlessithasbeenexcused,thenonoccurrenceofaconditiondischargesthedutywhentheconditioncan
nolongeroccur.
(3)Nonoccurrenceofaconditionisnotabreachbyapartyunlessheisunderadutythattheconditionoccur.
229.ExcuseofaConditiontoAvoidForfeiture
To the extent that the nonoccurrence of a condition would cause disproportionate forfeiture, a court may
excusethenonoccurrenceofthatconditionunlessitsoccurrencewasamaterialpartoftheagreedexchange.
Chapter10
PERFORMANCEANDNONPERFORMANCE
TOPIC1.PERFORMANCESTOBEEXCHANGEDUNDERANEXCHANGEOFPROMISES
234.OrderofPerformances
(1) Whereallorpartoftheperformancestobeexchangedunderanexchangeofpromisescanberendered
simultaneously,theyaretothatextentduesimultaneously,unlessthelanguageorthecircumstancesindicatethe
contrary.
(2) Except to the extent stated in Subsection (1), where the performance of only one party under such an
exchangerequiresaperiodoftime,hisperformanceisdueatanearliertimethanthatoftheotherparty,unless
thelanguageorthecircumstancesindicatethecontrary.
TOPIC2.EFFECTOFPERFORMANCEANDNONPERFORMANCE
236.ClaimsforDamagesforTotalandforPartialBreach
(1) A claim for damages for total breach is one for damages based on all of the injured partys remaining
rightstoperformance.
(2) A claim for damages for partial breach is one for damages based on only part of the injured partys
remainingrightstoperformance.
237.EffectonOtherPartysDutiesofaFailuretoRenderPerformance
Except as stated in 240, it is a condition of each partys remaining duties to render performances to be
exchangedunderanexchangeofpromisesthattherebenouncuredmaterialfailurebytheotherpartytorender
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anysuchperformancedueatanearliertime.
238.EffectonOtherPartysDutiesofaFailuretoOfferPerformance
Where all or part of the performances to be exchanged under an exchange of promises are due
simultaneously, it is a condition of each partys duties to render such performance that the other party either
renderor,withmanifestedpresentabilitytodoso,offerperformanceofhispartofthesimultaneousexchange.
210. PartPerformancesasAgreedEquivalents
Iftheperformancestobeexchangedunderanexchangeofpromisescanbeapportionedintocorresponding
pairs of part performances so that the parts of eachpair are properly regarded as agreed equivalents, a partys
performance of his part of such a pair has the same effect on the others duties to render performance of the
agreedequivalentasitwouldhaveifonlythatpairofperformanceshadbeenpromised.
241. CircumstancesSignificantinDeterminingWhetheraFailureisMaterial
In determining whether a failure to render or to offer performance ismaterial, the following circumstances
aresignificant:
(a) theextenttowhichtheinjuredpartywillbedeprivedofthebenefitwhichhereasonablyexpected;
(b) theextenttowhichtheinjuredpartycanbeadequatelycompensatedforthepartofthatbenefitofwhich
hewillbedeprived;
(c) theextenttowhichthepartyfailingtoperformortooffertoperformwillsufferforfeiture;
(d) thelikelihoodthatthepartyfailingtoperformortooffertoperformwillcurehisfailure,takingaccountof
allthecircumstancesincludinganyreasonableassurances;
(e) the extent to which the behavior of the party failing to perform or to offer to perform comports with
standardsofgoodfaithandfairdealing.
242. CircumstancesSignificantinDeterminingWhenRemainingDutiesareDischarged
In determining the time after which a partys uncured material failure to render or to offer performance
dischargestheotherpartysremainingdutiestorenderperformanceundertherulesstatedin237and238,the
followingcircumstancesaresignificant:
(a) thosestatedin241;
(b) theextenttowhichitreasonablyappearstotheinjuredpartythatdelaymaypreventorhinderhimin
makingreasonablesubstitutearrangements;
(c) the extent to which the agreement provides for performance without delay, but a material failure to
performortooffertoperformonastateddaydoesnotofitselfdischargetheotherpartysremaining
dutiesunlessthecircumstances,includingthelanguageoftheagreement,indicatethatperformanceor
anoffertoperformbythatdayisimportant.
