Summary
Section 17 establishes that the formation of a contract generally requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration. This section codifies the traditional bargain theory of contract formation that dominates American contract law.
The section recognizes two essential elements: mutual assent (typically manifested through offer and acceptance) and consideration (a bargained-for exchange of value). Without both elements, no contract is formed under traditional principles, though the Restatement acknowledges exceptions in subsequent sections.
Subsection (2) importantly notes that a contract may be formed under special rules applicable to formal contracts or under the rules stated in §§ 82-94, which cover promises enforceable without consideration, including promissory estoppel.
Key Elements
- 1Manifestation of mutual assent to the exchange
- 2Consideration as a bargained-for exchange
- 3Both elements are generally required for formation
- 4Exceptions exist for formal contracts and promises enforceable without consideration
- 5Assent is judged by objective manifestation, not subjective intent
Practical Application
Section 17 provides the analytical framework courts use to assess contract formation. In business disputes, courts apply this section to determine whether the parties’ communications constituted an offer and acceptance supported by consideration. It is particularly important in cases involving preliminary negotiations, where one party claims a contract was formed and the other denies it.
Exam Relevance
This is the starting framework for any contracts essay. When analyzing whether a contract was formed, begin with § 17: Was there mutual assent? Was there consideration? Only after establishing that one or both elements may be absent should you turn to alternative theories like promissory estoppel under § 90.