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§ 1 Contract Defined

A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.

COMMENTS & ILLUSTRATIONS: Comment:
a. Other meanings. The word "contract" is often used with meanings different from that given here. It is sometimes used as a synonym for "agreement" or "bargain." It may refer to legally inef-fective agreements, or to wholly executed transactions such as conveyances; it may refer indiffer-ently to the acts of the parties, to a document which evidences those acts, or to the resulting legal relations. In a statute the word may be given still other meanings by context or explicit definition. As is indicated in the Introductory Note to the Restatement of this Subject, definition in terms of "promise" excludes wholly executed transactions in which no promises are made; such a definition also excludes analogous obligations imposed by law rather than by virtue of a promise.
b. Act and resulting legal relations. As the term is used in the Restatement of this Subject, "contract," like "promise," denotes the act or acts of promising. But, unlike the term "promise," "contract" applies only to those acts which have legal effect as stated in the definition given. Thus the word "contract" is commonly and quite properly also used to refer to the resulting legal obliga-tion, or to the entire resulting complex of legal relations. Compare Uniform Commercial Code § 1-201(11), defining "contract" in terms of "the total legal obligation which results from the parties' agreement."
c. Set of promises. A contract may consist of a single promise by one person to another, or of mutual promises by two persons to one another; or there may be, indeed, any number of persons or any number of promises. One person may make several promises to one person or to several per-sons, or several persons may join in making promises to one or more persons. To constitute a "set," promises need not be made simultaneously; it is enough that several promises are regarded by the parties as constituting a single contract, or are so related in subject matter and performance that they may be considered and enforced together by a court.
d. Operative acts other than promise. The definition does not attempt to state what acts are es-sential to create a legal duty to perform a promise. In many situations other acts in addition to the making of a promise are essential, and the formation of the contract is not completed until those acts take place. For example, an act may be done as the consideration for a contract (see § 71), and may be essential to the creation of a legal duty to perform the promise (see § 17). Similarly, delivery is required for the formation of a contract under seal (see § 95). Such acts are not part of the promise, and are not specifically included in the brief definition of contract adopted here.
e. Remedies. The legal remedies available when a promise is broken are of various kinds. Di-rect remedies of damages, restitution and specific performance are the subject of Chapter 16. Whether or not such direct remedies are available, the law may recognize the existence of legal duty in some other way such as recognizing or denying a right, privilege or power created or terminated by the promise.
Illustration:
1. A orally agrees to sell land to B; B orally agrees to buy the land and pays $ 1000 to A. The agreement is unenforceable under the Statute of Frauds. B's right to restitution of the $ 1000, how-ever, is governed by the same rules as if the agreement were enforceable. B has a right to recover the $ 1000 paid if A refuses to convey the land, but not if A is ready and willing to convey. See § 140 and the provisions on restitution in § 375. By virtue of this indirect recognition of the duty to convey, the agreement is a contract.
f. Varieties of contracts. The term contract is generic. As commonly used, and as here defined, it includes varieties described as voidable, unenforceable, formal, informal, express, implied (see Comment a to § 4), unilateral, bilateral. In these varieties neither the operative acts of the parties nor the resulting relations are identical.
g. "Binding promise." A promise which is a contract is said to be "binding." As the term "con-tract" is defined, a statement that a promise is binding does not necessarily mean that any particular remedy is available in the event of breach, or indeed that any remedy is available. Because of the limitations inherent in stating or illustrating rules for the legal relations resulting from promises, it frequently becomes necessary to indicate that a legal duty to perform arises from the facts stated, assuming the absence of other facts. In order to avoid the connotation that the duty stated exists un-der all circumstances, the word "binding" or a statement that the promisor is "bound" is used to in-dicate that the duty arises if the promisor has full capacity, if there is no illegality or fraud in the transaction, if the duty has not been discharged, and if there are no other similar facts which would defeat the prima facie duty which is stated.

REPORTERS NOTES: This Section carries forward former § 1. See 1 Williston, Contracts § 1 (3d ed. 1957); 1 Corbin, Contracts § 3 (1963). For other important discussions of what contracts are, see Gilmore, The Death of Contract (1974); Friedman, Contract Law in America: A Social and Economic Case Study (1965); Symposium, The Relevance of Contract Theory, 1967 Wis. L. Rev. 303; Macauley, Contract Law and Contract Research, 20 J. Legal Ed. 452 (1968); Farnsworth, The Past of Promise: An Historical Introduction to Contract, 69 Colum. L. Rev. 576 (1969); Macneil, The Many Futures of Contract, 47 So. Cal. L. Rev. 691 (1974); Macneil, Restatement, Second, of Contracts and Presentiation, 60 Va. L. Rev. 589 (1974); Atiyah, Contracts, Promises and the Law of Obligations, 94 L. Q. Rev. 193 (1978); see also Leff, Contract as Thing, 19 Amer. U. L. Rev. 131 (1970).
Comments a and b. For a concise discussion of what constitutes a contract, how it can be cre-ated and its relation to tort actions for fraud, see Steinberg v. Chicago Medical School, 69 Ill.2d 320, 371 N.E.2d 634 (1977).
Comment e. Illustration 1 is new.
Comment f. Section 12 of the original Restatement defined unilateral and bilateral contracts. It has not been carried forward because of doubt as to the utility of the distinction, often treated as fundamental, between the two types. As defined in the original Restatement, "unilateral contract" included three quite different types of transaction: (1) the promise which does not contemplate a bargain, such as the promise under seal to make a gift, (2) certain option contracts, such as the op-tion under seal (see §§ 25, 45), and (3) the bargain completed on one side, such as the loan which is to be repaid. This grouping of unlike transactions was productive of confusion.
Moreover, as to bargains, the distinction tends to suggest, erroneously, that the obligation to re-pay a loan is somehow different if the actual delivery of the money was preceded by an advance commitment from the obligation resulting from a simultaneous loan and commitment. It also causes confusion in cases where performance is complete on one side except for an incidental or collateral promise, as where an offer to buy goods is accepted by shipment and a warranty is im-plied. Finally, the effect of the distinction has been to exaggerate the importance of the type of bar-gain in which one party begins performance without making any commitment, as in the classic classroom case of the promise to pay a reward for climbing a flagpole.
The principal value of the distinction has been the emphasis it has given to the fact that a prom-ise is often binding on the promisor even though the promisee is not bound by any promise. This value is retained in § 25 on option contracts. But the terms unilateral and bilateral are generally avoided in this Restatement.

CROSS REFERENCES: ALR Annotations:
What constitutes a contract for sale under uniform commercial code § 2-314. 78 A.L.R.3d 696.