243.EffectofaBreachbyNonPerformanceasGivingRisetoaClaimforDamagesforTotal
Breach
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(1) With respect to performances to be exchanged under an exchange of promises, a breach by non
performancegivesrisetoaclaimfordamagesfortotalbreachonlyifitdischargestheinjuredpartysremaining
dutiestorendersuchperformance,otherthanadutytorenderanagreedequivalentunder240.
(2) Except as stated in Subsection (3), a breach by nonperformance accompanied or followed by a
repudiationgivesrisetoaclaimfordamagesfortotalbreach.
(3) Where at the time of the breach the only remaining duties of performance are those of the party in
breach and are for the payment of money in installments not related to one another, his breach by non
performanceastolessthanthewhole,whetherornotaccompaniedorfollowedbyarepudiation,doesnotgive
risetoaclaimfordamagesfortotalbreach.
(4) Inanycaseotherthanthosestatedintheprecedingsubsections,abreachbynonperformancegivesrise
toaclaimfortotalbreachonlyifitsosubstantiallyimpairsthevalueofthecontracttotheinjuredpartyatthe
timeofthebreachthatitisjustinthecircumstancestoallowhimtorecoverdamagesbasedonallhisremaining
rightstoperformance.
TOPIC3.EFFECTOFPROSPECTIVENONPERFORMANCE
250.WhenaStatementoranActisaRepudiation
Arepudiationis
(a) astatementbytheobligortotheobligeeindicatingthattheobligorwillcommitabreachthatwouldof
itselfgivetheobligeeaclaimfordamagesfortotalbreachunder243,or
(b) a voluntary affirmative act which renders the obligor unable or apparently unable to perform without
suchabreach.
251.WhenaFailuretoGiveAssuranceMaybeTreatedasaRepudiation
(1) Wherereasonablegroundsarisetobelievethattheobligorwillcommitabreachbynonperformancethat
would of itself give the obligee a claim for damages for total breach under 243, the obligee may demand
adequateassuranceofdueperformanceandmay,ifreasonable,suspendanyperformanceforwhichhehasnot
alreadyreceivedtheagreedexchangeuntilhereceivessuchassurance.
(2) The obligee may treat as a repudiation the obligors failure to provide within a reasonable time such
assuranceofdueperformanceasisadequateinthecircumstancesoftheparticularcase.
253.EffectofaRepudiationasaBreachandonOtherPartysDuties
(1) Whereanobligorrepudiatesadutybeforehehascommittedabreachbynonperformanceandbeforehe
has received all of the agreed exchange for it, his repudiation alone gives rise to a claim for damages for total
breach.
(2) Whereperformancesaretobeexchangedunderanexchangeofpromises,onepartysrepudiationofa
dutytorenderperformancedischargestheotherpartysremainingdutiestorenderperformance.
256.NullificationofRepudiationorBasisforRepudiation
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(1) Theeffectofastatementasconstitutingarepudiationunder250orthebasisforarepudiationunder
251 is nullified by a retraction of the statement if notification of the retraction comes to the attention of the
injured party before he materially changes his position in reliance on the repudiation or indicates to the other
partythatheconsiderstherepudiationtobefinal.
(2) Theeffectofeventsotherthanastatementasconstitutingarepudiationunder250orthebasisfora
repudiation under 251 is nullified if, to the knowledgeof the injuredparty, those events have ceased to exist
before he materially changes his position in reliance on the repudiation or indicates to the other party that he
considerstherepudiationtobefinal.
Chapter11
IMPRACTICABILITYOFPERFORMANCEANDFRUSTRATIONOFPURPOSE
261.DischargebySuperveningImpracticability
Where, after a contract is made, a partys performance is made impracticable without his fault by the
occurrenceofaneventthenonoccurrenceofwhichwasabasicassumptiononwhichthecontractwasmade,his
dutytorenderthatperformanceisdischarged,unlessthelanguageorthecircumstancesindicatethecontrary.
