Contracts 2023

Cases and materials

  • Robert W Gordon (Stanford Law School)

Contracts are an important type of "private" law.  Many contracts arise due to gains from trade owing to differences in (i) resources, (ii) valuation, (iii) expectations, (iv) risk-bearing abilities, and (v) production abilities (from economies of scale, special skills, and specialization and division of labor), and complementarities among those abilities. Other contracts respond to issues, restrictions, obligations or entitlements arising from other laws, such as licenses, disclaimers, settlements, formal requirements, and confidentiality obligations. Lawyers play crucial roles in crafting contracts and structuring complex projects, linking "suites" of contracts to coordinate multiple parties over time, against background regulation and contract law. Courts and legislatures interact to produce and redirect common law of contract and specialized rules and standards for subtypes of contracts, which evolve over time and vary across jurisdictions and contract settings.  To do so, they pursue three general goals simultaneously:  (1) enhancing welfare of contract parties (or classes of parties) (sometimes called "efficiency" by economists and lawyer-economists), (2) respecting morality (particularly aspects of individual autonomy, but also limits of autonomy), and (3) minimizing costs of administration (sometimes called "administrability" or "system design").  Remedies are central, as well as limits on remedies, with courts inevitably developing and applying public policies due to the common need to find, construct and remedy breaches of contracts.  

[This summary of course content is the work of Professor John Coates of Harvard Law School.[

2 Grounds for Enforcement 2 Grounds for Enforcement

If promises should be kept, should law enforce all promises?  

2.1 Craswell & Schwartz Excerpts 1.1 2.1 Craswell & Schwartz Excerpts 1.1

1.1 Enforcing Promises

P.S. Atiyah, The Rise and Fall of Freedom of Contract

It is necessary at the outset to distinguish three situations in which contracts may be held legally binding, or promises may be found morally binding:

1.  In the first situation a contract or a promise may be found binding after a price has been paid for it.

For example, a person may borrow £ 100 from a friend and may simultaneously promise to repay it. In this situation there would, both legally and morally, be a liability to repay even if there were no promise. The promise may, indeed, be said to be “implied” but my contention is that in this situation the primary justification for imposing a legal or moral obligation on the party borrowing the money is that he has received a benefit at the expense of the other party, and that is, in a property-owning society, usually sufficient to establish a liability. I express this conclusion by saying that the liability is benefit-based in this type of case; it could also be said to arise from broad notions of unjust enrichment.

If it should be asked what is the function of the promise in such circumstances, one answer might be that the promise has evidentiary value. It is evidence that the promisor has received a benefit (for if it was not a benefit would he have promised to pay for it?) and it may be evidence of many ancillary matters such as the precise terms of the arrangement, the date of repayment and so on.

2.  In the second situation, a contract or promise may be enforced where the promisee has acted in reliance on the promise, or on the promisor’s conduct, and would in consequence be in a worse situation than if no promise had ever been made.

The case of a simple loan discussed above may, of course, also be a case of such action in reliance, for the lender may only have lent his money in reliance on the borrower’s promise to repay. But cases of action in reliance may arise without any element of benefit or unjust enrichment.

In the law, a common example is to be found in the typical contract of guarantee, as where A promises to guarantee repayment of a loan to be made by B to C. In this situation if B acts in reliance on the guarantee, he will lend money to C and may (if C is himself not good for the money) thus make his position worse than it would be if there had been no promise. In my terminology I would refer to liability in such a case as reliance-based.

As in the previous case, I suggest that many forms of reliance-based liability arise, or would arise even in the absence of a promise. The party relying may be relying, not on a promise, but on other words, or mere conduct. Such reliance is a commonplace in modern societies and often gives rise to liabilities even in the absence of a promise. For instance, a person who buys a new house, in reliance on the proper performance by the local authority of its duties of ensuring compliance with the Building Regulations, may have a remedy against the authority for malperformance even though they give no promise.

Here again, as with benefit-based liability, the result may be justified or explained by saying that there is an “implied” promise. But it will be observed that in such circumstances the liability comes first, and the implication is made subsequently to justify the decision already arrived at. Once the liability itself is well established (whether in law or in social custom) it is easy to make the implication.

But in the first instance, it is the conduct of one party, followed by the action in reliance of the other, which creates the liability. As with the case of benefit-based liability, it is likely that an actual, express promise, will serve a useful evidentiary role in reliance-based liability. Whether the party acting did in fact rely on the other (or, for example, on his own judgment) and if so, whether in so acting, he acted reasonably by the standards of the society in question, are questions whose answer may be greatly assisted by the presence of an express promise. But again, it does not follow that it is the promise which creates the liability.

3.  The third situation concerns a promise or a contract which has not been paid for, and which has not yet been relied upon. In the law such a contract or promise would be called “wholly executory.”

If such a promise or contract generates any liability, the liability must be promise-based, since it cannot be benefit-based or reliance-based. In the first two cases, distinct grounds exist for imposing the liability, apart altogether from the promise. In this case, no such distinct grounds exist. If the promise is held to be “binding” or to create some liability, it must be for some reason which is inherent in the promise itself. The principal grounds which (it is suggested) can be found for imposing such liability in this case are these.

First, it may be said that a promise, even while executory, creates expectations, and that these expectations will be disappointed if the promise is not performed. In this sense, there is a similarity between a promise-based and a reliance-based liability. The promisee whose expectations are disappointed may feel he is worse off than he would have been if no promise had been made at all. Psychologically this may be true; but in a pecuniary sense, it is not. The party who acts in reliance may spend money which he would lose if he could not claim recompense from the party on whose conduct he relied. But the promisee who has not yet acted in reliance on a promise, and not yet paid any price for it, will not be worse off in a pecuniary sense merely because his expectations are disappointed.

Secondly, it may be said that contracts and promises are essentially risk-allocation devices, like simple bets. The nature of this device is such that the transaction must generally remain executory prior to the occurrence of the risk, and the whole point of the transaction would be lost if the arrangement could not be made binding for the future.

The third possible ground for the enforcement of executory promises or contracts is that it may be desirable to uphold the principle of promissory liability, even in cases where the non-performance of the promise has little practical effect. The argument here comes to this, that if executory promises are held binding (whether in law or in social custom and morality) then people are more likely to perform promises which have been paid for, or relied upon.

Now it will be seen that many promises and contracts are likely to be wholly executory at the outset, but may quickly pass into one or other of the first two situations discussed above. A promise may be given which is at first executory, and only subsequently is it acted upon by the promisee, or paid for by the promisee. In this book I suggest that once this happens, the ground for imposing a liability shifts. The liability becomes benefit-based or reliance-based, where it was previously promise-based. This may seem strange, and indeed, it is precisely because this seems so strange that it has not generally been recognized, either in law or in general discussion of the nature of promissory liability. This, I suggest, is because promise-based liability is seen as the paradigm case for discussion both in law and among philosophers, and perhaps in ordinary discourse.

One of the purposes of this book is to suggest that this is itself part of our cultural and legal heritage, and that an alternative perspective may be possible and even preferable. If benefit-based and reliance-based liabilities are taken as the paradigm cases of obligation, whether legal or moral, it may be suggested that promise-based liabilities are neither paradigmatic nor of central importance. Far from being the typical case of obligation, a promise-based liability may be a projection of liabilities normally based on benefit or reliance. Because these are normally found such powerful grounds for imposing obligations, it has been thought that the element of promise (express or implied) which is often combined with benefit-based and reliance-based liability, is itself the ground for the obligation. And from this, it has been an easy move to the inference that promise-based liability, even without any element of benefit or reliance, carries its own justification.

Much of this book is based on the conviction that this traditional attitude to promise-based obligations is misconceived, and that the grounds for the imposition of such liabilities are, by the standards of modern values, very weak compared with the grounds for the creation of benefit-based and reliance-based obligations. The protection of mere expectations cannot (it is suggested) rank equally with the protection of restitution interests (arising from benefit-based liability) or reliance interests (arising from reliance-based liability). A person whose expectations are disappointed, but who suffers no pecuniary or other loss from the failure to perform a promise, has surely a relatively weak claim for complaint or redress.

No doubt if there is no excuse or justification at all for the failure to perform the promise or contract, the promisee may be felt entitled to some redress, but even then it does not follow that he should be entitled to demand full performance of the promise, or redress based on such an entitlement. Frequently, a promise-based claim is based on relatively short-lived expectations; for it is where the promisor has (for instance) made some mistake, or overlooked some fact, that he is most likely to attempt to withdraw a promise. Where the promisor does not do this, the probability is that some action in reliance (or some payment) will soon be performed by the promisee, and he can then claim the much greater protection due to reliance interests or restitution interests.

Adoption of this alternative approach would, of course, have a profound effect on the conceptual pattern of moral and legal obligation, but to argue, as I do, that the justification for creating promise-based obligations is usually weak, does not mean that this approach would involve a serious undercutting of typical moral or legal obligations. For in practice, even liabilities which are usually perceived as promise-based in law or social custom, are, in my terminology not exclusively promise-based at all. In fact most such liabilities are, or rapidly become, reliance-based or benefit-based, and the period during which they remain promise-based is usually relatively short. Indeed, in practical terms, the approach I advocate would tend chiefly to affect those relatively marginal cases in which promises are revoked shortly after they are given, and before they have been paid for or relied upon.

The second ground for maintaining the binding force of an executory contract is, as I have suggested, that such a contract is essentially a way of allocating a risk, or perhaps of transferring a risk from one party to another in advance. Where this is indeed the case (as for example, with bets, or some forms of insurance) it seems that the arrangement must, if it is to have any point at all, be binding on the parties at the outset. But this argument is open to two possible answers.

One is that most contracts are not in fact entered into for the purpose of transferring or allocating risks. If contracts are construed as being risk-allocation mechanisms, this is because they are often seen as such in the eye of the beholder. Pure risk-allocation contracts are relatively rare, and it may be that special considerations do apply to them.

The second possible answer is that even in contracts of this nature an element of reliance is still needed before it becomes essential to maintain the integrity of the transaction. Even an executory insurance arrangement, for instance, could be made cancellable so long as the insured still has time to find alternative cover. A person might, in principle, be given the right to withdraw from a bet on a race before the race is run, so long as the other party has time to place his own bet elsewhere at similar odds. There would be nothing logically impossible about such a possibility though it might be inconvenient.

The third ground for the creation of promise-based liabilities is also, I suggest, very weak in comparison with the grounds for the creation of benefit-based and reliance-based obligations. For this ground is, in effect, nothing more than an argument for the use of promise-based liability as a subsidiary method of ensuring compliance with benefit-based and reliance-based obligations.

There are, of course, great difficulties in arguing that promise-based liabilities should be observed even though there is no independent justification for their observance, in order that reliance-based and benefit-based obligations should be better observed. Now it cannot be claimed that the case for the enforcement of promise-based liabilities is entirely vitiated by these difficulties, because the fact that my approach is so unorthodox itself testifies to the practical strength of this argument. Both morally and legally, promise-based liabilities have traditionally been thought worthy of protection, even where there has been no element of reliance or reciprocal benefit. It seems certain, therefore, that where there is some element of reliance or benefit, the case for redress has been felt a fortiori to be the more powerful.

This too, I suggest, is part of the cultural heritage which I explore further in this book, and it is enough to say here that the whole trend of modern times is against arguments of principle of this character. It appears more in accord with contemporary beliefs to reject the argument of principle, and to insist upon the difference (for example) between maintaining the sanctity of a promise or contract because it has been relied upon, and because it might have been (but was not) relied upon. What is lacking is a theoretical or conceptual (and perhaps even linguistic) recognition of these differences.

In suggesting that these ideas are, at least intuitively or implicitly, gaining much ground today, and in advocating open recognition of these facts, it does not follow that I approve or disapprove of them. The nature of the conflict of values which underlies this question will become clear during the course of this book, but in its essentials the conflict is perfectly plain. Promise-based liability rests upon a belief in the traditional liberal values of free choice. Many still admire these values but they bring with them, inescapably, many other consequences which are today less admired, especially in England. They bring, in particular, the recognition that some individuals are better equipped to exercise free choice than others, through natural aptitude, education, or the possession of wealth. And the greater is the need for the exercise of free choice, the stronger is the tendency for these original inequalities to perpetuate themselves by maintaining or even increasing economic inequalities. For example, in contracts which really are risk-allocation arrangements, to hold the contract binding must, in general, favour the party who has the better skill and knowledge for assessing future risks.

By contrast, other forms of liability rest on different values. Even benefit-based liability, though it may tend to perpetuate existing inequalities of wealth, does at least militate against increasing those inequalities in the way in which promise-based liabilities may do. For where liabilities are benefit-based, the law (or the moral norms) strive for a reasonable or just balance in the reciprocity of benefit; where liabilities are promise-based the free choice of the parties determines this balance, and it is inevitable that this will tend to favour those better able to exercise free choice.

Reliance-based liabilities are still more hostile to the values of free choice. As soon as liabilities come to be placed upon a person in whom another has reposed trust or reliance, even though there is no explicit promise or agreement to bear that liability, the door is opened to a species of liability which does not depend upon a belief in individual responsibility and free choice. Not only is the party relied upon held liable without his promise, but the party relying is relieved from the consequences of his own actions. The values involved in this type of liability are therefore closely associated with a paternalist social philosophy, and a redistributive economic system.


Charles Fried, Contract as Promise

What is a promise, that by my words I should make wrong what before was morally indifferent? A promise is a communication—usually verbal; it says something. But how can my saying something put a moral charge on a choice that before was morally neutral? Well, by my misleading you, or by lying. Is lying not the very paradigm of doing wrong by speaking?

But this won’t do, for a promise puts the moral charge on a potential act—the wrong is done later, when the promise is not kept—while a lie is a wrong committed at the time of its utterance. Both wrongs abuse trust, but in different ways. When I speak I commit myself to the truth of my utterance, but when I promise I commit myself to act, later. Though these two wrongs are thus quite distinct there has been a persistent tendency to run them together by treating a promise as a lie after all, but a particular kind of lie: a lie about one’s intentions. Consider this case:

I offer to sell you a house, retaining an adjacent vacant lot. At the time of our negotiations, I state that I intend to build a home for myself on that lot. What if several years later I sell the lot to a person who builds a gas station on it? What if I sell it only one month later? What if I am already negotiating for its sale as a gas station at the time I sell the house to you?

If I was already negotiating to sell the lot for a gas station at the time of my statement to you, I have wronged you. I have lied to you about the state of my intentions, and this is as much a lie as a lie about the state of the plumbing.

If, however, I sell the lot many years later, I do you no wrong. There are no grounds for saying I lied about my intentions; I have just changed my mind. Now if I had promised to use the lot only as a residence, the situation would be different. Promising is more than just truthfully reporting my present intentions, for I may be free to change my mind, as I am not free to break my promise.

Let us take it as given here that lying is wrong and so that it is wrong to obtain benefits or cause harm by lying (including lying about one’s intentions). It does not at all follow that to obtain a benefit or cause harm by breaking a promise is also wrong. That my act procures me a benefit or causes harm all by itself proves nothing. If I open a restaurant near your hotel and prosper as I draw your guests away from the standard hotel fare you offer, this benefit I draw from you places me under no obligation to you. I should make restitution only if I benefit unjustly, which I do if I deceive you—as when I lie to you about my intentions in [the] example [above].

But where is the injustice if I honestly intend to keep my promise at the time of making it, and later change my mind? If we feel I owe you recompense in that case too, it cannot be because of the benefit I have obtained through my promise: We have seen that benefit even at another’s expense is not alone sufficient to require compensation. If I owe you a duty to return that benefit it must be because of the promise. It is the promise that makes my enrichment at your expense unjust, and not the enrichment that makes the promise binding. And thus neither the statement of intention nor the benefit explains why, if at all, a promise does any moral work.

