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Corbin on Contracts

Copyright 2007, Matthew Bender & Company, Inc., a member of the LexisNexis Group.

PART I FORMATION OF CONTRACTS

TOPIC A OFFER AND ACCEPTANCE

Supp. To CHAPTER 2 OFFERS: CREATION AND DURATION OF POWER OF ACCEPTANCE

1-2 Corbin on Contracts Supp. to § 2.29

Supp. to § 2.29 Revocation After Part Performance of Tender by the Offeree

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(A) The following case cites this section:

(1) McGrath v. Rhode Island Retirement Bd., 88 F.3d 12 (1st Cir. 1996) (applying the Contracts Clause, U.S. Const.). Rhode Island maintained a pension plan for municipal and state employees that allowed employees to purchase retirement credits for years served in the U.S. military. These credits accelerated an employee's pension vesting date and enlarged the basis on which pension payments would be calculated. From its inception, the plan also contained a clause permitting the state legislature to alter the terms of participation or cancel the plan for employees not yet retired. A covered employee purchased credits to accelerate his vesting date, but before that date, the state legislature eliminated the acceleration provision of the plan.

The employee argued that the legislative change violated the Contracts Clause of the U.S. Constitution, which applies to contracts between states and private parties. Citing this section of Corbin, the court treated the plan as an offer for a unilateral contract with an express provision permitting the offeror to revoke prior to acceptance. Acceptance would occur when the employee fulfilled the service requirements. Before then the state as offeror could revoke or modify, although afterwards it could not (despite its express power). Here the employer changed the terms before acceptance was effective, and therefore whatever rights the employee acquired by purchasing retirement credits were subject to the state's reservation of authority to alter the plan. Accordingly, no contractual right to acceleration had been created and no obligation protected by the Contract Clause had been impaired.

Supplement to Notes in Main Volume

1. Pa.- Abbott v. Schnader, Harrison, Segal & Lewis, LLP, 805 A.2d 547 (Pa. Super. Ct. 2002) . See full discussion of this case at § 3.9.

3. Eaton v. Eaton, 2005 Del. Ch. LEXIS 202 . Where a father executed a will devising his home to one of three sons but later offered to change the will and devise the property in equal shares to all three sons if they would make valuable improvements on the home, the sons made significant improvements but did not complete them when the father died, leaving the original will unmodified. Nonetheless, the sons proceeded to complete the improvements. The court found that the father's offer could only be accepted by performance. Though recognizing that the Restatement (Second) of Contracts no longer employs the term ''unilateral'' to refer to such a contract, the court deemed the use of the term ''efficient'' for its analysis. The court held that under § 45 of the Restatement (Second) of Contracts, the beginning of the sons' performance created an option contract conditioned on their completion of the performance within a reasonable time. The completion of the performance occurred, thereby concluding the contract which was specifically enforceable. This case is fully discussed at § 2.34 of this supplement.