265.DischargebySuperveningFrustration
Where,afteracontractismade,apartysprincipalpurposeissubstantiallyfrustratedwithouthisfaultbythe
occurrenceofaneventthenonoccurrenceofwhichwasabasicassumptiononwhichthecontractwasmade,his
remaining duties to render performance are discharged, unless the language or the circumstances indicate the
contrary.
266.ExistingImpracticabilityorFrustration
(1) Where,atthetimeacontractismade,apartysperformanceunderitisimpracticablewithouthisfault
because of a fact of which he has no reason to know and the nonexistence of which is a basic assumption on
which the contract is made, no duty to render that performance arises, unless the language or circumstances
indicatethecontrary.
(2) Where,atthetimeacontractismade,apartysprincipalpurposeissubstantiallyfrustratedwithouthis
faultbyafactofwhichhehasnoreasontoknowandthenonexistenceofwhichisabasicassumptiononwhich
the contract is made, no duty of that party to renderperformance arises, unless thelanguage orcircumstances
indicatethecontrary.
272.ReliefIncludingRestitution;SupplyingaTerm
(1) InanycasegovernedbytherulesstatedinthisChapter,eitherpartymayhaveaclaimforreliefincluding
restitutionundertherulesstatedin240and377.
(2) InanycasegovernedbytherulesstatedinthisChapter,ifthoserulestogetherwiththerulesstatedin
Chapter16willnotavoidinjustice,thecourtmaygrantreliefonsuchtermsasjusticerequiresincludingprotection
Page22of30
ofthepartiesrelianceinterests.
Chapter14
CONTRACTBENEFICIARIES
302.IntendedandIncidentalBeneficiaries
(1) Unless otherwise agreed between promisor and promisee, a beneficiary of a promise is an intended
beneficiaryifrecognitionofarighttoperformanceinthebeneficiaryisappropriatetoeffectuatetheintentionof
thepartiesandeither
(a) theperformanceofthepromisewillsatisfyanobligationofthepromiseetopaymoneytothebeneficiary;
or
(b) thecircumstancesindicatethatthepromiseeintendstogivethebeneficiarythebenefitofthepromised
performance.
(2) Anincidentalbeneficiaryisabeneficiarywhoisnotanintendedbeneficiary.
309.DefensesAgainsttheBeneficiary
(1) A promise creates no duty to a beneficiary unless a contract is formed between the promisor and the
promisee;andifacontractisvoidableorunenforceableatthetimeofitsformationtherightofanybeneficiaryis
subjecttotheinfirmity.
(2) Ifacontractceasestobebindinginwholeorinpartbecauseofimpossibility,illegality,nonoccurrenceof
a condition, or present or prospective failure of performance, the right of any beneficiary is to that extent
dischargedormodified.
(3) ExceptasstatedinSubsections(1)and(2)andin311orasprovidedbythecontract,therightofany
beneficiaryagainstthepromisorisnotsubjecttothepromisorsclaimsordefensesagainstthepromiseeortothe
promiseesclaimsordefensesagainstthebeneficiary.
(4) Abeneficiarysrightagainstthepromisorissubjecttoanyclaimordefensearisingfromhisownconduct
oragreement.
311.VariationofaDutytoaBeneficiary
(1) Discharge or modification of a duty to an intended beneficiary by conduct of the promisee or by a

subsequentagreementbetweenpromisorandpromiseeisineffectiveifatermofthepromisecreatingthedutyso
provides.
(2) Intheabsenceofsuchaterm,thepromisorandpromiseeretainpowertodischargeormodifytheduty
bysubsequentagreement.
(3) Such a power terminates when the beneficiary, before he receives notification of the discharge or
modification,materiallychangeshispositioninjustifiablerelianceonthepromiseorbringssuitonitormanifests
assenttoitattherequestofthepromisororpromisee.
(4) Ifthepromiseereceivesconsiderationforanattempteddischargeormodificationofthepromisorsduty
whichisineffectiveagainstthebeneficiary,thebeneficiarycanassertarighttotheconsiderationsoreceived.The
promisorsdutyisdischargedtotheextentoftheamountreceivedbythebeneficiary.