A more common attempt to reduce the force of a promise to some other moral category invokes the harm you suffer in relying on my promise. My statement is like a pit I have dug in the road, into which you fall. I have harmed you and should make you whole. Thus the tort principle might be urged to bridge the gap in the argument between a statement of intention and a promise: I have a duty just because I could have foreseen (indeed it was my intention) that you would rely on my promise and that you would suffer harm when I broke it. And this wrong then not only sets the stage for compensation of the harm caused by the misplaced reliance, but also supplies the moral predicate for restitution of any benefits I may have extracted from you on the strength of my promise.

But we still beg the question. If the promise is no more than a truthful statement of my intention, why am I responsible for harm that befalls you as a result of my change of heart? To be sure, it is not like a change in the weather—I might have kept to my original intention—but how does this distinguish the broken promise from any other statement of intention (or habit or prediction of future conduct) of mine of which you know and on which you choose to rely? Should your expectations of me limit my freedom of choice? If you rent the apartment next to mine because I play chamber music there, do I owe you more than an expression of regret when my friends and I decide to meet instead at the cellist’s home? And in general, why should my liberty be constrained by the harm you would suffer from the disappointment of the expectations you choose to entertain about my choices?

Does it make a difference that when I promise you do not just happen to rely on me, that I communicate my intention to you and therefore can be taken to know that changing my mind may put you at risk? But then I might be aware that you would count on my keeping to my intentions even if I myself had not communicated those intentions to you. (You might have told me you were relying on me, or you might have overheard me telling some third person of my intentions.) It might be said that I become the agent of your reliance by telling you, and that this makes my responsibility clearer: After all, I can scarcely control all the ways in which you might learn of my intentions, but I can control whether or not I tell you of them. But we are still begging the question. If promising is no more than my telling you of my intentions, why do we both not know that I may yet change my mind? Perhaps, then, promising is like telling you of my intention and telling you that I don’t intend to change my mind. But why can’t I change my mind about the latter intention?

Perhaps the statement of intention in promising is binding because we not only foresee reliance, we invite it: We intend the promisee to rely on the promise. Yet even this will not do. If I invite reliance on my stated intention, then that is all I invite. Certainly I may hope and intend, in example I, that you buy my house on the basis of what I have told you, but why does that hope bind me to do more than state my intention honestly? And that intention and invitation are quite compatible with my later changing my mind. In every case, of course, I should weigh the harm I will do if I do change my mind. If I am a doctor and I know you will rely on me to be part of an outing on which someone may fall ill, I should certainly weigh the harm that may come about if that reliance is disappointed. Indeed I should weigh that harm even if you do not rely on me, but are foolish enough not to have made a provision for a doctor. Yet in none of these instances am I bound as I would be had I promised.

A promise invokes trust in my future actions, not merely in my present sincerity. We need to isolate an additional element, over and above benefit, reliance, and the communication of intention. That additional element must commit me, and commit me to more than the truth of some statement. That additional element has so far eluded our analysis.

It has eluded us, I believe, because there is a real puzzle about how we can commit ourselves to a course of conduct that absent our commitment is morally neutral. The invocation of benefit and reliance are attempts to explain the force of a promise in terms of two of its most usual effects, but the attempts fail because these effects depend on the prior assumption of the force of the commitment. The way out of the puzzle is to recognize the bootstrap quality of the argument: To have force in a particular case promises must be assumed to have force generally. Once that general assumption is made, the effects we intentionally produce by a particular promise may be morally attributed to us. This recognition is not as paradoxical as its abstract statement here may make it seem. It lies, after all, behind every conventional structure: games, institutions and practices, and most important, language....

... The conventional nature of language is too obvious to belabor. It is worth pointing out, however, that the various things we do with language—informing, reporting, promising, insulting, cheating, lying—all depend on the conventional structure’s being firmly in place. You could not lie if there were not both understanding of the language you lied in and a general convention of using that language truthfully. This point holds irrespective of whether the institution of language has advanced the situation of mankind and of whether lying is sometimes, always, or never wrong.

Promising too is a very general convention—though less general than language, of course, since promising is itself a use of language. The convention of promising (like that of language) has a very general purpose under which we may bring an infinite set of particular purposes. In order that I be as free as possible, that my will have the greatest possible range consistent with the similar will of others, it is necessary that there be a way in which I may commit myself. It is necessary that I be able to make nonoptional a course of conduct that would otherwise be optional for me.

By doing this I can facilitate the projects of others, because I can make it possible for those others to count on my future conduct, and thus those others can pursue more intricate, more far-reaching projects. If it is my purpose, my will that others be able to count on me in the pursuit of their endeavor, it is essential that I be able to deliver myself into their hands more firmly than where they simply predict my future course. Thus the possibility of commitment permits an act of generosity on my part, permits me to pursue a project whose content is that you be permitted to pursue your project. But of course this purely altruistic motive is not the only motive worth facilitating. More central to our concern is the situation where we facilitate each other’s projects, where the gain is reciprocal. Schematically the situation looks like this:

You want to accomplish purpose A and I want to accomplish purpose B. Neither of us can succeed without the cooperation of the other. Thus I want to be able to commit myself to help you achieve A so that you will commit yourself to help me achieve B.

Now if A and B are objects or actions that can be transferred simultaneously there is no need for commitment. As I hand over A you hand over B, and we are both satisfied. But very few things are like that. We need a device to permit a trade over time: to allow me to do A for you when you need it, in the confident belief that you will do B for me when I need it. Your commitment puts your future performance into my hands in the present just as my commitment puts my future performance into your hands. A future exchange is transformed into a present exchange. And in order to accomplish this all we need is a conventional device which we both invoke, which you know I am invoking when I invoke it, which I know that you know I am invoking, and so on....

The Moral Obligation of Promise

Once I have invoked the institution of promising, why exactly is it wrong for me then to break my promise?

My argument so far does not answer that question. The institution of promising is a way for me to bind myself to another so that the other may expect a future performance, and binding myself in this way is something that I may want to be able to do. But this by itself does not show that I am morally obligated to perform my promise at a later time if to do so proves inconvenient or costly. That there should be a system of currency also increases my options and is useful to me, but this does not show why I should not use counterfeit money if I can get away with it. In just the same way the usefulness of promising in general does not show why I should not take advantage of it in a particular case and yet fail to keep my promise. That the convention would cease to function in the long run, would cease to provide benefits if everyone felt free to violate it, is hardly an answer to the question of why I should keep a particular promise on a particular occasion....

Considerations of self-interest cannot supply the moral basis of my obligation to keep a promise. By an analogous argument neither can considerations of utility. For however sincerely and impartially I may apply the utilitarian injunction to consider at each step how I might increase the sum of happiness or utility in the world, it will allow me to break my promise whenever the balance of advantage (including, of course, my own advantage) tips in that direction. The possible damage to the institution of promising is only one factor in the calculation. Other factors are the alternative good I might do by breaking my promise, whether and by how many people the breach might be discovered, what the actual effect on confidence of such a breach would be. There is no a priori reason for believing that an individual’s calculations will come out in favor of keeping the promise always, sometimes, or most of the time.

Rule-utilitarianism seeks to offer a way out of this conundrum. The individual’s moral obligation is determined not by what the best action at a particular moment would be, but by the rule it would be best for him to follow. It has, I believe, been demonstrated that this position is incoherent: Either rule-utilitarianism requires that rules be followed in a particular case even where the result would not be best all things considered, and so the utilitarian aspect of rule-utilitarianism is abandoned; or the obligation to follow the rule is so qualified as to collapse into act-utilitarianism after all. There is, however, a version of rule-utilitarianism that makes a great deal of sense. In this version the utilitarian does not instruct us what our individual moral obligations are but rather instructs legislators what the best rules are. If legislation is our focus, then the contradictions of rule-utilitarianism do not arise, since we are instructing those whose decisions can only take the form of issuing rules. From that perspective there is obvious utility to rules establishing and enforcing promissory obligations. Since I am concerned now with the question of individual obligation, that is, moral obligation, this legislative perspective on the argument is not available to me.

The obligation to keep a promise is grounded not in arguments of utility but in respect for individual autonomy and in trust. Autonomy and trust are grounds for the institution of promising as well, but the argument for individual obligation is not the same. Individual obligation is only a step away, but that step must be taken. An individual is morally bound to keep his promises because he has intentionally invoked a convention whose function it is to give grounds—moral grounds—for another to expect the promised performance. To renege is to abuse a confidence he was free to invite or not, and which he intentionally did invite. To abuse that confidence now is like (but only like) lying: the abuse of a shared social institution that is intended to invoke the bonds of trust.

A liar and a promise-breaker each use another person. In both speech and promising there is an invitation to the other to trust, to make himself vulnerable; the liar and the promise-breaker then abuse that trust. The obligation to keep a promise is thus similar to but more constraining than the obligation to tell the truth. To avoid lying you need only believe in the truth of what you say when you say it, but a promise binds into the future, well past the moment when the promise is made. There will, of course, be great social utility to a general regime of trust and confidence in promises and truthfulness. But this just shows that a regime of mutual respect allows men and women to accomplish what in a jungle of unrestrained self-interest could not be accomplished. If this advantage is to be firmly established, there must exist a ground for mutual confidence deeper than and independent of the social utility it permits.

The utilitarian counting the advantages affirms the general importance of enforcing contracts. The moralist of duty, however, sees promising as a device that free, moral individuals have fashioned on the premise of mutual trust, and which gathers its moral force from that premise. The moralist of duty thus posits a general obligation to keep promises, of which the obligation of contract will be only a special case—that special case in which certain promises have attained legal as well as moral force. But since a contract is first of all a promise, the contract must be kept because a promise must be kept.

To summarize: There exists a convention that defines the practice of promising and its entailments. This convention provides a way that a person may create expectations in others. By virtue of the basic Kantian principles of trust and respect, it is wrong to invoke that convention in order to make a promise, and then to break it.

2.2 Pargendler Excerpt 2.2 Pargendler Excerpt

Mariana Pargendler, The Role of the State in Contract Law: The Common-Civil Law Divide, 43 Yale J. Int'l L. 143 (2018)

This Article undertakes to examine in a coordinated manner some of the central-and persisting -- doctrinal distinctions in the laws of contract of common and civil law jurisdictions. The classification of legal systems into the legal families of common law and civil law has long played a central role in comparative law scholarship and, more recently, also in the economic literature, which has posited a strong connection between legal traditions and various economic outcomes. While the importance and continued vitality of legal family categorizations have come under attack, they continue to play a useful descriptive and didactic role in broadly mapping the legal regimes of multiple jurisdictions.

The analysis here will simultaneously examine the distinctions between the common and civil law of contracts that have received the lion's share of attention in both scholarly and practical commentary. These are:

(i) The stronger duty of good faith in the civil law;
(ii) The greater number of mandatory contract rules in the civil law;
(iii) The greater intervention in the interpretation and revision of contract terms in the civil law;
(iv) The greater enforcement of penalty clauses in the civil law;
(v) The greater availability of specific performance in the civil law; and
(vi) The greater availability of contract discharge through a "fresh start" in bankruptcy in the common law.

At first sight, it is hard to make sense of these distinctions. The presence of (i) a broader duty of good faith, (ii) more mandatory rules, and (iii) the greater judicial rewriting of contract terms in civil law jurisdictions may lead one to conclude that common law systems provide a stronger role for freedom of contract than do civil law systems -- which is indeed a common stereotype in business practice.

Yet this view is not without difficulties. If the common law is truly devoted to sanctity of contract, why does it (iv) deny enforcement to penalty clauses freely agreed by the parties, (v) refuse to grant specific performance as a matter of right (even if the parties specifically choose this remedy), and (vi) more easily discharge contracts in bankruptcy proceedings? 

This Article suggests that these differences can be explained by the distinct roles of the State in shaping contract law in common and civil law systems. In civil law systems, the State tends to play a stronger part in all respects.

On the one hand, the State, through legislatures and courts, goes further in providing and policing the substantive terms of the agreement to ensure compliance with broader social values and objectives.

On the other hand, once the contract passes muster under this test, the State is also willing to sanction breaches with more severe consequences: namely, by permitting the enforcement of penalty clauses, granting specific performance, and making it more difficult to discharge contractual obligations in bankruptcy proceedings. 

Common law systems, by contrast, embrace the opposite approach: legislatures and courts are less willing both to meddle with the terms of the contract and to offer relief to the aggrieved party if voluntary performance is not forthcoming. Under Ian Macneil's conceptualization of the two dimensions of freedom of contract, the common law favors only a narrow version of it, in the sense of "freedom from restraint" in "making or receiving promises." It is the civil law that embraces a stronger version of the other side of freedom of contract, the "power of contract," which consists in the ability to secure legal sanctions for non-performance.

So how does this overarching pattern relate to prevailing conceptions about common and civil law systems more generally?

The character of contract law appears to map the findings of the burgeoning literature on the role of the State across legal traditions, with common law systems boasting more liberal, and civil law systems more interventionist, arrangements of contract law and enforcement. It is, however, partly in tension with the prevailing notion that the common law necessarily places greater value on -- and provides stronger enforcement to -- private contracting schemes. 

Indeed, once the more modest remedies for breach of contract are taken into account, State support to private contracts in common law jurisdictions looks far more fragile. In other words, the common law's apparent intervention to restrict the remedies available for breach of contract effectively results in a more limited use of the State's coercive powers in contract enforcement.

To put it differently, the common law is not so much supportive of private contracts as it is conducive to private ordering, including with respect to mechanisms for the enforcement of contractual obligations.  At a high level of generality, the different roles of the State in (i) policing the terms of the contract and (ii) calibrating the remedies for non-performance can be viewed as alternative mechanisms to mitigate the effects of harsh contractual commitments.

These different approaches are unlikely to guarantee identical results. Yet the analysis offered here highlights how substantive control of contract terms and discharge in bankruptcy can serve as alternative mechanisms for allocating contract risk and mitigating the effects of harsh bargains-a crucial relationship that has been largely overlooked by the existing literature. In this context, the ultimate outcomes in both systems are closer than one would anticipate by focusing on individual rules or styles of State intervention in isolation. 

 

2.3 Mills v. Wyman 2.3 Mills v. Wyman

Daniel Mills versus Seth Wyman.

The general position, that a moral obligation is a sufficient consideration for an express promise, is to be limited in its application, to cases where a good or valuable consideration has once existed.

Thus, where a son, who was of full age and had ceased to be a member of his father’s family, was suddenly taken sick among strangers, and, being poor and in distress, was relieved by the plaintiff, and afterwards the father wrote to the plaintiff promising to pay him the expenses incurred, it was held, that such promise would not sustain an action.

This was an action of assumpsit brought to recover a com pensation for the board, nursing, &c., of Levi Wyman, son ol the defendant, from the 5th to the 20th of February, 1821. The plaintiff then lived at Hartford, in Connecticut; the defendant, at Shrewsbury, in this county. Levi Wyman, at the time when the services were rendered, was about 25 years of age, and had long ceased to be a member of his father’s family. He was on his return from a voyage at sea, and being suddenly taken sick at Hartford, and being poor and in distress, was relieved by the plaintiff in the manner and to the extent above stated. On the 24th of February, after all the expenses had been incurred, the defendant wrote a letter to the plaintiff, promising to pay him such expenses. There was no consideration for this promise, except what grew out of the relation which subsisted between Levi Wyman and the defendant, and Howe J., before whom the cause was tried in the Court of Common Pleas, thinking this not sufficient to support the action, directed a nonsuit. To this direction the plaintiff filed exceptions.

J. .Davis and Allen m support of the exceptions.

The moral obligation of a parent to support his child is a sufficient consideration for an express promise. Andover &c. Turnpike Corp. v. Gould, 6 Mass. R. 40; Andover v. Salem, 3 Mass. R. 438; Davenport v. Mason, 15 Mass. R. 94 ; 1 Bl. Comm. 446 ; Reeve’s Dom. Rel. 283. The arbitrary rule of law, fixing the age of twenty-one years for the period of emancipation, does not interfere with this moral obligation, in case a child of full age shall be unable to support himself. Our statute of 1793, c. 59, requiring the kindred of a poor person to support him, proceeds upon the ground of a :iora obligation.

