76 Of 174 documents

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 § 2.33

Supp. to § 2.33 When a Standing Offer of a Series of Separate Contracts Is Irrevocable

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(A) The following case cites this section:

(1) Bank of Am. v. Jarczyk, 268 B.R. 17 (W.D.N.Y. 2001) . The plaintiff bank sought to have the defendant credit cardholder's debt declared nondischargeable in bankruptcy due to fraud. Courts have struggled in applying the traditional elements of fraud in credit card transactions because, at the time the credit card debt is incurred, there is typically no express representation to a credit card issuer such as the plaintiff. The debtor simply presents the card to the merchant, who obtains approval for the transaction from the issuer. The majority of courts have developed an ''implied representation'' theory which holds that each time a cardholder uses the card, he impliedly represents to the issuing bank that he intends to repay the debt incurred. The bankruptcy court rejected this theory, apparently on the assumption that issuance of the credit card forms a contract between the issuer and cardholder. Thus, any representations concerning an intent to repay would be made at the time the card was issued when the bankruptcy court deemed the contract to be formed. The court disagreed with this assumption since the mere issuance of a credit card does not create a binding contract. Relying upon Corbin at § 2.33, the court held that issuance of the card is an offer that can be withdrawn at any time. Use of the card is an acceptance of the offer in accordance with its terms. Thus, the offer created by issuance contemplates a series of unilateral contracts that are formed each time the cardholder uses the card. The fraud issue, therefore, is whether the cardholder had no intention of repaying the debt when he used the card. While the evidence was insufficient to find any such intention by the defendant, the plaintiff complained that it had insufficient opportunity to discover such evidence based on the summary judgment ruling that followed from the bankruptcy court's refusal to consider the implied representation theory. The court reversed the summary judgment and remanded to the bankruptcy court.

77 Of 174 documents

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 § 2.34

Supp. to § 2.34 Effect of Death or Insanity on Power of Acceptance

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Supplement to Notes in Main Volume

2. O'Neil v. Bunge Corp., 365 F.3d 820 (9th Cir. 2004) . Where the decedent died before signing a settlement agreement for a lump sum payment from his former employer in lieu of biweekly payments, the court cited the Restatement (Second) of Contracts, § 48 in holding that the decedent's brother and representative of his estate did not have a power of acceptance since a party's power of acceptance terminates when the offeree or offeror dies or is deprived of the capacity to enter into a contract. This case is fully discussed in § 2.9 of this supplement.

6. Eaton v. Eaton, 2005 Del. Ch. LEXIS 202 . A father executed a will devising his home to one of his three sons. Shortly thereafter, the father orally offered to devise the home to the three sons in equal shares if valuable improvements were made on the home. The father signed an application for a building permit and the sons pursued significant improvements to the home. Before the improvements were completed, the father died. His original will was unmodified. The plaintiffs (the two sons not named in the will) completed the improvements after the father's death. Though the third son (the defendant who was named in the will) had stated that he would honor his father's promise to all three sons, he refused to do so. The plaintiffs asserted their claims against the estate. The defendant, in his capacity as executor of the estate, rejected the plaintiffs' claims. The plaintiffs claimed that they had a contract with the father and sought specific performance of that contract as well as other claims that the court did not address because of its analysis of the specific performance claim. The court noted that Delaware law recognizes a contract to make a will, but the enforcement of such contracts requires clear and convincing evidence. Moreover, the plaintiffs also faced the burden of proving an oral contract for specific performance of property absent a written will. The court held that the evidence of the plaintiff's performance was sufficiently clear and convincing to allow the remedy of specific performance. Having satisfied these preliminary issues, the court confronted the issues of contract formation where an offer such as that made by the father can only be accepted by performance. Employing the analysis of § 45 of the Restatement (Second) of Contracts, the court found that the beginning of performance by the improvement work on the house created an option contract to allow the offerees to complete the performance within a reasonable time. Since the old common law rule that death revokes an offer (Restatement (Second) of Contracts, § 48) continues to prevail, the court noted that, absent an exception to that rule, the father's death would have revoked the offer since he could not be bound by any reciprocal duty until the act of acceptance (completion of the improvements) occurred. Since, however, an option contract was created upon the beginning of performance in response to an offer that can only be accepted by performance, such an option contract makes the offer irrevocable, even with respect to the death of the offeror. The death of the offeror did not revoke the offer herein since, as suggested in the Restatement (Second) of Contracts, § 37, the power of acceptance under an option contract is not terminated by death or other acts or events that would normally revoke an offer. The court held that the plaintiffs were entitled to specific performance. It directed the defendant to convey title to the property in fee simple to each of the plaintiffs and the defendant in equal shares as tenants in common. This case is also discussed at § 2.29 of this supplement.