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313.GovernmentContracts
(1) TherulesstatedinthisChapterapplytocontractswithagovernmentorgovernmentalagencyexceptto
theextentthatapplicationwouldcontravenethepolicyofthelawauthorizingthecontractorprescribingremedies
foritsbreach.
(2) In particular, a promisor who contracts with a government or governmental agency to do an act for or
render a service to the public is not subject to contractual liability to a member of the public for consequential
damagesresultingfromperformanceorfailuretoperformunless
(a) thetermsofthepromiseprovideforsuchliability;or
(b) thepromiseeissubjecttoliabilitytothememberofthepublicforthedamagesandadirectactionagainst
thepromisorisconsistentwiththetermsofthecontractandwiththepolicyofthelawauthorizingthe
contractandprescribingremediesforitsbreach.
Chapter15
ASSIGNMENTANDDELEGATION
TOPIC1.WHATCANBEASSIGNEDORDELEGATED
317. AssignmentofaRight
(1) Anassignmentofarightisamanifestationoftheassignorsintentiontotransferitbyvirtueofwhichthe
assignorsrighttoperformancebytheobligorisextinguishedinwholeorinpartandtheassigneeacquiresaright
tosuchperformance.
(2) Acontractualrightcanbeassignedunless
(a) thesubstitutionofarightoftheassigneefortherightoftheassignorwouldmateriallychangethedutyof
theobligor,ormateriallyincreasetheburdenorriskimposedonhimbyhiscontract,ormateriallyimpair
hischanceofobtainingreturnperformance,ormateriallyreduceitsvaluetohim,or
(b) theassignmentisforbiddenbystatuteorisotherwiseinoperativeongroundsofpublicpolicy,or
(c) assignmentisvalidlyprecludedbycontract.
318.DelegationofPerformanceofDuty
(1) Anobligorcanproperlydelegatetheperformanceofhisdutytoanotherunlessthedelegationiscontrary
topublicpolicyorthetermsofhispromise.
(2) Unlessotherwiseagreed,apromiserequiresperformancebyaparticularpersononlytotheextentthat
theobligeehasasubstantialinterestinhavingthatpersonperformorcontroltheactspromised.
(3) Unless the obligee agrees otherwise, neither delegation of performance nor a contract to assume the
dutymadewiththeobligorbythepersondelegateddischargesanydutyorliabilityofthedelegatingobligor.
321.AssignmentofFutureRights
(1) Exceptasotherwiseprovidedbystatute,anassignmentofarighttopaymentexpectedtoariseoutofan
Page24of30
existingemploymentorothercontinuingbusinessrelationshipiseffectiveinthesamewayasanassignmentofan
existingright.
(2)ExceptasotherwiseprovidedbystatuteandasstatedinSubsection(1),apurportedassignmentofaright
expectedtoariseunderacontractnotinexistenceoperatesonlyasapromisetoassigntherightwhenitarises
andasapowertoenforceit.
322. ContractualProhibitionofAssignment
(1) Unlessthecircumstancesindicatethecontrary,acontracttermprohibitingassignmentofthecontract
barsonlythedelegationtoanassigneeoftheperformancebytheassignorofadutyorcondition.
(2) A contract term prohibiting assignment of rights under the contract, unless a different intention is
manifested.
(a) doesnotforbidassignmentofarighttodamagesforbreachofthewholecontractorarightarisingoutof
theassignorsdueperformanceofhisentireobligation;
(b) givestheobligorarighttodamagesforbreachofthetermsforbiddingassignmentbutdoesnotrender
theassignmentineffective;
(c) is for the benefit of the obligor, and does not prevent the assignee from acquiring rights against the
assignorortheobligorfrom~discharginghisdutyasiftherewerenosuchprohibition.
TOPIC2.MODEOFASSIGNMENTORDELEGATION
328.InterpretationofWordsofAssignment;EffectofAcceptanceofAssignment
(1) Unless the language or the circumstances indicate the contrary, as in an assignment for security, an
assignmentofthecontractorofallmyrightsunderthecontractoranassignmentinsimilargeneraltermsis
anassignmentoftheassignorsrightsandadelegationofhisunperformeddutiesunderthecontract.