But if there was no moral obligation on the part of the defendant, it is sufficient that his promise was in writing, and was made deliberately, with a knowledge of all the circumstances A man has a right to give away his property. [Parker C. J. There is a distinction between giving and promising.] The case of Bowers v. Hurd, 10 Mass. R. 427, does not take that distinction. [Parker C. J. That case has been doubted.] Neither does the case of Packard v. Richardson, 17 Mass. R. 122 ; and in this last case (p. 130) the want of consideration is treated as a technical objection.

Brigham, for the defendant,

furnished in vacation a written argument, in which he cited Fowler v. Shearer, 7 Mass. R. 22 ; Rann v. Hughes, 7 T. R. 350, note ; Jones v. Ashburnham, 4 East, 463; Pearson v. Pearson, 7 Johns. R. 26 ; Schoonmaker v. Roosa, 17 Johns. R. 301 ; the note to Wennall v. Adney, 3 Bos. & Pul. 249 ; Fink v. Cox, 18 Johns. R. 145 ; Barnes v. Hedley, 2 Taunt. 184 ; Lee v. Muggeridge, 5 Taunt. 36. He said the case of Bowers v. Hurd was upon a promissory note, where the receipt of value is acknowledged ; which is a privileged contract. Livingston v. Hastie, 2 Caines’s R. 246 ; Bishop v. Young, 2 Bos. & Pul. 79, 80 ; Pillans v. Mierop, 3 Burr. 1670 ; 1 Wms’s Saund 211, note 2.

The opinion of the Court was read, as drawn up by

Parker C. J.

General rules of law established for tho protection and security of honest and fair-minded men, who may inconsiderately make promises without any equivalent, will sometimes screen men of a different character from engagements which they are bound in foro consciehtice to perform. This is a defect inherent in all human systems of legislation. The rule that a mere verbal promise, without any consideration, cannot be enforced by action, is universal in its application, and cannot be departed from to suit particular cases m which a refusal to perform such a promise may be disgraceful.

The promise declared on in this case appears to have been made without any legal consideration. The kindness and set-vices towards the sick son of the defendant were not bestowed at his request. The son was in no respect under the care of the defendant. He was twenty-five years old, and had long left his father’s family. On his return from a foreign country, he fell sick among strangers, and the plaintiff acted the part oi the good Samaritan, giving him shelter and comfort until he died. The defendant, his father, on being informed of this event, influenced by a transient feeling of gratitude, promises in writing to pay the plaintiff for the expenses he had incurred. But he has determined to break this promise, and is willing to have his case appear on record as a strong example of particular injustice sometimes necessarily resulting from the operation of general rules.

It is said a moral obligation is a sufficient consideration to support an express promise ; and some authorities lay down the rule thus broadly ; but upon examination of the cases we are satisfied that the universality of the rule cannot be supported, and that there must have been some preexisting obligation, which has become inoperative by positive law, to form a basis for an effective promise. The cases of debts barred by the statute of limitations, of debts incurred by infants, of debts of bankrupts, are generally put for illustration of the rule. Ex press promises founded on such preexisting equitable obligations may be enforced ; there is a good consideration for them ; they merely remove an impediment created by law to the recovery of debts honestly due, but which public policy protects the debtors from being compelled to pay. In all these cases there was originally a quid pro quo ; and according to the principles of natural justice the party receiving ought to pay ; but the legislature has said he shall not be coerced ; then comes the promise to pay the debt that is barred, the promise of the man to pay the debt of the infant, of the discharged bankrupt to restore to his creditor what by the law he had lost. In all these cases there is a moral obligation founded upon an antecedent valuable consideration. These promises therefore have a sound legal basis. They are not promises to pay someth. ng for nothing; not naked pacts ; but the voluntary revival or creation of obligation which before existed in natural law, but which had been dispensed with, not for the benefit of the party obliged solely, but principally for the public convenience. If moral obligation, in its fullest sense, is a good substratum for an express promise, it is not easy to perceive why it is not equally good to support an implied promise. What a man ought to do, generally he ought to be made to do, whether he promise or refuse. But the law of society has left most of such obligations to the interior forum, as the tribunal of conscience has been aptly called. Is there not a moral obligation upon every son who has become affluent by means of the education and advantages bestowed upon him by his father, to relieve that father from pecuniary embarrassment, to promote his comfort and happiness, and even to share with him his riches, if thereby he will be made happy ? And yet such a son may, with impunity, leave such a father in any degree of penury above that which will expose the community in which ho dwells, to the danger of being obliged to preserve him from absolute want. Is not a wealthy father under strong moral obligation to advance the" interest of an obedient, well disposed son, to furnish him with the means of acquiring and maintaining a becoming rank in life, to rescue him from the horrors of debt incurred by misfortune ? Yet the law will uphold him in any degree of parsimony, short of that which would reduce his son to the necessity of seeking public charity.

Without doubt there are great interests of society which justify withholding the coercive arm of the law from these duties of imperfect obligation, as they are called; imperfect, not uecause they are less binding upon the conscience than those which are called perfect, but because the wisdom of the social law does not impose sanctions upon them.

A deliberate promise, in writing, made freely and without any mistake, one which may lead the party to whom it is made into contracts and expenses, cannot be broken without a violation of moral duty. But if there was nothing paid or promised for it, the law, perhaps wisely, leaves the execution of it to the conscience of him who makes it. It is only when the party making the promise gains something, or he to whom it is made loses something, that the law gives the promise validity. And in the case of the promise of the adult to pay the debt of the infant, of the debtor discharged by the statute of hm rations or bankruptcy, the principle is preserved by looking back to the origin of the transaction, where an equivalent is to be founn An exact equivalent is not required by the law ; for there oeing a consideration, the parties are left to estimate its value : though here the courts of equity will step in to relieve from gross inadequacy between the consideration and the promise.

These principles are deduced from the general current of decided cases upon the subject, as well as from the known maxims of the common law. The general position, that moral obligation is a sufficient consideration for an express promise, is to be limited in its application, to cases where at some time or other a good or valuable consideration has. existed.1

A legal obligation is always a sufficient consideration to support either an express or an implied promise ; such as an infant’s debt for necessaries, or a father’s promise to pay for the support and education of his minor children. But when the child shall have attained to manhood, and shall have become his own agent in the world’s business, the debts he in curs, whatever may be their nature, create no obligation upon the father ; and it seems to follow, that his promise founded upon such a debt has no legally binding force.

The cases of instruments under seal and certain mercantile contracts, in which considerations need not be proved, do not contradict the principles above suggested. The first import a consideration in themselves, and the second belong to a branch of the mercantile law, which has found it necessary to disregard the point of consideration in respect to instruments negotiable in their nature and essential to the interests of com merce.

Instead of citing a multiplicity of cases to support the positions I have .aben, I will only refer to a very able review of all the cases in' the note in 3 Bos. & Pul. 249. The opinions of the judges had been variant for a long course of years upon this subject, but there seems to be no case in which it was nakedly decided, that a promise to pay the debt of a son of full age, not living with his father, though the debt were incurred by sickness which ended in the death of the son, without a previous request by the father proved or presumed, could be enforced by action.

It has been attempted to show a legal obligation on the part of the defendant by virtue of our statute, which compels lineal kindred in the ascending or descending line to support such of their poor relations as are likely to become chargeable to the town where they have their settlement. But it is a sufficient answer to this position, that such legal obligation does not exist except in the very cases provided for in the statute, and never until the party charged has been adjudged to be of sufficient ability thereto. We do not know from the report any of the facts which are necessary to create such an obligation. Whether the deceased had a legal settlement in this commonwealth at the time of his death, whether he was likely to become chargeable had he lived, whether the defendant was of sufficient ability, are essential facts to be adjudicated by the court to which is given jurisdiction on this subject. The legal liability does not arise until these facts have all been ascertained by judgment, after hearing the party intended to be charged.1

For the foregoing reasons we are all of opinion that the non-suit directed by the Court of Common Pleas was right, and that judgment be entered thereon for costs for the defendant,

2.4 Muir v. Kane 2.4 Muir v. Kane

[No. 7913. Department One. October 4, 1909.]


B. L. Muir, Respondent,

v.

M. FRANCIS KANE et al., Appellants.

CONTRACTS—CONSIDERATION—MORAL OBLIGATION—FRAUDS, STATUTE OF. An oral contract with a broker to pay commissions on the sale of real estate, void under the statute of frauds, raises a moral obligation which is sufficient consideration to support a subsequent written agreement to pay the same, after the rendition of the services.

Appeal from a judgment of the superior court for King county, Griffin, J., entered May 15, 1908, upon findings in favor of the plaintiff, after a trial on the merits before the court without a jury, in an action to recover a broker’s commission. Affirmed.

Rice & Frank, for appellants.

F. J. Carver, for respondent.

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FULLURTON, J.—

The respondent brought this action to recover of the appellants the sum of $200, alleged to be due pursuant to a written agreement executed and delivered to him by the appellants, whereby they agreed to pay him the sum of $200 for his services in selling for appellants a certain tract of real property. Issue was taken on the complaint and a trial had thereon, which resulted in a judgment in his favor for the amount claimed to be due. The case was tried by the court silting without a jury. No question is raised as to the correctness of the facts found, but the case is here on the question whether these facts justify the judgment of the court.

The court’s findings of fact are as follows:

“(1) That now and at all times herein referred to the plaintiff is and was doing a general real estate business in Seattle, Washington, under the firm name and style of B. L. Muir & Co. being the sole owner thereof.

“(2) That now and at all times concerned herein, the defendants are and were husband and wife.

“(3) That on or about the 21st day of November, 1906, the defendants made, executed and delivered to the plaintiff their written agreement agreeing to pay said plaintiff two hundred dollars ($200) for his services in selling for them a certain parcel of real estate; said agreement being in words and figures, to wit:

“ ‘M. Francis Kane and Ida Kane, his wife, agree to sell and Paul Bush agrees to buy the following described real estate situated in the County of King, State of Washington, to wit:

“ ‘South 40 feet of lot 1, block 17, J. H. Nagle’s addition to the city of Seattle, for the sum of nine thousand six hundred dollars ($9,600) the purchaser having paid the sum of five hundred dollars ($500) the receipt of which is hereby acknowledged, as earnest money and part payment for said land, the same to be held in trust by B. L. Muir & Co. until the sale is closed or canceled and the balance of said purchase price shall be paid as follows, or as soon after said dates respectively as the title to said real estate is shown to be marketable, to wit:

“ ‘Three thousand dollars ($3,000) on or before the 22nd

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day of Nov. 1900, at 1 p. m.; nineteen hundred dollars ($1,900) on or before the 22nd day of Nov. 1907, at 1 p. m.; four thousand dollars ($4,000) according to certain mortgage to be executed due in three years from date.

“ ‘The purchaser agrees to pay interest at the rate of six per cent payable semi-annually on all deferred payments.

“ ‘The vendor agrees to furnish an abstract of title made by a reliable abstract company, for said real estate showing a marketable title of record in the vendor free from encumbrances to date of conveyance except the street assessments amount to about two hundred dollars ($200) and if over $200 the surplus to be deducted from the nineteen hundred payment which the purchaser assumes and agrees to pay as a part of the above named purchase price, and the vendor further agrees to transfer said property to the purchaser by a good and sufficient warranty deed to the said vendee or his assigns and pay two hundred dollars ($200) of the purchase price to B. L. Muir & Co. for services rendered.

“ ‘The purchaser shall have one day’s time after the delivery of said abstract for examination of same, and in case the abstract shall show a marketable title in the vendor, this sale shall be completed, and if the said title is not marketable and cannot be made so, then B. L. Muir & Co. shall refund to the said vendee the above named earnest money, and the sale shall be canceled, the deposit of $500 to be paid to Mrs. Ida Kane in the event of the purchaser failing to comply with this agreement.

“ ‘Witness our hands this 21st day of November, 1906. “ ‘Signed and delivered in the presence of B. L. Muir.

“ ‘M. FRANCIS KANE, [SEAL.]

“ ‘IDA KANE, [SEAL.]

“ ‘PAUL BUSH. [SEAL.]’

“(4) That the plaintiff did make the sale referred to in said written contract and which sale was accepted by the defendants, but they have since failed, neglected and refused to pay the aforesaid two hundred dollars ($200) commission allowed, although the same is long past due and still the property of the plaintiff.”

The statute governing contracts for commissions for buying or selling real estate provides that any agreement authorizing an employee, an agent or broker, to sell or pur-

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chase real estate for compensation or a commission, shall be void unless the agreement, contract, or promise, or some note or memorandum thereof, be in writing. The appellants contend that the writing relied upon by the respondent is insufficient under the statute; that it is not an agreement authorizing the respondent to sell the real property described for compensation or commission, nor does it authorize or employ the respondent to sell real estate at all. Manifestly, if the writing sued upon was intended as an agreement authorizing the respondent to sell real estate of the appellants, it is faulty in the particulars mentioned, and so far deficient as not to warrant a recovery even if a sale had been made thereunder. But we do not understand that this is the question presented by the record. It is clear that this writing was not intended as an agreement authorizing the respondent to sell the real property mentioned. In fact, it was executed after that service had been performed, and is an agreement in writing to pay a fixed sum for a past service, not a service to be performed in the future. The question for determination is its validity as a promise to pay for a past service.

Looking to the instrument itself, there is nothing on its face that in any manner impugns its validity. It is a direct promise to pay a fixed sum of money for services rendered. Prima facie, therefore, it is legal and valid; and if it is illegal at all, it is because the actual consideration for the promise, which was alleged and proven, rendered the promise illegal. This consideration was the sale of real property for the appellants by the respondent acting as a broker, without a written agreement authorizing the service, and it is thought that because the statute declares an agreement for such a service void unless in writing, the service furnishes no consideration for the subsequent promise, since the service must either have been founded upon an invalid agreement or was voluntary. There are cases which maintain this doctrine. In Bagnole v. Madden (N. J . ) , 69 Atl. 967, the precise question was presented. There the plaintiff had been orally authorized

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by the defendant to sell a parcel of real estate owned by the defendant. A purchaser was found and a contract of sale entered into. The defendant thereupon executed a written agreement and delivered the same to the plaintiff, wherein she promises to pay him $50 for his services. In an action brought upon the writing, the court held that she could not recover because of the invalidity of the original oral contract authorizing the services, it being in violation of the statute declaring such agreement void unless in writing. The case was rested on a decision of the Court of Errors and Appeals, Stout v. Humphrey, 69 N. J. L. 436, 55 Atl. 281, which announced the same doctrine, but upon a state of facts not quite the same; the subsequent promise to pay being oral instead of in writing. In the course of its opinion in the latter case, the court said:

“It is clear that if a contract between two parties be void, and not merely voidable, no subsequent express promise will operate to charge the party promising, even though he has derived the benefit of the contract. Yet, according to the commonly received notion respecting moral obligations, and the force attributed to a subsequent express promise, such a person ought to pay. An express promise, therefore, as it should seem, can only revive a precedent good consideration which might have been enforced at law through the medium of an implied promise had it not been suspended by some positive rule of law, but can give no original right of action if the obligation on which it is founded never could have been enforced at law, though not barred by any legal maxim or statute provision.”

The court, it will be observed, makes a distinction between contracts formerly good but on which the right of recovery has been barred by the statute, and those contracts which are barred in the first instance because of some legal defect in their execution, holding that the former will furnish a consideration for a subsequent promise to perform, while the latter will not.

It has seemed to us that this distinction is not sound. The moral obligation to pay for services rendered as a broker in

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selling real estate, under an oral contract where the statute requires such contract to be in writing, is just as binding as is the moral obligation to pay a debt that has become barred by the statute of limitations, and there is no reason for holding that the latter will support a new promise to pay while the former will not. There is no moral delinquency that attaches to an oral contract to sell real property as a broker. This service cannot be recovered for because the statute says the promise must be in writing; not because it is illegal in itself. It was not intended by the statute to impute moral turpitude to such contracts. The statute was intended to prevent frauds and perjuries, and to accomplish that purpose, it is required that the evidence of the contract be in writing; but it is not conducive to either fraud or perjury to say that the services rendered under the void contract, or voluntarily, will support a subsequent written promise to pay for such service. Nor is it a valid objection to say there was no antecedent legal consideration. The validity of a promise to pay a debt barred by the statute of limitations is not founded on its antecedent legal obligation. There is no legal obligation to pay such a debt; if there were, there would be no need for the new promise. The obligation is moral solely, and since there can be no difference in character between one moral obligation and another, there can be no reason for holding that one moral obligation will support a promise while another will not.

