What is the effect of an offeree beginning to perform in response to an offer?

Hypo 1: Sam is a house painter. One day he is painting a house in Bob's neighborhood. Bob yells out of his window, "Hey! Sam! I'll pay you $100 if you paint my house!" Hours later, Bob walks out of his house to see Sam setting up his materials and painting a small portion of the house. Bob says, "Never mind, I wasn't serious." Result: Whether Bob was joking or not, his statement would likely to have been reasonably believed to be an offer by Sam. When Sam began to paint Bob's house, it was implicit that he accepted Bob's offer. At this point, you have Bob's promise to pay $100 paired with Sam's promise to paint Bob's house. A valid bilateral contract exists.

Now hold up -- you may be wondering, "Why isn't this a unilateral contract?" After all, Bob wanted his house painted, and his house isn't yet painted. Perhaps Bob was expecting full performance in order to actually pay, and it was never his intention to engage in a bilateral contract. First off, if that is what you were thinking: good job. That kind of argument plays well on exams to earn extra points. But let's walk through it. The first thing to note is that Bob's offer was $100 to paint his house, not $100 for a painted house. It's a subtle nit-pick, but offering $100 to someone to paint your house is inviting them to accept with their assurance that they will paint your house, resulting in a bilateral contract. On the other hand, offering $100 for a painted house puts the emphasis on the end result, which is your house being painted. The second thing to note is that even if this was somehow a unilateral contract, the fact that Sam was already starting would require Bob to allow him a reasonable amount of time to finish. Had he caught Sam before he started painting, then there may be an argument that it was only "mere preparation" to perform, which would mean Bob wouldn't have to pay Sam. But, again, this was a bilateral contract, so that doesn't apply here.