(2)Unlessthelanguageorthecircumstancesindicatethecontrary,theacceptancebyanassigneeofsuchan
assignmentoperatesasapromisetotheassignortoperformtheassignorsunperformedduties,andtheobligorof
theassignedrightsisanintendedbeneficiaryofthepromise.
Caveat: The Institute expresses no opinion as to whether the rule stated in Subsection (2) applies to an
assignmentbyapurchaserofhisrightsunderacontractforthesaleofland.
TOPIC3.EFFECTBETWEENASSIGNORANDASSIGNEE
332.RevocabilityofGratuitousAssignments
(1) Unlessacontraryintentionismanifested,agratuitousassignmentisirrevocableif
(a) theassignmentisinawritingeithersignedorundersealthatisdeliveredbytheassignor;or
(b) theassignmentisaccompaniedbydeliveryofawritingofatypecustomarilyacceptedasasymboloras
evidenceoftherightassigned.
(2) Except as stated in this Section, a gratuitous assignment is revocable and the right of the assignee is
terminatedbytheassignorsdeathorincapacity,byasubsequentassignmentbytheassignor,orbynotification
fromtheassignorreceivedbytheassigneeorbytheobligor.
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(3) A gratuitous assignment ceases to be revocable to the extent that before the assignees right is
terminatedheobtains
(a) paymentorsatisfactionoftheobligation,or
(b) judgmentagainsttheobligor,or
(c) anewcontractoftheobligorbynovation.
(4) A gratuitous assignment is irrevocable to the extent necessary to avoid injustice where the assignor
shouldreasonablyexpecttheassignmenttoinduceactionorforbearancebytheassigneeorasubassigneeand
theassignmentdoesinducesuchactionorforbearance.
(5) Anassignmentisgratuitousunlessitisgivenortaken
(a) inexchangeforaperformanceorreturnpromisethatwouldbeconsiderationforapromise;or
(b) assecurityfororintotalorpartialsatisfactionofapreexistingdebtorotherobligation.
333.WarrantiesofanAssignor
(1) Unless a contrary intention is manifested, one who assigns or purports to assign a right by assignment
undersealorforvaluewarrantstotheassignee
(a) thathewilldonothingtodefeatorimpairthevalueoftheassignmentandhasnoknowledgeofanyfact
whichwoulddoso;
(b) that the right, as assigned, actually exists and is subject to no limitations or defenses good against the
assignorotherthanthosestatedorapparentatthetimeoftheassignment;
(c) thatanywritingevidencingtherightwhichisdeliveredtotheassigneeorexhibitedtohimtoinducehim
toaccepttheassignmentisgenuineandwhatitpurportstobe.
(2)Anassignmentdoesnotofitselfoperateasawarrantythattheobligorissolventorthathewillperformhis
obligation.
(3)Anassignorisboundbyaffirmationsandpromisestotheassigneewithreferencetotherightassignedin
thesamewayandtothesameextentthatonewhotransfersgoodsisboundinlikecircumstances.
(4) An assignment of a right to a subassignee does not operate as an assignment of the assignees rights
underhisassignorswarrantiesunlessanintentionismanifestedtoassigntherightsunderthewarranties.
TOPIC4.EFFECTONTHEOBLIGORSDUTY
336.DefensesAgainstanAssignee
(1) By an assignment the assignee acquires a right against the obiigor only to the extent that the obligor is
underadutytotheassignor;andiftherightoftheassignorwouldbevoidablebytheobligororunenforceable
againsthimifnoassignmenthadbeenmade,therightoftheassigneeissubjecttotheinfirmity.
(2) Therightofanassigneeissubjecttoanydefenseorclaimoftheobligorwhichaccruesbeforetheobligor
receivesnotificationoftheassignment,butnottodefensesorclaimswhichaccruethereafterexceptasstatedin
thisSectionorasprovidedbystatute.