Our attention has been called to no case, other than the New Jersey case above cited, where the facts of the case at bar are presented. A case in point on the principle involved, however, is Ferguson v. Harris, 39 S. C. 323, 39 Am. St. 731. Certain persons, without authority from the defendant, had ordered lumber and used it in the erection of a building on the defendant’s separate property, she being a married woman. Subsequently she gave her promissory note therefor, and when an action was brought upon the note she sought to defend on the ground of want of consideration. It

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was conceded that there was never any legal obligation on the part of the defendant to pay for the lumber, but that her obligation was wholly moral. It was thereupon urged that such an obligation was insufficient to support the promise. Speaking upon this question the court said:

“All of the authorities admit that where an action to recover a debt is barred by the statute of limitations, or by a discharge in bankruptcy, a subsequent promise to pay the same can be supported by the moral obligation to pay the same, although the legal obligation is gone forever; and I am unable to perceive any just distinction between such a case and one in which there never was a legal, but only a moral, obligation to pay. In the one case, the legal obligation is gone as effectually as if it had never existed, and I am at a loss to perceive any sound distinction in principle between the two cases. In both cases, at the time the promise sought to be enforced is made, there is nothing whatever to support it except the moral obligation, and why the fact that, because in the one case there was once a legal obligation, which, having utterly disappeared, is as if it had never existed, should affect the question, I am at a loss to conceive. If, in the one case, the moral obligation, which alone remains, is sufficient to afford a valid consideration for the promise, I cannot see why the same obligation should not have the same effect in the other. The remark made by Lord Denman, in Eastwood v. Kenyon, 11 Ad. & E. 438, that the doctrine for which I am contending ‘would annihilate the necessity for any consideration at all, inasmuch as the mere fact of giving a promise creates a moral obligation to perform it,’ is more specious than sound, for it entirely ignores the distinction between a promise to pay money which the promisor is under a moral obligation to pay, and a promise to pay money which the promisor is under no obligation, either legal or moral, to pay. It seems to me that the cases relied upon to establish the modern doctrine, so far as my examination of them has gone, ignore the distinction pointed out in the note to Comstock v. Smith, 7 Johns. 89, above cited, between an express and an implied promise resting merely on a moral obligation, for while such obligation does not seem to be sufficient to support an implied promise, yet it is sufficient to support an express promise.”

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To the same effect is Anderson v. Best, 176Pa.St. 498, 35 Atl.194, wherein it was said:

“The distinction sought to be made between considerations formerly good but now barred by statute, and those barred by statute in the first instance, is not substantial, and is not sustained by the cases.”

See, also, Bailey v. Philadelphia, 167 Pa. St. 569,31 Atl. 925, 46 Am. St. 691; Stout v. Ennis, 28 Kan. 706.

Believing as we do that the better rule is with the cases holding the moral obligation alone sufficient to sustain the promise, it follows that the judgment appealed from should be affirmed. I t is so ordered.

RUDKIN, C. J., GOSE, CHADWICK, and MORRIS, JJ., concur

2.5 Webb v. McGowin 2.5 Webb v. McGowin

27 Ala.App. 82, 168 So. 196 (1935)
Joe WEBB
v.
Floyd and Joseph F. McGOWIN
Court of Appeals of Alabama
Nov. 12, 1935
Denied 232 Ala. 374, 168 So. 199 (1936)

Appeal from Circuit Court, Butler County; A. E. Gamble, Judge.

Action by Joe Webb against N. Floyd McGowin and Joseph F. McGowin, as executors of the estate of J. Greeley McGowin, in, deceased. From a judgment of nonsuit, plaintiff appeals.

Reversed and remanded.

Certiorari denied by Supreme Court in . Webb v. McGowin, 232 Ala. 374, 168 So. 199.

Powell & Hamilton, of Greenville, for appellant.

A moral obligation is a sufficient consideration and will support a subsequent promise to pay, where the promisor has received an actual pecuniary or material benefit, although there was no original duty or liability. Lycoming County v. Union County, 15 Pa. 166, 53 Am. Dec. 579; Ferguson v. Harris, 39 S.c. 323, 17 S.E. 782, 39 'Am. St.Rep. 731; Muir v. Kane, 55 Wash. 131, .104 P. 153, 26 L.R.A.(N.S.) 519, 526, 19 Ann.Cas. 1180; 17 A.L.R. 1324, 1368, 1370, .1374; Park Falls State Bank v. Fordyce, 206 Wis. 628, 238 N.W. 516, 79 A.L.R. 1339; Hawkes v. Saunder.s, 1 Cowp. 290; State v. Funk, 105 Or. 134, 19Q P. 592, 209 P. 113, 25 A.L.R. 634; Edson v; Poppe, 24 S.D. 466, 124 N.W. 441, 26 L.R.A.(N.S.). 534; Sutch's Estate, 201 Pa. 305, 50 A. 943; Olsen v. Hagan, 102 Wash. 321, 172 P.1173. A promise to pay for part services implies that they were rendered upon a previous request. Such services are a good consideration for the promise, and the implication that a previous request had been made for the services rendered is one of law. 17 A.L.R. 1370-1374; Pittsburg, etc., Co. v. Cerebus Oil Co., 79 Kan. 603, 100 P. 631; Holland v. Martinson, 119 Kan. 43, 237 P. 902; Fellows Box Co. v. Mills, 86 N. H. 267, 167 A. 153; McMorris v. Herndon, 2 Bailey (S.C.) 56, 21 Am.Dec. 517; Bailey v. Philadelphia, 167 Pa. 569, 31 A. 925, 46 Am.St Rep. 691; Chick v. Trevett, 20 Me. 462, 37 Am.Dec. 69; Chadwick v. Knox, 31 N.H. 226, 64 Am.Dec. 329: Ross v. Pearson, 21 Ala. 473, 477; Baker v. Gregory, 28 Ala. 544, 65 Am. Dec. 366; Clanton v. Eaton, 92 Ala. 612, 8 So. 823; Harris v. Davis, 1 Ala. 259. The agreement sued on is not within the statute of frauds. 25 R.C.L. 456, 457, 470.

Calvin Poole, of Greenville, for appellee. A past consideration is not sufficient to support a subsequent promise. . It is not enough to show that a service has been rendered and that it was beneficial to the party sought to be charged, unless such service was rendered at the promisor's special request. A promise given in consideration of past services voluntarily rendered without the promisor's privity or request is purely gratuitous and creates no legal liability. 1 Elliott on Contr. § 213; Clark on Contr. 197, § 91; Shaw v. Boyd, 1 Stew. & P. 83 j Thomason v. Dill, 30 Ala . 444; Holland v. Barnes, 53 Ala. 83, 25 Am.  Rep. 595; 13 C.J. 359; 6 R.C.L. 672; 17 A.L.R. 1373; 79 A.L.R. 1354. A promise to pay for services rendered is never implied unless the services were rendered under such circumstances as to raise a presumption that they were to be paid for' or, at least, that the circumstances were such that a reasonable man in the same situation would and ought to understand that compensation was to be paid for such services. 2 Elliott on Contr. § 1365 j 6 R.C.L. 587; Brush E. L. & P. Co. v. City Council of Montgomery, 114 Ala. 433, 21 So. 960; 13 C.J. 240. A mere moral obligation will not support an express promise. A valid consideration must have at one time existed creating a legal duty or obligation which is barred at the time of the promise by some positive rule of law. Clark on Contr. 180,. § 84 j 1 Elliott on Contr. § 211; Vance v. Wells, 6 Ala. 737; Agee v. Steele, 8 Ala. 948; Kenan v. Holloway, 16 Ala. 53, 50 Am..Dec. 162; Turlington v. Slaughter, 54 Ala. 195; Grimball v. Mastin, 77 Ala. 553; Thompson v. Hudgins, 116 Ala. 93, 107, 22 So. 632; 53 L.RA. 361; 17 A.L.R 1304; 79 A.L.R 1347. A promise to pay based on an illegal consideration is not enforceable. The alleged contract sued on is void as' being in contravention of public policy. 50 C.J. 857; 6 R.C.L. 727; Vance v. Wells, supra; Georgia Fruit Exch. v. Turnipseed, 9 Ala.App. 123, 62 So. 542; Union Nat. Bank v; Hartwell, 84 Ala. 379, 4 So. 156; Western Union Tel. Co. Y. Priester, 21 Ala.App. 587, 111 So. 199.

BRICKEN, Presiding Judge.

This action is in assumpsit. The complaint as originally filed was amended. The demurrers to the complaint as amended were sustained, and because of this adverse ruling by the court the plaintiff took a nonsuit, and the assignment of errors on this appeal are predicated upon said action or ruling of the court.

A fair statement of the case presenting the questions for decision is set out in appellant's brief, which we adopt.

"On the 3d day of August, 1925, appellant while in the employ of the W.T. Smith Lumber Company, a corporation, and acting within the scope of his employment, was engaged in clearing the upper floor of Mill No.2 of the company. While so engaged he was in the act of dropping a pine block from the upper floor of the mill to the ground below; this being the usual and ordinary way of clearing the floor, and it being the duty of the plaintiff in the course of his employment to so drop it. The block weighed about 75 pounds.

"As appellant was in the act of dropping the block to the ground below, he was on the edge of the upper floor of the mill. As he started to turn the block loose so that it would drop to the ground, he saw J. Greeley McGowin, testator of the defendants, on the ground below and directly under where the block would have fallen had appellant turned it loose. Had he turned it loose it would have struck McGowin with such force as to have caused him serious bodily harm or death. Appellant could have remained safely on the upper floor of the mill by turning the block loose and allowing it to drop, but had he done this the block would have fallen on McGowin and caused him serious Injuries or death. The only safe and reasonable way to prevent this was for appellant to hold to the block and divert its direction in falling from the place where McGowin was standing and the only safe way to divert it so as to prevent its coming into contact with McGowin was for appellant to fall with it to the ground below. Appellant did this, and by holding to the block and falling with it to the ground below, he diverted the course of its fall in such way that McGowin was not injured. In thus preventing the injuries to McGowin appellant himself received serious bodily injuries, resulting in his right leg being broken, the heel of his right foot torn off and his right arm broken. He was badly crippled for life and rendered unable to do physical or mental labor.

"On September 1, 1925, in consideration of appellant having prevented him from sustaining death or serious bodily harm and in consideration of the injuries appellant had received, McGowin agreed with him to care for and maintain him for the remainder of appellant's life at the rate of $15 every two weeks from the time he sustained his injuries to and during the remainder of appellant's life; it being agreed that McGowin would pay this sum to appellant for his maintenance. Under the agreement McGowin paid or caused to be paid to appellant the sum so agreed on up until McGowin's death on January 1, 1934. After his death the payments were continued to and including January 27, 1934, at which time they were discontinued. Thereupon plaintiff brought suit to recover the unpaid installments accruing up to the time of the bringing of the suit.

"The material averments of the different counts of the original complaint and the amended complaint are predicated upon the foregoing statement of facts."

In other words, the complaint as amended averred in substance: (1) That on August 3, 1925, appellant saved J. Greeley McGowin, appellee's testator, from death or grievous bodily harm; (2) that in doing so appellant sustained bodily injury crippling him for 'life; (3) that in consideration of the services rendered and the injuries received by appellant, McGowin agreed to care for him the remainder of appellant's life, the amount to be paid being $15 every two weeks; (4) that McGowin complied with this agreement until he died on January 1, .1934, and the payments were kept up to January 27, 1934, after which they were discontinued.

The action was for the unpaid installments accruing after January 27, 1934, to the time of the suit.

The principal grounds of' demurrer to the original and amended complaint are: (1) It states no cause of action; (2) its averments show the contract was without consideration; (3) it fails to allege that McGowin had, at or before the services were rendered, agreed to pay appellant for them; (4) the contract declared on is void under the statute of frauds.

1. The averments of the complaint show that appellant saved McGowin from death or grievous bodily harm. This was a material benefit to him of infinitely more value than any financial aid he could have received. Receiving this benefit, McGowin became morally bound to compensate appellant for the services rendered. Recognizing his moral obligation, he expressly agreed to pay appellant as alleged in the complaint and complied with this agreement up to the time of his death; a period of more than 8 years.

Had McGowin been accidentally poisoned and a physician, without his knowledge or request, had administered an antidote, thus saving his life, a subsequent promise by McGowin to pay the physician would have been valid. Likewise, McGowin's agreement as disclosed by the complaint to compensate appellant for saving him from death or grievous bodily injury is valid and enforceable.

Where the promisee cares for, improves, and preserves the property of the promisor, though done without his request, it is sufficient consideration for the promisor's subsequent agreement to pay for the service, because of the material benefit received. Pittsburg Vitrified Paving & Building Brick Co. v. Cerebus Oil Co., 79 Kan. 603, 100 P. 631; Edson v. Poppe, 24 S.D. 466, 124 N.W. 441, 26 I.R.A.(N.S.) .534; Drake v. Bell, 26 Misc. 237, 55 N.Y.S. 945.

In Boothe v. Fitzpatrick, 36 Vt. 681, the court held that a promise by defendant to pay for the past keeping of a bull which had escaped from defendant's premises and been cared for by plaintiff was valid, although there was no previous request, because the subsequent promise obviated that objection; it being equivalent to a previous request. On the same principle, had the promisee saved the promisor's life or his body from grievous harm, his subsequent promise to pay for the services rendered would have been valid. Such service would have been far more material than caring for his bull. Any holding that saving a man from death or grievous bodily harm is not a material benefit sufficient to uphold a subsequent promise to pay for the service, necessarily rests on the assumption that saving life and preservation of the body from harm have only a sentimental value. The converse of this is true. Life and preservation of the body have material, pecuniary values, measurable in dollars and cents. Because of this, physicians practice their profession charging for services rendered in saving life and curing the body of its ills, and surgeons perform operations. The same is true as to the law of negligence, authorizing the assessment of damages in personal injury cases based upon the extent of the injuries, earnings, and life expectancies of those injured.

In the business of life insurance, the value of a man's life is measured in dollars and cents according to his expectancy, the soundness of his body, and his ability to pay premiums. The same is true as to health and accident insurance.

It follows that if, as alleged in the complaint, appellant saved J. Greeley McGowin from death or grievous bodily harm, and McGowin subsequently agreed to pay him for the service rendered, it became a valid and enforceable contract.

2. It is well settled that a moral obligation is a sufficient consideration to support a subsequent promise to pay where the promisor has received a material benefit, although there was no original duty or liability resting on the promisor.  Lycoming County v. Union County, 15 Pa. 166, 53  Am.Dec. 575, 579, 580 j Ferguson v. Harris, 39 S.C. 323, 17 S.E. 782, 39 Am.St.Rep. 731, 734; Muir v. Kane, 55 Wash. 131, 104 P. 153, 26 L.R.A.(N.S,) 519, 19 Ann.Cas. 1180; State ex reI. Bayer v.Funk, 105 Or. 134, 199 P. 592, 209 P. 113, 25 A.L.R. 625, 634; Hawkes v. Saunders, 1 Cowp. 290; In re Sutch's Estate, 201 Pa. 305, 50 A 943 Edson v. Poppe, 24 S.D. 466, 124 N.W. 441, 26 L.R.A(N. S.) .534; Park Falls State Bank v. Fordyce, 206 Wis. 628, 238 N.W. 516, 79 AL. R. 1339; Baker v. Gregory, 28 Ala. 544, 65 Am.Dec. 366. In the case of State ex rel. Bayer v. Funk, supra, the court held that a moral obligation is a sufficient consideration to support all executory promise where the promisor received an actual pecuniary or material benefit for which he subsequently expressly promised to pay.

