Restat 2d of Contracts, § 27

• Restatement of the Law, Second, Contracts
• Chapter 3- Formation of Contracts -- Mutual Assent
• Topic 3- Making of Offers
• § 27 Existence of Contract Where Written Memorial Is Contemplated

Manifestations of assent that are in themselves sufficient to conclude a contract will not be prevented from so operating by the fact that the parties also manifest an intention to prepare and adopt a written memorial thereof; but the circumstances may show that the agreements are preliminary negotiations.

Comment:

a.  Parties who plan to make a final written instrument as the expression of their contract necessarily discuss the proposed terms of the contract before they enter into it and often, before the final writing is made, agree upon all the terms which they plan to incorporate therein. This they may do orally or by exchange of several writings. It is possible thus to make a contract the terms of which include an obligation to execute subsequently a final writing which shall contain certain provisions. If parties have definitely agreed that they will do so, and that the final writing shall contain these provisions and no others, they have then concluded the contract.

b.  On the other hand, if either party knows or has reason to know that the other party regards the agreement as incomplete and intends that no obligation shall exist until other terms are assented to or until the whole has been reduced to another written form, the preliminary negotiations and agreements do not constitute a contract.

c.  Among the circumstances which may be helpful in determining whether a contract has been concluded are the following: the extent to which express agreement has been reached on all the terms to be included, whether the contract is of a type usually put in writing, whether it needs a formal writing for its full expression, whether it has few or many details, whether the amount involved is large or small, whether it is a common or unusual contract, whether a standard form of contract is widely used in similar transactions, and whether either party takes any action in preparation for performance during the negotiations. Such circumstances may be shown by oral testimony or by correspondence or other preliminary or partially complete writings.

d.  Even though a binding contract is made before a contemplated written memorial is prepared and adopted, the subsequent written document may make a binding modification of the terms previously agreed to.

This Section is based on former § 26. See 1 Williston, Contracts § 28 (3d ed. 1957); 1 Corbin, Contracts § 31 (1963 & Supp. 1980).

Comment c is based on Mississippi & Dominion S.S. Co. v. Swift, 86 Me. 248, 259, 29 A. 1063, 1067 (1894). See Llewellyn, On Our Case-Law of Contract: Offer and Acceptance, I, 48 Yale L.J. 1, 14 (1938).

Digest System Key Numbers:

Contracts 32