(3) Wheretherightofanassignorissubjecttodischargeormodificationinwholeorinpartbyimpossibility,
illegality,nonoccurrenceofacondition,orpresentorprospectivefailureofperformancebyanobligee,theright
oftheassigneeistothatextentsubjecttodischargeormodificationevenaftertheobligorreceivesnotificationof
theassignment.
(4) An assignees right against the obligor is subject to anydefense or claim arising from his conduct or to
whichhewassubjectasapartyorapriorassigneebecausehehadnotice.
Page26of30
338.DischargeofanObligorafterAssignment
(1) Except as stated in this Section, notwithstanding an assignment, the assignor retains his power to
dischargeormodifythedutyoftheobligortotheextentthattheobligorperformsorotherwisegivesvalueuntil
but not after the obligor receives notification that the right has been assigned and that performance is to be
renderedtotheassignee.
(2) So far asan assigned right is conditional on the performanceof a return promise, and notwithstanding
notification of the assignment, any modification of or substitution for the contract made by the assignor and
obligor in good faith and in accordance with reasonable commercial standards is effective against the assignee.
Theassigneeacquirescorrespondingrightsunderthemodifiedorsubstitutedcontract.
(3) Notwithstandingadefectintherightofanassignee,hehasthesamepowerhisassignorhadtodischarge
ormodifythedutyoftheobligortotheextentthattheobligorgivesvalueorotherwisechangeshispositionin
goodfaithandwithoutknowledgeorreasontoknowofthedefect.
(4) Wherethereisawritingofatypecustomarilyacceptedasasymbolorasevidenceoftherightassigned,a
dischargeormodificationisnoteffective
(a) against the owner or an assignor having a power of avoidance, unless given by him or by a person in
possessionofthewritingwithhisconsentandanynecessaryendorsementorassignment;
(b) against a subsequent assignee who takes possession of the writing and gives value in good faith and
withoutknowledgeorreasontoknowofthedischargeormodification.
Chapter16
REMEDIES
TOPIC2.ENFORCEMENTBYAWARDOFDAMAGES
317.MeasureofDamagesinGeneral
Subject to the limitations stated in 35053, the injured party has a right to damages based on his
expectationinterestasmeasuredby
(a) thelossinthevaluetohimoftheotherpartysperformancecausedbyitsfailureordeficiency,plus
(b) anyotherloss,includingincidentalorconsequentialloss,causedbythebreach,less
(c) anycostorotherlossthathehasavoidedbynothavingtoperform.
348.AlternativestoLossinValueofPerformance
(1) If a breach delays the use of property and the loss in value to the injured party is not proved with
reasonable certainty, he may recover damages based on the rental value of the property or on interest on the
valueoftheproperty.
(2) Ifabreachresultsindefectiveorunfinishedconstructionandthelossinvaluetotheinjuredpartyisnot
provedwithsufficientcertainty,hemayrecoverdamagesbasedon
(a) thediminutioninthemarketpriceofthepropertycausedbythebreach,or
(b) the reasonable cost of completing performance or of remedying the defects if that cost is not clearly
disproportionatetotheprobablelossinvaluetohim.
(3) Ifabreachisofapromiseconditionedonafortuitouseventanditisuncertainwhethertheeventwould
have occurred had there been no breach, the injured party may recover damages based on the value of the
Page27of30
conditionalrightatthetimeofbreach.
349.DamagesBasedonRelianceInterest
Asanalternativetothemeasureofdamagesstatedin347,theinjuredpartyhasarighttodamagesbased
onhisrelianceinterest,includingexpendituresmadeinpreparationforperformanceorinperformance,lessany
lossthatthepartyinbreachcanprovewithreasonablecertaintytheinjuredpartywouldhavesufferedhadthe
contractbeenperformed.
350.AvoidabilityasaLimitationonDamages
(1) ExceptasstatedinSubsection(2),damagesarenotrecoverableforlossthattheinjuredpartycouldhave
avoidedwithoutunduerisk,burdenorhumiliation.
(2) TheinjuredpartyisnotprecludedfromrecoverybytherulestatedinSubsection(1)totheextentthathe
hasmadereasonablebutunsuccessfuleffortstoavoidloss.