The case at bar is clearly distinguishable from that class of cases where the consideration is a mere moral obligation or conscientious duty unconnected with receipt by promisor of benefits of a material or pecuniary nature. Park Falls State Bank v. Fordyce, supra. Here the promisor received a material benefit constituting a valid consideration for his promise.

3. Some authorities hold that, for a moral obligation to support a subsequent promise to pay, there must have existed a prior legal or equitable obligation, which for some reason had become unenforceable, but for which the promisor was still morally bound. This rule, however, is subject to qualification in those cases where the promisor having received a material benefit from the promisee, is morally bound to compensate him for the services rendered and in consideration of this obligation promises to pay. In such cases the subsequent promise to pay is an affirmance or ratification of the services rendered carrying with it the presumption that a previous request for the service was made McMorris v. Herndon, 2 Bailey (S.c,) 56, 21 Am.Dec. 515; Chadwick v. Knox, 31 N.H. 226, 64 Am.Dec. 329; Ke- follownan v. Holloway, 16 Ala. 53, 50 Am.Dec. 162; Ross v. Pearson, 21 Ala. 473.

Under the decisions above cited, McGowin's express promise to pay appellant for the services rendered was an affirmance or ratification of what appellant had done raising the presumption that the services had been rendered at McGowin's request.

4. The averments of the complaint show that in saving McGowin from death or grievous bodily harm, appellant was crippled for life. This was part of the consideration of the contract declared on. MeGowin was benefited. Appellant was injured. Benefit to the promisor or injury to the promisee is a sufficient legal consideration for the promissor's agreement to pay. Fisher v. Bartlett, 8 Greenl. (Me.) 122, 22 Am.Dec. 225; State ex reI. Bayer v. Funk, supra.

5. Under the averments of the complaint the services rendered by appellant were not gratuitous. The agreement of McGowin to pay and the acceptance of payment by appellant conclusively shows the contrary..

6. The contract declared on was not void under the statute of frauds (Code 1923, § 8034). The demurrer on this ground was not well taken. 25 R.C.L. 456, 457 and 470, § 49. .

The cases of Shaw v. Boyd, 1 Stew. & P. 83, and Duncan v. Hall, 9 Ala. 128, are not in conflict with the principles here announced. In those cases the lands were owned by the United States at the time the alleged improvements were made, for which subsequent purchasers  from the government agreed to pay. These subsequent purchasers were not the, owners of the lands at the time the improvements were made. Consequently, they could not have been made for their benefit.

From what has been said, we are of the opinion that the court below erred in the ruling complained of; that is to say in sustaining the demurrer, and for this error the case is reversed and remanded.

Reversed and remanded.

SAMFORD, Judge (concurring).

The questions involved in this case are not free from doubt, and perhaps the strict letter of the rule, as stated by judges, though riot always in accord, would bar a recovery by plaintiff, but following the principle announced by Chief Justice Marshall in Hoffman v. Porter, Fed. Cas. No. 6,577, 2 Brock. 156, 159, where he says, "I do not think that law ought to be separated from justice, where it is at most doubtful," I concur in the conclusions reached by the court.

2.6 Restatement (2d) 86 Promise for Benefit 2.6 Restatement (2d) 86 Promise for Benefit

Restatement (Second) of Contracts -- 86 Promise for Benefit Received

(1) A promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice.

(2) A promise is not binding under Subsection (1)

(a) if the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched; or

(b) to the extent that its value is disproportionate to the benefit.

2.7 Hamer v. Sidway 2.7 Hamer v. Sidway

124 N.Y. 538

Louisa W. Hamer, Appellant,
v.
Franklin Sidway, as Executor, etc., Respondent.


Court of Appeals of New York.
Argued February 24, 1981.
Decided April 14, 1891.

OPINION OF THE COURT

PARKER, J. The question which provoked the most discussion by counsel on this appeal, and which lies at the foundation of plaintiff's asserted right of recovery, is whether by virtue of a contract defendant's testator William E. Story became indebted to his nephew William E. Story, 2d, on his twenty-first birthday in the sum of five thousand dollars. The trial court found as a fact that “on the 20th day of March, 1869, . . . William E. Story agreed to and with William E. Story, 2d, that if he would refrain from drinking liquor, using tobacco, swearing, and playing cards or billiards for money until he should become 21 years of age then he, the said William E. Story, would at that time pay him, the said William E. Story, 2d, the sum of $5,000 for such refraining, to which the said William E. Story, 2d, agreed,” and that he “in all things fully performed his part of said agreement.”

The defendant contends that the contract was without consideration to support it, and, therefore, invalid. He asserts that the promisee by refraining from the use of liquor and tobacco was not harmed but benefited; that that which he did was best for him to do independently of his uncle's promise, and insists that it follows that unless the promisor was benefited, the contract was without consideration. A contention, which if well founded, would seem to leave open for controversy in many cases whether that which the promisee did or omitted to do was, in fact, of such benefit to him as to leave no consideration to support the enforcement of the promisor's agreement. Such a rule could not be tolerated, and is without foundation in the law. The Exchequer Chamber, in 1875, defined consideration as follows: “A valuable consideration in the sense of the law may consist either in some right, interest, profit or benefit accruing to the one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other.” Courts

“will not ask whether the thing which forms the consideration does in fact benefit the promisee or a third party, or is of any substantial value to anyone. It is enough that something is promised, done, forborne or suffered by the party to whom the promise is made as consideration for the promise made to him.”

(Anson's Prin. of Con. 63.)

“In general a waiver of any legal right at the request of another party is a sufficient consideration for a promise.” (Parsons on Contracts, 444.)

“Any damage, or suspension, or forbearance of a right will be sufficient to sustain a promise.” (Kent, vol. 2, 465, 12th ed.)

Pollock, in his work on contracts, page 166, after citing the definition given by the Exchequer Chamber already quoted, says:

“The second branch of this judicial description is really the most important one. Consideration means not so much that one party is profiting as that the other abandons some legal right in the present or limits his legal freedom of action in the future as an inducement for the promise of the first.”

Now, applying this rule to the facts before us, the promisee used tobacco, occasionally drank liquor, and he had a legal right to do so. That right he abandoned for a period of years upon the strength of the promise of the testator that for such forbearance he would give him $5,000. We need not speculate on the effort which may have been required to give up the use of those stimulants. It is sufficient that he restricted his lawful freedom of action within certain prescribed limits upon the faith of his uncle's agreement, and now having fully performed the conditions imposed, it is of no moment whether such performance actually proved a benefit to the promisor, and the court will not inquire into it, but were it a proper subject of inquiry, we see nothing in this record that would permit a determination that the uncle was not benefited in a legal sense. Few cases have been found which may be said to be precisely in point, but such as have been support the position we have taken.

In Shadwell v. Shadwell (9 C. B. [N. S.] 159), an uncle wrote to his nephew as follows:

"MY DEAR LANCEY — I am so glad to hear of your intended marriage with Ellen Nicholl, and as I promised to assist you at starting, I am happy to tell you that I will pay to you 150 pounds yearly during my life and until your annual income derived from your profession of a chancery barrister shall amount to 600 guineas, of which your own admission will be the only evidence that I shall require.

“Your affectionate uncle,
“CHARLES SHADWELL.”

It was held that the promise was binding and made upon good consideration.

In Lakota v. Newton, an unreported case in the Superior Court of Worcester, Mass., the complaint averred defendant's promise that “if you (meaning plaintiff) will leave off drinking for a year I will give you $100,” plaintiff's assent thereto, performance of the condition by him, and demanded judgment therefor. Defendant demurred on the ground, among others, that the plaintiff's declaration did not allege a valid and sufficient consideration for the agreement of the defendant. The demurrer was overruled.

In Talbott v. Stemmons (a Kentucky case not yet reported), the step- grandmother of the plaintiff made with him the following agreement: “I do promise and bind myself to give my grandson, Albert R. Talbott, $500 at my death, if he will never take another chew of tobacco or smoke another cigar during my life from this date up to my death, and if he breaks this pledge he is to refund double the amount to his mother.” The executor of Mrs. Stemmons demurred to the complaint on the ground that the agreement was not based on a sufficient consideration. The demurrer was sustained and an appeal taken therefrom to the Court of Appeals, where the decision of the court below was reversed. In the opinion of the court it is said that

“the right to use and enjoy the use of tobacco was a right that belonged to the plaintiff and not forbidden by law. The abandonment of its use may have saved him money or contributed to his health, nevertheless, the surrender of that right caused the promise, and having the right to contract with reference to the subject-matter, the abandonment of the use was a sufficient consideration to uphold the promise.”

Abstinence from the use of intoxicating liquors was held to furnish a good consideration for a promissory note in Lindell v. Rokes (60 Mo. 249).

The cases cited by the defendant on this question are not in point. In Mallory v. Gillett (21 N. Y. 412); Belknap v. Bender (75 id. 446), and Berry v. Brown (107 id. 659), the promise was in contravention of that provision of the Statute of Frauds, which declares void all promises to answer for the debts of third persons unless reduced to writing. In Beaumont v. Reeve (Shirley's L. C. 6), and Porterfield v. Butler (47 Miss. 165), the question was whether a moral obligation furnishes sufficient consideration to uphold a subsequent express promise. In Duvoll v. Wilson (9 Barb. 487), and In re Wilber v. Warren (104 N. Y. 192), the proposition involved was whether an executory covenant against incumbrances in a deed given in consideration of natural love and affection could be enforced. In Vanderbilt v. Schreyer (91 N. Y. 392), the plaintiff contracted with defendant to build a house, agreeing to accept in part payment therefor a specific bond and mortgage. Afterwards he refused to finish his contract unless the defendant would guarantee its payment, which was done. It was held that the guarantee could not be enforced for want of consideration. For in building the house the plaintiff only did that which he had contracted to do. And in Robinson v. Jewett (116 N. Y. 40), the court simply held that “The performance of an act which the party is under a legal obligation to perform cannot constitute a consideration for a new contract.” It will be observed that the agreement which we have been considering was within the condemnation of the Statute of Frauds, because not to be performed within a year, and not in writing. But this defense the promisor could waive, and his letter and oral statements subsequent to the date of final performance on the part of the promisee must be held to amount to a waiver. Were it otherwise, the statute could not now be invoked in aid of the defendant. It does not appear on the face of the complaint that the agreement is one prohibited by the Statute of Frauds, and, therefore, such defense could not be made available unless set up in the answer. (Porter v. Wormser, 94 N. Y. 431, 450.) This was not done.

In further consideration of the questions presented, then, it must be deemed established for the purposes of this appeal, that on the 31st day of January, 1875, defendant's testator was indebted to William E. Story, 2d, in the sum of $5,000, and if this action were founded on that contract it would be barred by the Statute of Limitations which has been pleaded, but on that date the nephew wrote to his uncle as follows:

“DEAR UNCLE—I am now 21 years old to-day, and I am now my own boss, and I believe, according to agreement, that there is due me $5,000. I have lived up to the contract to the letter in every sense of the word."

A few days later, and on February sixth, the uncle replied, and, so far as it is material to this controversy, the reply is as follows:

"DEAR NEPHEW—Your letter of the 31st ult. came to hand all right saying that you had lived up to the promise made to me several years ago. I have no doubt but you have, for which you shall have $5,000 as I promised you. I had the money in the bank the day you was 21 years old that I intended for you, and you shall have the money certain. Now, Willie, I don't intend to interfere with this money in any way until I think you are capable of taking care of it, and the sooner that time comes the better it will please me. I would hate very much to have you start out in some adventure that you thought all right and lose this money in one year. . . . This money you have earned much easier than I did, besides acquiring good habits at the same time, and you are quite welcome to the money. Hope you will make good use of it. . . .

W. E. STORY.
P. S.—You can consider this money on interest.”

The trial court found as a fact that “said letter was received by said William E. Story, 2d, who thereafter consented that said money should remain with the said William E. Story in accordance with the terms and conditions of said letter.”

And further,

“That afterwards, on the first day of March, 1877, with the knowledge and consent of his said uncle, he duly sold, transferred and assigned all his right, title and interest in and to said sum of $5,000 to his wife Libbie H. Story, who thereafter duly sold, transferred and assigned the same to the plaintiff in this action.”

We must now consider the effect of the letter, and the nephew's assent thereto. Were the relations of the parties thereafter that of debtor and creditor simply, or that of trustee and cestui que trust? If the former, then this action is not maintainable, because barred by lapse of time. If the latter, the result must be otherwise. No particular expressions are necessary to create a trust. Any language clearly showing the settler's intention is sufficient if the property and disposition of it are definitely stated. (Lewin on Trusts, 55.)

A person in the legal possession of money or property acknowledging a trust with the assent of the cestui que trust, becomes from that time a trustee if the acknowledgment be founded on a valuable consideration. His antecedent relation to the subject, whatever it may have been, no longer controls. (2 Story's Eq. §972.) If before a declaration of trust a party be a mere debtor, a subsequent agreement recognizing the fund as already in his hands and stipulating for its investment on the creditor's account will have the effect to create a trust. (Day v. Roth, 18 N. Y. 448.)

It is essential that the letter interpreted in the light of surrounding circumstances must show an intention on the part of the uncle to become a trustee before he will be held to have become such; but in an effort to ascertain the construction which should be given to it, we are also to observe the rule that the language of the promisor is to be interpreted in the sense in which he had reason to suppose it was understood by the promisee. (White v. Hoyt, 73 N. Y. 505, 511.) At the time the uncle wrote the letter he was indebted to his nephew in the sum of $5,000, and payment had been requested. The uncle recognizing the indebtedness, wrote the nephew that he would keep the money until he deemed him capable of taking care of it. He did not say “I will pay you at some other time,” or use language that would indicate that the relation of debtor and creditor would continue. On the contrary, his language indicated that he had set apart the money the nephew had 'earned' for him so that when he should be capable of taking care of it he should receive it with interest. He said: “I had the money in the bank the day you were 21 years old that I intended for you and you shall have the money certain.” That he had set apart the money is further evidenced by the next sentence: “Now, Willie, I don't intend to interfere with this money in any way until I think you are capable of taking care of it.” Certainly, the uncle must have intended that his nephew should understand that the promise not “to interfere with this money” referred to the money in the bank which he declared was not only there when the nephew became 21 years old, but was intended for him. True, he did not use the word “trust,” or state that the money was deposited in the name of William E. Story, 2d, or in his own name in trust for him, but the language used must have been intended to assure the nephew that his money had been set apart for him, to be kept without interference until he should be capable of taking care of it, for the uncle said in substance and in effect:

“This money you have earned much easier than I did . . . you are quite welcome to. I had it in the bank the day you were 21 years old and don't intend to interfere with it in any way until I think you are capable of taking care of it and the sooner that time comes the better it will please me.”

In this declaration there is not lacking a single element necessary for the creation of a valid trust, and to that declaration the nephew assented.

The learned judge who wrote the opinion of the General Term, seems to have taken the view that the trust was executed during the life-time of defendant's testator by payment to the nephew, but as it does not appear from the order that the judgment was reversed on the facts, we must assume the facts to be as found by the trial court, and those facts support its judgment.

The order appealed from should be reversed and the judgment of the Special Term affirmed, with costs payable out of the estate.

All concur.

Order reversed and judgment of Special Term affirmed.

2.8 Congregation Kadimah Toras-Moshe v. DeLeo 2.8 Congregation Kadimah Toras-Moshe v. DeLeo

405 Mass. 365 (1989)
540 N.E.2d 691

CONGREGATION KADIMAH TORAS-MOSHE
vs.
ROBERT A. DeLEO, administrator.[1]

Supreme Judicial Court of Massachusetts, Suffolk.

March 7, 1989.
July 11, 1989.

Present: LIACOS, C.J., WILKINS, ABRAMS, LYNCH, & O'CONNOR, JJ.

Andrew M. Fischer for the plaintiff.

Ralph R. Bagley for the defendant.

LIACOS, C.J.

