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5. In an action by the lender against the father's estate for $1,000 plus accrued interest, which of the following is true regarding the father's promise to pay?
Assume that the borrower's entire $1,000 debt is due and that she has failed to repay any part of it.
The borrower did not pay the installments due on October 31, November 30, or December 31, and has informed the lender that she will be unable to make repayments in the foreseeable future.
A borrower asked a lender to lend her $1,000. The lender replied that he would do so only if the borrower's father would guarantee the loan. At the borrower's request the father mailed a signed letter to the lender: «If you lend $1,000 to my daughter, I will repay it if she doesn't.» On September 15, the lender having read the father's letter, lent $1,000 to the borrower, which the borrower agreed to repay in installments of $100 plus accrued interest on the last day of each month beginning October 31. The father died on September 16. Later that same day, unaware of the father's death, the lender mailed a letter to the father advising that he had made the $1,000 loan to the borrower on September 15.
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An acceptance is the offeree's manifestation of assent to the terms of the offer, made in a matter invited or required by the offer. The offeror is the master of his offer, which means he may prescribe the method by which it may be accepted.
Most offers propose an exchange of promises. However, in some instances, the offer will propose an exchange of the offeror's promise for the offeree's act. A unilateral contract is a type of contract in which only one party promises to do something and the other party is free to act or not act as he wishes. When an offer proposes that the offeree accept by performing an act rather than by making a return promise, this is an offer for a unilateral contract.
D is correct. A unilateral contract is a contract created by an offer that can only be accepted by performance. Here, the father's letter could only be accepted by the lender lending $1,000 to the borrower. Generally, the offeree is not required to give the offeror notice that he has begun the requested performance, but is required to notify the offeror within a reasonable time after performance has been completed. Therefore, when the lender made the loan to the borrower on September 15, the contract was effectively accepted even if the father had not yet been notified. Thus, the father's death on September 16 does nothing to render the promise made in his letter to the lender ineffective.
A is incorrect. In order to constitute consideration, there must be a bargained-for-exchange between the parties and a benefit to the promisor or detriment to the promisee. Here, the father wanted the lender to lend the $1,000 to his daughter. The loan was to his benefit. Therefore, there was consideration.
B is incorrect. The father died on September 16, but the lender accepted the father's offer on September 15, when he lent $1,000 to the borrower.
C is incorrect. A majority of courts hold that when an offer looks to be a unilateral contract, the offeree must give reasonably prompt notice of his acceptance after he has done the requested act. Here, the lender provided notice of the loan to the father one day after he provided the loan to the borrower. Therefore, the lender fulfilled his notice requirement, even though the father died without knowing that his offer had been accepted.