351.UnforeseeabilityandRelatedLimitationsonDamages
(1) Damages are not recoverable for loss that the party in breach did not have reason to foresee as a
probableresultofthebreachwhenthecontractwasmade.
(2) Lossmaybeforeseeableasaprobableresultofabreachbecauseitfollowsfromthebreach
(a) intheordinarycourseofevents,or
(b) asaresultofspecialcircumstancesbeyondtheordinarycourseofevents,thatthepartyinbreachhad
reasontoknow.
(3) A court may limit damages for foreseeable loss by excluding recovery for loss of profits, by allowing
recoveryonlyforlossincurredinreliance,orotherwiseifitconcludesthatinthecircumstancesjusticesorequires
inordertoavoiddisproportionatecompensation.
352.UncertaintyasaLimitationonDamages
Damages are not recoverable for loss beyond an amount that the evidence permits to be established with
reasonablecertainty.
353.LossDuetoEmotionalDisturbance
Recovery for emotional disturbance will be excluded unless the breach also caused bodily harm or the
contractorthebreachisofsuchakindthatseriousemotionaldisturbancewasaparticularlylikelyresult.
335.PunitiveDamages
Punitivedamagesarenotrecoverableforabreachofcontractunlesstheconductconstitutingthebreachis
Page28of30
alsoatortforwhichpunitivedamagesarerecoverable.
TOPIC4.RESTITUTION
371.MeasureofRestitutionInterest
Ifasumofmoneyisawardedtoprotectapartysrestitutioninterest,itmayasjusticerequiresbemeasured
byeither
(a) thereasonablevaluetotheotherpartyofwhathereceivedintermsofwhatitwouldhavecosthimto
obtainitfromapersonintheclaimantsposition,or
(b) the extent to which the other partys property has been increased in value or his other interests
advanced.
373.RestitutionWhenOtherPartyisinBreach
(1) SubjecttotherulestatedinSubsection(2),onabreachbynonperformancethatgivesrisetoaclaimfor
damagesfortotalbreachoronarepudiation,theinjuredpartyisentitledtorestitutionforanybenefitthathehas
conferredontheotherpartybywayofpartperformanceorreliance.
(2) Theinjuredpartyhasnorighttorestitutionifhehasperformedallofhisdutiesunderthecontractandno
performancebytheotherpartyremainsdueotherthanpaymentofadefinitesumofmoneyforthatperformance.
371.RestitutioninFavorofPartyinBreach
(1) SubjecttotherulestatedinSubsection(2),ifapartyjustifiablyrefusestoperformonthegroundthathis
remainingdutiesofperformancehavebeendischargedbytheotherpartysbreach,thepartyinbreachisentitled
torestitutionforanybenefitthathehasconferredbywayofpartperformanceorrelianceinexcessoftheloss
thathehascausedbyhisownbreach.
(2) Totheextentthat,underthemanifestedassentoftheparties,apartysperformanceistoberetainedin
thecaseofbreach,thatpartyisnotentitledtorestitutionifthevalueoftheperformanceasliquidateddamagesis
reasonableinthelightoftheanticipatedoractuallosscausedbythebreachandthedifficultiesofproofofloss.
376.RestitutionWhenContractisVoidable
A party who has avoided a contract on the ground of lack of capacity, mistake, misrepresentation, duress,
undueinfluenceorabuseofafiduciaryrelationisentitledtorestitutionforanybenefitthathehasconferredon
theotherpartybywayofpartperformanceorreliance.
377. RestitutioninCasesofImpracticability,Frustration,NonOccurrenceofConditionor
DisclaimerbyBeneficiary
A party whose duty of performance does not arise or is discharged as a result of impracticability of
Page29of30
performance, frustration of purpose, nonoccurrence of a condition or disclaimer by a beneficiary is entitled to
restitutionforanybenefitthathehasconferredontheotherpartybywayofpartperformanceorreliance.
Page30of30

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RESTATEMENT(SECOND)OFCONTRACTS

Agreements andnegotiations prior to orcontemporaneous withthe adoption of a writing are admissible in

(1) Discharge or modification of a duty to an intended beneficiary by conduct of the promisee or by a

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