Congregation Kadimah Toras-Moshe (Congregation), an Orthodox Jewish synagogue, commenced this action in the Superior Court to compel the administrator of an estate (estate) to fulfil the oral promise of the decedent to give the Congregation $25,000. The Superior Court transferred the case to the Boston Municipal Court, which rendered summary judgment for the estate. The case was then transferred back to the Superior Court, which also rendered summary judgment for the estate and dismissed the Congregation's complaint. We granted the Congregation's application for direct appellate review. We now affirm.

[366] The facts are not contested. The decedent suffered a prolonged illness, throughout which he was visited by the Congregation's spiritual leader, Rabbi Abraham Halbfinger. During four or five of these visits, and in the presence of witnesses, the decedent made an oral promise to give the Congregation $25,000. The Congregation planned to use the $25,000 to transform a storage room in the synagogue into a library named after the decedent. The oral promise was never reduced to writing. The decedent died intestate in September, 1985. He had no children, but was survived by his wife.

The Congregation asserts that the decedent's oral promise is an enforceable contract under our case law, because the promise is allegedly supported either by consideration and bargain, or by reliance. See Loranger Constr. Corp. v. E.F. Hauserman Co., 376 Mass. 757, 761, 763 (1978) (distinguishing consideration and bargain from reliance in the absence of consideration). We disagree.

The Superior Court judge determined that "[t]his was an oral gratuitous pledge, with no indication as to how the money should be used, or what [the Congregation] was required to do if anything in return for this promise." There was no legal benefit to the promisor nor detriment to the promisee, and thus no consideration. See Marine Contractors Co. v. Hurley, 365 Mass. 280, 286 (1974); Gishen v. Dura Corp., 362 Mass. 177, 186 (1972) (moral obligation is not legal obligation). Furthermore, there is no evidence in the record that the Congregation's plans to name a library after the decedent induced him to make or to renew his promise. Contrast Allegheny College v. National Chautauqua County Bank, 246 N.Y. 369, 377-379 (1927) (subscriber's promise became binding when charity implicitly promised to commemorate subscriber).

As to the lack of reliance, the judge stated that the Congregation's "allocation of $25,000 in its budget[,] for the purpose of renovating a storage room, is insufficient to find reliance or an enforceable obligation." We agree. The inclusion of the promised $25,000 in the budget, by itself, merely reduced to writing the Congregation's expectation that it would have additional funds. A hope or expectation, even though well founded, is [367] not equivalent to either legal detriment or reliance.[2]Hall v. Horton House Microwave, Inc., 24 Mass. App. Ct. 84, 94 (1987).

The Congregation cites several of our cases in which charitable subscriptions were enforced. These cases are distinguishable because they involved written, as distinguished from oral, promises and also involved substantial consideration or reliance. See, e.g., Trustees of Amherst Academy v. Cowls, 6 Pick. 427, 434 (1828) (subscribers to written agreement could not withdraw "after the execution or during the progress of the work which they themselves set in motion"); Trustees of Farmington Academy v. Allen, 14 Mass. 172, 176 (1817) (trustees justifiably "proceed[ed] to incur expense, on the faith of the defendant's subscription").[3] Conversely, in the case of Cottage St. Methodist Episcopal Church v. Kendall, 121 Mass. 528 [368] (1877), we refused to enforce a promise in favor of a charity where there was no showing of any consideration or reliance.

The Congregation asks us to abandon the requirement of consideration or reliance in the case of charitable subscriptions. The Congregation cites the Restatement (Second) of Contracts § 90 (1981), which provides, in subsection (2): "A charitable subscription ... is binding under Subsection (1) without proof that the promise induced action or forbearance." Subsection (1), as modified in pertinent part by subsection (2), provides: "A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person ... is binding if injustice can be avoided only by enforcement of the promise...."

Assuming without deciding that this court would apply § 90, we are of the opinion that in this case there is no injustice in declining to enforce the decedent's promise. Although § 90 dispenses with the absolute requirement of consideration or reliance, the official comments illustrate that these are relevant considerations. Restatement (Second) of Contracts, supra at § 90 comment f. The promise to the Congregation is entirely unsupported by consideration or reliance.[4] Furthermore, it is an oral promise sought to be enforced against an estate. To enforce such a promise would be against public policy.[5]

Judgment affirmed.

[1] Of the estate of Saul Schwam.

[2] "We do not use the expression `promissory estoppel,' since it tends to confusion rather than clarity." Loranger Constr. Corp. v. E.F. Hauserman Co., 376 Mass. 757, 761 (1978).

[3]The Congregation cites two cases for the proposition that Massachusetts requires so little consideration or reliance that, in practice, none is required. The Congregation misconstrues each case.

The Congregation interprets this court's opinion in Robinson v. Nutt, 185 Mass. 345 (1904), to state the principle that the promises of several subscribers to donate funds are interdependent, that each promise is "consideration" or "reliance" for the other, and that each subscription is therefore an enforceable contract. This interpretation is neither the reasoning of the case nor good law in Massachusetts. The court in Robinson decided that the financial duties imposed on the charity therein, and adhered to by the charity for five years, were consideration for the promised funds. Id. at 348-349. The principle to which the Congregation refers, on the other hand, had been repudiated by this court in Cottage St. Methodist Episcopal Church v. Kendall, 121 Mass. 528, 530 (1877).

The second case cited by the Congregation, In re Morton Shoe Co., 40 Bankr. 948 (D. Mass. 1984), is not controlling, and is in any event distinguishable. That case involved an organized campaign of solicitation and significant reliance by the charity therein. "After the pledge drive, [the charity] establishe[d] an operating budget, determine[d] the amount of and recipients of distributions, and hire[d] personnel. In addition, based on the estimated amount of subscriptions, [the charity] borrow[ed] money from banks so that it [could] make immediate distributions to recipients before obtaining the actual pledge amount." Id. at 949. Thus, even assuming this case to have some precedential value, it demonstrates the need for reliance or consideration, not the opposite.

[4] We need not decide whether we would enforce an oral promise where there was a showing of consideration or reliance.

[5] The defendant argues that, if the decedent was aware of impending death, yet made no gift during life, then the promise is in the nature of a promise to make a will, which is unenforceable, by virtue of the Statute of Frauds. See G.L.c. 259, §§ 5, 5A (1986 ed.). Under the view we take, we need not consider this argument.

2.9 Kirksey v. Kirksey 2.9 Kirksey v. Kirksey

KIRKSEY v. KIRKSEY.

1. A brother-in-law, wrote to the widow of his brother, living sixty miles distant, that if she would come and see him, he would let her have aplace to raise her family. Shortly after, she broke up and removed to the residence of her brother-in-law, who for two years furnished her with a comfortable residence, and then required her to give it up: Held, that the promise was a mere and that an action would not lie for a violation of it.

Error to the Circuit Court of Talladega.

*132Assumpsit by the defendant, against the plaintiff in error. The question is presented in this Court, upon a case agreed, which shows the following facts:

The plaintiff was the wife of defendant’s brother, but had for sometime been a widow, and had several children. In 1840, the plaintiff resided on public land, under a contract of lease, she ha’d held over, and was comfortably settled, and would have attempted to secure the land she lived on. The defendant resided in Talladega county, some sixty, or seventy miles off. On the 10th October, 1840, he wrote to her the following letter:

“ Dear sister Antillico — Much to my mortification, I heard, that brother Henry was dead, and one of his children. I know that your situation is one of grief, and difficulty. You had a bad chance before, but a great deal worse now. I should like to come and see you, but cannot with convenience at present. * * * I do not know whether you have a preference on the place you live on, or not. If you had, I would advise you to obtain your preference, and sell the land and quit the country, as I understand it is very unhealthy, and I know society is very bad. Ef you will come down and see me, I will let you have a place to aise your family, and I have more open land than I can tend; nd on the account of your situation, and that of your family, I feel like I want you and the children to do well.”

Within a month or two after the receipt of this letter, the plaintiff abandoned her possession, without disposing of it, and removed with her family, to the residence of the defendant, who put her in comfortable houses, and gave her land to cultivate for two years, at the end of which time he notified her to remove, and put her in a house, not comfortable, in the woods, which he aftex--wards required her to leave.

A verdict being found for the plaintiff for two hundred dollars, the above facts were agreed, and if they will sustain the action, the judgment is to be affirmed, otherwise it is to be reversed.

Rice, for plaintiff in error,

cited 4 Johns. 235; 10 id. 246; 6 Litt. 101; 2Cowen, 139; 1 Caine’s,47.

W. P. Chilton and Porter, for defendant in error,

cited 1 Kinne’s Law Com. 216,218; Story on Con. 115; Chitty on Con. *13329; 18 Johns. 337; 2 Peters, 182; 1 Mar. 535; 5 Cranch, 142; 8 Mass. 200; 6 id. 58; 4 Maun. 63; 1 Conn. 519.

ORMOND, J.

The inclination of my mind, is, that the loss and inconvenience, which the plaintiff sustained in breaking up, and moving to the defendant’s, a distance of sixty miles, is a sufficient consideration to support the promise, to furnish her with a house, and land to cultivate, until she could raise her family. My brothers, however think, that the promise on the part of the defendant, was a mere gratuity, and that an action will not lie for its breach. The judgment of the Court below must therefore be reversed, pursuant to the agreement of the parties.

2.10 Restatement (2d) 71 Requirement of Exchange; Types of Exchange 2.10 Restatement (2d) 71 Requirement of Exchange; Types of Exchange

Restatement (Second) of Contracts § 71 Requirement of Exchange; Types of Exchange

(1) To constitute consideration, a performance or a return promise must be bargained for.

(2) A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise.

(3) The performance may consist of

(a) an act other than a promise, or

(b) a forbearance, or

(c) the creation, modification, or destruction of a legal relation.

(4) The performance or return promise may be given to the promisor or to some other person. It may be given by the promisee or by some other person.

2.11 Does Promise Have Value? 2.11 Does Promise Have Value?

2.12 Fiege v. Boehm 2.12 Fiege v. Boehm

Court of Appeals of Maryland
210 Md. 352
No. 188
1956-06-18

FIEGE v. BOEHM

[No. 188,

October Term, 1955.]

*354 Decided June 18, 1956.

The cause was argued before Bruñe, C. J., and Deeapeaine, Coeeins, Henderson and Hammond, JJ.

*355 Arold H. Ripperger for appellant.

R. Lewis Bainder, with whom was James K. Cullen, Jr., on the brief, for appellee.

Delaplaine, J.,

delivered the opinion of the Court.

This suit was brought in the Superior Court of Baltimore City by Hilda Louise Boehm against Louis Gail Fiege to recover for breach of a contract to pay the expenses incident to the birth of his bastard child and to provide for its support upon condition that she would refrain from prosecuting him for bastardy.

Plaintiff alleged in her declaration substantially as follows: (1) that early in 1951 defendant had sexual intercourse with her although she was unmarried, and as a result thereof she became pregnant, and defendant acknowledged that he was responsible for her pregnancy; (2) that on September 29, 1951, she gave birth to a female child; that defendant is the father of the child; and that he acknowledged on many occasions that he is its father; (3) that before the child was born, defendant agreed to pay all her medical and miscellaneous expenses and to compensate her for the loss of her salary caused by the child’s birth, and also to pay her ten dollars per week for its support until it reached the age of 21, upon condition that she would not institute bastardy proceedings against him as long as he made the payments in accordance with the agreement; (4) that she placed the child for adoption on July 13, 1954, and she claimed the following sums: Union Memorial Hospital, $110; Florence Crittenton Home, $100; Dr. George Merrill, her physician, $50; medicines, $70.35; miscellaneous expenses, $20.45; loss of earnings for 26 weeks, $1,105; support of the child, $1,440; total, $2,895.80; and (5) that defendant paid her only $480, and she demanded that he pay her the further sum of $2,415.80, the balance due under the agreement, but he failed and refused to pay the same.

Defendant demurred to the declaration on the ground that it failed to allege that in September, 1953, plaintiff instituted bastardy proceedings against him in the Criminal Court of *356Baltimore, but since it had been found from blood tests that he could not have been the father of the child, he was acquitted of bastardy. The Court sustained the demurrer with leave to amend.

Plaintiff then filed an amended declaration, which contained the additional allegation that, after the breach of the agreement by defendant, she filed a charge with the State’s Attorney that defendant was the father of her bastard child; and that on October 8, 1953, the Criminal Court found defendant not guilty solely on a physician’s testimony that “on the basis of certain blood tests made, the defendant can be excluded as the father of the said child, which testimony is not conclusive upon a jury in a trial court.”

Defendant also demurred to the amended declaration, but the Court overruled that demurrer.

Plaintiff, a typist, now over 35 years old, who has been employed by the Government in Washington and Baltimore for over thirteen years, testified in the Court below that she had never been married, but that at about midnight on January 21, 1951, defendant, after taking her to a moving picture theater on York Road and then to a restaurant, had sexual intercourse with her in his automobile. She further testified that he agreed to pay all her medical and hospital expenses, to compensate her for loss of salary caused by the pregnancy and birth, and to pay her ten dollars per week for the support of the child upon condition that she would refrain from instituting bastardy proceedings against him. She further testified that between September 17, 1951, and May, 1953, defendant paid her a total of $480.

Defendant admitted that he had taken plaintiff to restaurants, had danced with her several times, had taken her to Washington, and had brought her home in the country; but he asserted that he had never had sexual intercourse with her. He also claimed that he did not enter into any agreement with her. He admitted, however, that he had paid her a total of $480. His father also testified that he stated “that he did not want his mother to know, and if it were just kept quiet, kept principally away from his mother and the public and the courts, that he would take care of it.”

*357Defendant further testified that in May, 1953, he went to see plaintiff’s physician to make inquiry about blood tests to show the paternity of the child; and that those tests were made and they indicated that it was not possible that he could have been the child’s father. He then stopped making payments. Plaintiff thereupon filed a charge of bastardy with the State’s Attorney.

The testimony which was given in the Criminal Court by Dr. Milton Sachs, hematologist at the University Hospital, was read to the jury in the Superior Court. In recent years the blood-grouping test has been employed in criminology, in the selection of donors for blood transfusions, and as evidence in paternity cases. The Landsteiner blood-grouping test is based on the medical theory that the red corpuscles in human blood contain two affirmative agglutinating substances, and that every individual’s blood falls into one of the four classes and remains the same throughout life. According to Mendel’s law of inheritance, this blood individuality is an hereditary characteristic which passes from parent to child, and no agglutinating substance can appear in the blood of a child which is not present in the blood of one of its parents. The four Eandsteiner blood groups, designated as AB, A, B, and O, into which human blood is divided on the basis of the compatibility of the corpuscles and serum with the corpuscles and serum of other persons, are characterized by different combinations of two agglutinogens in the red blood cells and two agglutinins in the serum. Dr. Sachs reported that Fiege’s blood group was Type O, Miss Boehm’s was Type B, and the infant’s was Type A. He further testified that on the basis of these tests, Fiege could not have been the father of the child, as it is impossible for a mating of Type O and Type B to result in a child of Type A.

Although defendant was acquitted by the Criminal Court, the Superior Court overruled his motion for a directed verdict. In the charge to the jury the Court instructed them that defendant’s acquittal in the Criminal Court was not binding upon them. The jury found a verdict in favor of plaintiff for $2,415.80, the full amount of her claim.

Defendant filed a motion for judgment n. o. v. or a new *358trial. The Court overruled that motion also, and entered judgment on the verdict of the jury. Defendant appealed from that judgment.

Defendant contends that, even if he did enter into the contract as alleged, it was not enforceable, because plaintiff’s forbearance to prosecute was not based on a valid claim, and hence the contract was without consideration. He, therefore, asserts that the Court erred in overruling (1) his demurrer to the amended declaration, (2) his motion for a directed verdict, and (3) his motion for judgment n. o. v. or a new trial.

It was originally held at common law that a child born out of wedlock is films nullius, and a putative father is not under any legal liability to contribute to the support of his illegitimate child, and his promise to do so is unenforceable because it is based on purely a moral obligation. Some of the courts in this country have held that, in the absence of any statutory obligation on the father to aid in the support of his bastard child, his promise to the child’s mother to pay her for its maintenance, resting solely on his natural affection for it and his moral obligation to provide for it, is a promise which the law cannot enforce because of lack of sufficient consideration. Mercer v. Mercer, 87 Ky. 30, 7 S. W. 401; Wiggins v. Keizer, 6 ,Ind. 252; Davis v. Herrington, 53 Ark. 5, 13 S. W. 215. On the contrary, a few courts have stated that the natural affection of a father for his child and the moral obligation upon him to support it and to aid the woman he has wronged furnish sufficient consideration for his promise to the mother to pay for the support of the child to make the agreement enforceable at law. Birdsall v. Edgerton, 25 Wend., N. Y., 619; Todd v. Weber, 95 N. Y. 181, 47 Am. Rep. 20; Trayer v. Setzer, 72 Neb. 845, 101 N. W. 989.

However, where statutes are in force to compel the father of a bastard to contribute to its support, the courts have invariably held that a contract by the putative father with the mother of his bastard child to provide for the support of the child upon the agreement of the mother to refrain from invoking the bastardy statute against the father, or to abandon proceedings already commenced, is supported by sufficient con*359sideration. Jangraw v. Perkins, 77 Vt. 375, 60 A. 385; Beach v. Voegtlen, 68 N. J. L. 472, 53 A. 695; Thayer v. Thayer, 189 N. C. 502, 127 S. E. 553, 39 A. L. R. 428.

In Maryland it is now provided by statute that whenever a person is found guilty of bastardy, the court shall issue an order directing such person (1) to pay for the maintenance and support of the child until it reaches the age of eighteen years, such sum as may be agreed upon, if consent proceedings be had, or in the absence of agreement, such sum as the court may fix, with due regard to the circumstances of the accused person; and (2) to give bond to the State of Maryland in such penalty as the court may fix, with good and sufficient securities, conditioned on making the payments required by the court’s order, or any amendments thereof. Failure to give such bond shall be punished by commitment to the jail or the House of Correction until bond is given but not exceeding two years. Code Supp. 1955, art. 12, sec. 8.

Prosecutions for bastardy are treated in Maryland as criminal proceedings, but they are actually civil in purpose. Kennard v. State, 177 Md. 549, 10 A. 2d 710; Kisner v. State, 209 Md. 524, 122 A. 2d 102. While the prime object of the Maryland Bastardy Act is to protect the public from the burden of maintaining illegitimate children, it is so distinctly in the interest of the mother that she becomes the beneficiary of it. Accordingly a contract by the putative father of an illegitimate child to provide for its support upon condition that bastardy proceedings will not be instituted is a compromise of civil injuries resulting from a criminal act, and not a contract to compound a criminal prosecution, and if it is fair and reasonable, it is in accord with the Bastardy Act and the public policy of the State.

Of course, a contract of a putative father to provide for the support of his illegitimate child must be based, like any other contract, upon sufficient consideration. The early English law made no distinction in regard to the sufficiency of a claim which the claimant promised to forbear to prosecute, as the consideration of a promise, other than the broad distinction between good claims and bad claims. No promise to forbear to prosecute an unfounded claim was sufficient consideration. *360In the early part of the Nineteenth Century, an advance was made from the criterion of the early authorities when it was held that forbearance to prosecute a suit which had already been instituted was sufficient consideration, without inquiring whether the suit would have been successful or not. Longridge v. Dorville, 5 B. & Ald. 117.

In 1867 the Maryland Court of Appeals, in the opinion delivered by Judge Bartol in Hartle v. Stahl, 27 Md. 157, 172, held: (1) that forbearance to assert a claim before institution of suit, if not in fact a legal claim, is not of itself sufficient consideration to support a promise; but (2) that a compromise of a doubtful claim or a relinquishment of a pending suit is good consideration for a promise; and (3) that in order to support a compromise, it is sufficient that the parties entering into it thought at the time that there was a bona fide question between them, although it may eventually be found that there was in fact no such question.

We have thus adopted the rule that the surrender of, or forbearance to assert, an invalid claim by one who has not an honest and reasonable belief in its possible validity is not sufficient consideration for a contract. 1 Restatement, Contracts, sec. 76(b). We combine the subjective requisite that the claim be bona fide with the objective requisite that it must have a reasonable basis of support. Accordingly a promise not to prosecute a claim which is not founded in good faith does not of itself give a right of action on an agreement to pay for refraining from so acting, because a release from mere annoyance and unfounded litigation does not furnish valuable consideration.

Professor Williston was not entirely certain whether the test of reasonableness is based upon the intelligence of the claimant himself, who may be an ignorant person with no knowledge of law and little sense as to facts; but he seemed inclined to favor the view that “the claim forborne must be neither absurd in fact from the standpoint of a reasonable man in the position of the claimant, nor, obviously unfounded in law to one who has an elementary knowledge of legal principles.” 1 Williston on Contracts, Rev. Ed., sec. 135. We agree that while stress is placed upon the honesty and good faith of *361the claimant, forbearance to prosecute a claim is insufficient consideration if the claim forborne is so lacking in foundation as to make its assertion incompatible with honesty and a reasonable degree of intelligence. Thus, if the mother of a bastard knows that there is no foundation, either in law or fact, for a charge against a certain man that he is the father of the child, but that man promises to pay her in order to prevent bastardy proceedings against him, the forbearance to institute proceedings is not sufficient consideration.

On the other hand, forbearance to sue for a lawful claim or demand is sufficient consideration for a promise to pay for the forbearance if the party forbearing had an honest intention to prosecute litigation which is not frivolous, vexatious, or unlawful, and which he believed to be well founded. Snyder v. Cearfoss, 187 Md. 635, 643, 51 A. 2d 264; Pullman Co. v. Ray, 201 Md. 268, 94 A. 2d 266. Thus the promise of a woman who is expecting an illegitimate child that she will not institute bastardy proceedings against a certain man is sufficient consideration for his promise to pay for the child’s support, even though it may not be certain whether the man is the father or whether the prosecution would be successful, if she makes the charge in good faith. The fact that a man accused of bastardy is forced to enter into a contract to pay for the support of his bastard child from fear of exposure and the shame that might be cast upon him as a result, as well as a sense of justice to render some compensation for the injury he inflicted upon the mother, does not lessen the merit of the contract, but greatly increases it. Hook v. Pratt, 78 N. Y. 371, 34 Am. Rep. 539; Hays v. McFarlan, 32 Ga. 699, 79 Am. Dec. 317.

A case in point is Pflaum v. McClintock, 130 Pa. 369, 18 A. 734. That was an action to collect a judgment bond which the defendant signed when he was in jail to settle a fornication and bastardy case. The defendant claimed that the bond was conditioned on the support of a child expected to be born, but that he was innocent of the charge, and that in fact the obligee had not given birth to any living child, but died without issue before the judgment was entered. The Supreme Court of Pennsylvania decided that the bond was supported by a good consideration.

*362Another analogous case is Thompson v. Nelson, 28 Ind. 431. There the plaintiff sought to recover back money which he had paid to compromise a prosecution for bastardy. He claimed that the prosecuting witness was not pregnant and therefore the prosecution was fraudulent. It was held by the Supreme Court of Indiana, however, that the settlement of the prosecution was a good consideration for the payment of the money and it could not be recovered back, inasmuch as it appeared from the evidence that the prosecution was instituted in good faith, and at that time there was reason to believe that the prosecuting witness was pregnant, although it was found out afterwards that she was not pregnant.

Likewise, in Heaps v. Dunham, 95 Ill. 583, 590, the Supreme Court of Illinois held that a man charged with bastardy may compromise the claim with the woman who claims to be pregnant, and if the man, after being arrested, enters into a settlement not induced by fraud or oppression and gives his promissory note for the benefit of the woman and child, such a contract is supported by a good consideration. In explanation of its ruling, the Court said:

“But while there is great doubt from the evidence whether Lavina Snell was pregnant, yet so far as the charge of bastardy is concerned, as complainant voluntarily settled and gave his notes in settlement of the prosecution which had been commenced against him, he must be concluded by that settlement. When arrested on the charge he had the right to contest the case and require strict proof to sustain the charge, but under our statute a charge of this character may be settled between the prosecuting witness and defendant, and when a settlement has been made without fraud or oppression, we think it should be conclusive and binding between the parties.”

In the case at bar there was no proof of fraud or unfairness. Assuming that the hematologists were accurate in their laboratory tests and findings, nevertheless plaintiff gave testimony which indicated that she made the charge of bastardy against defendant in good faith. For these reasons the Court *363acted properly in overruling the demurrer to the amended declaration and the motion for a directed verdict.

Finally, in attacking the action of the Court in overruling the motion for judgment n. o. v. or a new trial, defendant made the additional complaint that there was error in the charge to the jury. As we have said, the Court instructed the jury that defendant’s acquittal in the Criminal Court was not binding upon the jury in the case before them. Defendant urged strongly that he had been acquitted by the Criminal Court in consequence of scientific findings from blood tests.

It is immaterial whether defendant was the father of the child or not. In the light of what we have said, we need not make any specific determination on this subject, as defendant took only one exception to the Court’s charge, and his only objection was the general one that the charge did not refer to “a valid binding agreement in law.”

The Court then gave the jury the following additional instruction :

“Members of the Jury: Counsel for the defendant has asked me to add one point to the charge that I have just given you. He has asked me to instruct you that there must be a valid binding agreement.
“There has been some testimony from the defendant that he was forced to make an agreement. In fact, I think in fairness to the defendant I should say that he definitely denies having made that agreement.
“Now, there is a defense in the law of contracts called duress. If you enter into a contract as a result of coercion, or force or threats it might be an invalid agreement. * * *
“So that, in fairness to both sides, I add to my instruction that even if the defendant has admitted making an agreement — and I leave that to your recollection of the facts — if you feel that the agreement was invalid by reason of his having been forced to it, then there should not be such an agreement that he should be forced to adhere to it.”

The Court then asked the attorneys if they were ready for *364argument. There was no further exception to the charge. Counsel on both sides informed the Court that they were ready to argue the case to the jury. Before the jury retires to consider its verdict, a party may object to any portion of any instruction given, or to any omission therefrom, or to the failure to give any instruction, stating distinctly the portion, or omission, or failure to instruct, to which he objects and the specific grounds of his objection. On appeal a party, in assigning error in the instructions, is restricted to (1) the particular portion of the instructions given, or the particular omission therefrom, or the particular failure to instruct, distinctly objected to before the jury retired, and (2) the specific grounds of objection distinctly stated at that time. Under our rules, no other errors or assignments of error in the instructions are considered by the Court of Appeals. General Rules of Practice and Procedure, part 3, subd. 3, rule 6; State Roads Commission of Maryland v. Berry, 208 Md. 461, 469, 118 A. 2d 649, 653.

As we have found no reversible error in the rulings and instructions of the trial Court, we will affirm the judgment entered on the verdict of the jury.

Judgment affirmed, with costs.

2.13 Restatement 2d of Contracts § 73 [+ cmts. a, b, c, d] 2.13 Restatement 2d of Contracts § 73 [+ cmts. a, b, c, d]

§ 73 Performance of Legal Duty
  • Performance of a legal duty owed to a promisor which is neither doubtful nor the subject of honest dispute is not consideration; but a similar performance is consideration if it differs from what was required by the duty in a way which reflects more than a pretense of bargain.
Comment:
a. Rationale. A claim that the performance of a legal duty furnished consideration for a promise often raises a suspicion that the transaction was gratuitous or mistaken or unconscionable. If the performance was not in fact bargained for and given in exchange for the promise, the case is not within this Section: in such cases there is no consideration under the rule stated in § 71(1). Mistake, misrepresentation, duress, undue influence, or public policy may invalidate the transaction even though there is consideration. See Chapters 6-8. But the rule of this Section renders unnecessary any inquiry into the existence of such an invalidating cause, and denies enforcement to some promises which would otherwise be valid. Because of the likelihood that the promise was obtained by an express or implied threat to withhold performance of a legal duty, the promise does not have the presumptive social utility normally found in a bargain. Enforcement must therefore rest on some substantive or formal basis other than the mere fact of bargain. See Comments b and c to § 72. As to such bases, see Topics 2 and 3, and particularly § 89.
b. Public duties; torts and crimes. A legal duty may be owed to the promisor as a member of the public, as when the promisee is a public official. In such cases there is often no direct sanction available to a member of the public to compel performance of the duty, and the danger of express or implied threats to withhold performance affects public as well as private interests. A bargain by a public official to obtain private advantage for performing his duty is therefore unenforceable as against public policy. See Chapter 8. And under this Section performance of the duty is not consideration for a promise.
Similar reasoning may apply to duties of public utilities, duties of fiduciaries, and in some cases to duties of citizens generally. Thus a bargain to pay a witness for testimony may be unenforceable as against public policy. See §§ 178- 80. A bargain induced by an improper threat may be voidable for duress. See §§ 175- 76. If the only thing bargained for is forbearance to commit a crime or tort, the bargain may be unenforceable as against public policy. See § 178. The performance of legal duty is not consideration for a promise in any such case if the duty is owed to the promisor. If the legal duty is not owed to the promisor, there is consideration but the violation of public policy or other invalidating cause may remain.
In applying this Section it is first necessary to define the legal duty. The requirement of consideration is satisfied if the duty is doubtful or is the subject of honest dispute, or if the consideration includes a performance in addition to or materially different from the performance of the duty. Whether such facts eliminate duress or violation of public policy or other invalidating cause depends on the circumstances. Ordinarily a mere formality such as the affixing of a seal, though sufficient to render consideration unnecessary, does not cure such defects. In some situations, however, where there is no other invalidating cause but lack of consideration, the bargain may be enforceable by virtue of reliance or unjust enrichment or formality. See §§ 82- 109.
  • Illustrations:
    • 1. A offers a reward to whoever produces evidence leading to the arrest and conviction of the murderer of B. C produces such evidence in the performance of his duty as a police officer. C's performance is not consideration for A's promise.
    • 2. In Illustration 1, C's duties as a police officer are limited to crimes committed in a particular State, and while on vacation he gathers evidence as to a crime committed elsewhere. C's performance is consideration for the promise.
    • 3. In a State where contracts between husband and wife are enforced and spouses are under a duty not to leave without just cause, A's wife, B, leaves him without just cause. A promises to pay B $1,000 if she will return. Induced thereby, B returns. Her return is not consideration. Compare §§ 175- 77, 190.
c. Contractual duty to the promisor. Legal remedies for breach of contract ordinarily involve delay and expense and rarely put the promisee in fully as good a position as voluntary performance. It is therefore often to a promisee's advantage to offer a bonus to a recalcitrant promisor to induce performance without legal proceedings, and an unscrupulous promisor may threaten breach in order to obtain such a bonus. In extreme cases, a bargain for additional compensation under such circumstances may be voidable for duress. See §§ 175- 76. And the lack of social utility in such bargains provides what modern justification there is for the rule that performance of a contractual duty is not consideration for a new promise.
But the rule has not been limited to cases where there was a possibility of unfair pressure, and it has been much criticized as resting on scholastic logic. Slight variations of circumstance are commonly held to take a case out of the rule, particularly where the parties have made an equitable adjustment in the course of performance of a continuing contract, or where an impecunious debtor has paid part of his debt in satisfaction of the whole. See §§ 89, 273- 77. And in some states the rule has simply been repudiated.
  • Illustrations:
    • 4. A, an architect, agrees with B to superintend a construction project for a fixed fee. During the course of the project, without excuse, A takes away his plans and refuses to continue, and B promises him an extra fee if A will resume work. A's resumption of work is not consideration for B's promise of an extra fee.
    • 5. A files a claim for total disability under an accident insurance policy written by B. Without investigation, discussion or dispute, B pays A the lesser amount which would be payable for partial disability, and A signs a receipt for “full payment” of the claim. The payment is not consideration for A's promise to accept it in full satisfaction of his claim for total disability.
    • 6. A, being insolvent and contemplating bankruptcy, offers B $30 in full settlement of a debt of $100. B dissuades A from going into bankruptcy, accepts the offer, receives the money, and closes the account. A's forbearance to seek a discharge in bankruptcy is consideration for B's promise not to seek further payment.
    • 7. A owes B a liquidated sum. Any payment by A at an earlier time, or in a different medium from that required by the duty, is consideration for B's promise to accept it in full satisfaction if the difference in performance is part of what is requested and given in exchange for the promise.
    • 8. A owes B a matured liquidated debt bearing interest. Mutual promises to extend the debt for a year even at a lower rate of interest are binding. By such an agreement A gives up the right to terminate the running of interest by paying the debt.
d. Contractual duty to third person. The rule that performance of legal duty is not consideration for a promise has often been applied in cases involving a contractual duty owed to a person other than the promisor. In such cases, however, there is less likelihood of economic coercion or other unfair pressure than there is if the duty is owed to the promisee. In some cases consideration can be found in the fact that the promisee gives up his right to propose to the third person the rescission or modification of the contractual duty. But the tendency of the law has been simply to hold that performance of contractual duty can be consideration if the duty is not owed to the promisor. Relief may still be given to the promisor in appropriate cases under the rules governing duress and other invalidating causes.
  • Illustrations:
    • 9. A and B are engaged to be married. In an antenuptial agreement C, A's father, promises B that C will pay an annuity to A, and A and B marry in reliance on the promise. The marriage is consideration for C's promise.
    • 10. A and her husband B are employed as domestic servants of C. B having become ill, C employs A to care for B in the home of A and B. A's care for B is consideration for C's promise to pay wages to A.
    • 11. A contracts with B to install heating units in houses being built by B for C. B becomes insolvent and discontinues work, and C promises to pay A if A completes the installation in accordance with the contract between A and B. A's performance is consideration for C's promise.
    • 12. A is employed to drive B's horse in a race. C owns the dam of B's horse and is entitled to a prize if B's horse wins the race. C promises A a bonus if he wins the race. A's driving in the race is consideration for C's promise, but B may be entitled to the bonus. See Restatement, Second, Agency §§ 313, 388.

2.14 Lake Land Employment Group of Akron, LLC v. Columber 2.14 Lake Land Employment Group of Akron, LLC v. Columber

Supreme Court of Ohio
101 Ohio St. 3d 242
No. 2002-2069
2004-03-10

Lake Land Employment Group of Akron, LLC, Appellant, v. Columber, Appellee, et al.

[Cite as Lake Land Emp. Group of Akron, LLC v. Columber, 101 Ohio St.3d 242, 2004-Ohio-786.]

*243(No. 2002-2069

Submitted September 24, 2003

Decided March 10, 2004.)

Moyer, C.J.

{¶ 1} Lake Land Employment Group of Akron, LLC (“Lake Land”), appellant, initiated this action by filing a complaint asserting that its ex-employee, appellee Lee Columber, had breached a noncompetition agreement the parties had executed. The agreement provided that for a period of three years after his termination of employment Columber would not engage in any business within a 50-mile radius of Akron, Ohio, that competed with the business of Lake Land. Lake Land further claimed that Columber’s employment with Lake Land terminated in 2001 and that he thereafter violated the terms of the noncompetition agreement. Lake Land sought money damages and an order prohibiting Columber from engaging in any activities that violated the noncompetition agreement.

{¶ 2} Columber answered and admitted that he had been employed by Lake Land from 1988 until 2001. He further admitted that he had signed the noncompetition agreement and that following his discharge from Lake Land he had formed a corporation that is engaged in a business similar to that of Lake Land. Columber pled lack of consideration in his answer.

{¶ 3} Columber moved for summary judgment, claiming that the noncompetition agreement was unenforceable. He asserted that the agreement was not supported by consideration and that the restrictions in the agreement were overly restrictive and imposed an undue hardship on him.

{¶ 4} Columber could remember very little about the presentation or execution of the noncompetition agreement. He could not remember whether he had been told that his continued employment was dependent upon execution of the agreement or whether he had posed questions about the restrictions it contained. He testified that he vaguely remembered signing the agreement after his employer presented it to him and told him to read and sign it. He acknowledged that he *244had read the agreement, but had not talked to an attorney or anybody else about it. The at-will relationship of the parties continued for ten years thereafter.

{¶ 5} The trial court granted summary judgment in Columber’s favor. It found no dispute that Columber had been employed by Lake Land beginning in 1988 and that Columber signed the agreement in September 1991. It further found no dispute that there “was no increase of salary, benefits, or other remunerations given as consideration for Columber signing the non-competition agreement” and “no change in his employment status in connection with the signing of the noncompetition agreement.” The trial court concluded that the noncompetition agreement lacked consideration, and was unenforceable. The trial court therefore found it unnecessary to determine the reasonableness of the temporal and geographical restrictions in the noncompetition agreement.

{¶ 6} The court of appeals affirmed. It certified a conflict, however, between its decision and the judgments of the Eighth District Court of Appeals in Swagelok Co. v. Young, 8th Dist. No. 78976, 2002-Ohio-3416, 2002 WL 1454058, and the Twelfth District Court of Appeals in Willis Refrigeration, Air Conditioning & Heating, Inc. v. Maynard (Jan. 18, 2000), 12th Dist. No. CA99-05-047, 2000 WL 36102. The certified issue is “Is subsequent employment alone sufficient consideration to support a covenant-not-to-compete agreement with an at-will employee entered into after employment has already begun?”

I

Legal Background

{¶ 7} Generally, courts look upon noncompetition agreements with some skepticism and have cautiously considered and carefully scrutinized them. Ingram, Covenants Not to Compete (2002), 36 Akron L.Rev. 49, 50. Under English common law, agreements in restraint of trade, including noncompetition agreements, were disfavored as being against public policy, although partial restraints supported by fair consideration were upheld. Lange v. Werk (1853), 2 Ohio St. 519, 527-528, 1853 WL 117, citing Mitchel v. Reynolds (1711), 1 P. Wms. 181, 24 Eng.Rep. 347. In a society in which working men entered skilled trades only by serving apprenticeships, and mobility was minimal, restrictive covenants precluding an ex-employee from competing with his ex-employer “either destroyed a man’s means of livelihood, or bound him to his master for life.” Raimonde v. Van Vlerah (1975), 42 Ohio St.2d 21, 71 O.O.2d 12, 325 N.E.2d 544.

{¶ 8} Modern economic realities, however, do not justify a strict prohibition of noncompetition agreements between employer and employee in an at-will relationship. “The law upholds these agreements because they allow the parties to work together to expand output and competition. If one party can trust the other with confidential information and secrets, then both parties are better *245positioned to compete with the rest of the world. * * * By protecting ancillary covenants not to compete, even after an employee has launched his own firm, the law ‘makes it easier for people to cooperate productively in the first place.’ ” KW Plastics v. United States Can Co. (Feb. 2, 2001), M.D. Ala. Nos. Civ. A. 99-D-286-N and 99-D-878-N, 2001 WL 135722, quoting Polk Bros., Inc. v. Forest City Ent., Inc. (C.A.7, 1985), 776 F.2d 185, 189.

{¶ 9} Accordingly, this court has long recognized the validity of agreements that restrict competition by an ex-employee if they contain reasonable geographical and temporal restrictions. Briggs v. Butler (1942), 140 Ohio St. 499, 507, 24 O.O. 523, 45 N.E.2d 757. Such an agreement does not violate public policy, “being reasonably necessary for the protection of the employer’s business, and not unreasonably restrictive upon the rights of the employee.” Id. at 508, 24 O.O. 523, 45 N.E.2d 757.

{¶ 10} In Rogers v. Runfola & Assoc., Inc. (1991), 57 Ohio St.3d 5, 565 N.E.2d 540, this court found valid a noncompetition clause in a written contract for a one-year term of employment that was subject to automatic renewal, in which the employer agreed to discharge the employee only for specified reasons. We rejected the argument of the ex-employee that her promise not to compete lacked consideration in light of the “the exchange of mutually beneficial promises,” id. at 7, 565 N.E.2d 540, even though the agreement was signed well after the employment relationship had begun. The case at bar, however, is distinguishable, as it involves an at-will employee who had no express contractual expectation of, or legal entitlement to, continued employment.

{¶ 11} Jurisdictions throughout the country are split on the issue presented by the certified question. See, generally, Annotation, Sufficiency of Consideration for Employee’s Covenant Not to Compete, Entered into after Inception of Employment (1973), 51 A.L.R.3d 825. As summarized by the Supreme Court of Minnesota, “cases which have held that continued employment is not a sufficient consideration stress the fact that an employee frequently has no bargaining power once he is employed and can easily be coerced. By signing a noncompetition agreement, the employee gets no more from his employer than he already has,[1] and in such cases there is a danger that an employer does not need protection for his investment in the employee but instead seeks to impose barriers to prevent an employee from securing a better job elsewhere. Decisions in which continued employment has been deemed a sufficient consideration for a noncompetition agreement have focused on a variety of factors, including the *246possibility that the employee would otherwise have been discharged, the employee was actually employed for a substantial time after executing the contract, or the employee received additional compensation or training or was given confidential information after he signed the agreement.” (Citations omitted.) Davies & Davies Agency, Inc. v. Davies (Minn.1980), 298 N.W.2d 127, 130.

{¶ 12} More recently, some courts have found sufficient consideration in an at-will employment situation where a substantial period of employment ensues after a noncompetition covenant is executed, especially when the continued employment is accompanied by raises, promotion, or similar tangible benefits. 6 Lord, Williston on Contracts (4th Ed.1995), Section 13:13. These courts thereby implicitly find that the execution of a noncompetition agreement changes the prior employment relationship from one purely at will. Id. at 577-584. In effect, these courts infer a promise on the part of the employer to continue the employment of his previously at-will employee for an indefinite yet substantial term. Under this approach, however, neither party knows whether the agreement is enforceable until events occur after its execution.

{¶ 13} This diversity of approach to the issue is reflected in opinions of the courts of appeals of this state. In addition to the cases cited by the court of appeals as being in conflict with its judgment, see, also, Copeco, Inc. v. Caley (1992), 91 Ohio App.3d 474, 632 N.E.2d 1299; Canter v. Tucker (1996), 110 Ohio App.3d 421, 674 N.E.2d 727; Prinz Office Equip. Co. v. Pesko (Jan. 31, 1990), Summit App. No. 14155, 1990 WL 7996; and Swagelok, 2002-Ohio-3416, ¶ 22 (recognizing that the majority of Ohio districts ruling on the issue have found that continued employment does constitute sufficient consideration to enforce a noncompetition agreement entered into after the commencement of the employment relationship).

II

Formation of Binding Contract

{¶ 14} The elements of a contract include the following: an offer, an acceptance, contractual capacity, consideration (the bargained-for legal benefit or detriment), a manifestation of mutual assent, and legality of object and of consideration. Kostelnik v. Helper, 96 Ohio St.3d 1, 2002-Ohio-2985, 770 N.E.2d 58, ¶ 16.

{¶ 15} The certified question puts in issue only the element of consideration. It asks, “Is subsequent employment alone sufficient consideration to support a covenant-not-to-compete agreement with an at-will employee entered into after employment has already begun?” We conclude that forbearance on the part of an at-will employer from discharging an at-will employee serves as consideration to support a noncompetition agreement.

*247{¶ 16} This court has long recognized the rule that a contract is not binding unless supported by consideration. Judy v. Louderman (1891), 48 Ohio St. 562, 29 N.E. 181, paragraph two of the syllabus. Consideration may consist of either a detriment to the promisee or a benefit to the promisor. Irwin v. Lombard Univ. (1897), 56 Ohio St. 9, 19, 46 N.E. 63. A benefit may consist of some right, interest, or profit accruing to the promisor, while a detriment may consist of some forbearance, loss, or responsibility given, suffered, or undertaken by the promisee. Id. at 20, 46 N.E. 63. See, also, Brads v. First Baptist Church (1993), 89 Ohio App.3d 328, 336, 624 N.E.2d 737; Nilavar v. Osborn (1998), 127 Ohio App.3d 1, 15, 711 N.E.2d 726; Mooney v. Green (1982), 4 Ohio App.3d 175, 177, 4 OBR 276, 446 N.E.2d 1135.

{¶ 17} At-will employment is contractual in nature. Floyd v. DuBois Soap Co. (1942), 139 Ohio St. 520, 530-531, 23 O.O. 20, 41 N.E.2d 393. In such a relationship, the employee agrees to perform work under the direction and control of the employer, and the employer agrees to pay the employee at an agreed rate. Moreover, either an employer or an employee in a pure at-will employment relationship may legally terminate the employment relationship at any time and for any reason. Mers v. Dispatch Printing Co. (1985), 19 Ohio St.3d 100, 103, 19 OBR 261, 483 N.E.2d 150. In the event that an at-will employee quits or is fired, he or she provides no further services for the employer and is generally entitled only to wages and benefits already earned.

{¶ 18} It follows that either an employer or an employee in an at-will relationship may propose to change the terms of their employment relationship at any time. If, for instance, an employer notifies an employee that the employee’s compensation will be reduced, the employee’s remedy, if dissatisfied, is to quit. Similarly, if the employee proposes to the employer that he deserves a raise and will no longer work at his current rate, the employer may either negotiate an increase or accept the loss of his employee. In either event the employee is entitled to be paid only for services already rendered pursuant to terms to which they both have agreed. Thus, mutual promises to employ and to be employed on an ongoing at-will basis, according to agreed terms, are supported by consideration: the promise of one serves as consideration for the promise of the other.

{¶ 19} The presentation of a noncompetition agreement by an employer to an at-will employee is, in effect, a proposal to renegotiate the terms of the parties’ at-will employment. Where an employer makes such a proposal by presenting his employee with a noncompetition agreement and the employee assents to it, thereby accepting continued employment on new terms, consideration supporting the noncompetition agreement exists. The employee’s assent to the agreement is given in exchange for forbearance on the part of the employer from terminating the employee.

*248{¶ 20} We therefore hold that consideration exists to support a noncompetition agreement when, in exchange for the assent of an at-will employee to a proffered noncompetition agreement, the employer continues an at-will employment relationship that could legally be terminated without cause.

Ill

Caveat

{¶ 21} We concur in the view that in cases involving noncompetition agreements, “as in other cases, it is still believed to be good policy to let people make their own bargains and their own valuations.” 15 Corbin on Contracts (Interim Ed.2002) 96-97, Section 1395. Professor Corbin suggests that courts should inquire into the sufficiency of consideration in cases involving noncompetition agreements by examining the extent and character of the consideration received by the promisor-employee, “even though we do not do so in ordinary contract cases.” Id. at 94-95.

{¶ 22} Our decision today does no more than recognize that consideration exists where an at-will employer and an at-will employee continue their employment relationship, rather than terminate it, after the employer imposes a new requirement for employment, i.e., execution of a noncompetition agreement by the employee. While we are not prepared to abandon our long-established precedent that courts may not inquire into the adequacy of consideration, we do not disagree with Corbin’s conclusion that the validity of a restraining contract such as a noncompetition agreement should be “determined by weighing as best we can the sum-total of all factors standing together.” Id. at 97. We simply recognize that weighing of these factors should not be performed in the context of an inquiry concerning the sufficiency of consideration. That balancing instead should occur in the context of our established precedent recognizing that only reasonable noncompetition agreements are enforceable. We reaffirm the law set forth in paragraphs one and two of the syllabus to Raimonde, as follows:

{¶ 23} “1. A covenant not to compete which imposes unreasonable restrictions upon an employee will be enforced to the extent necessary to protect an employer’s legitimate interests. * * *

{¶ 24} “2. A covenant restraining an employee from competing with his former employer upon termination of employment is reasonable if the restraint is no greater than is required for the protection of the employer, does not impose undue hardship on the employee, and is not injurious to the public.” 42 Ohio St.2d 21, 71 0.0.2d 12, 325 N.E.2d 544.

{¶ 25} Our refusal to sanction judicial inquiry into the adequacy of consideration in cases similar to the one at bar does not exclude consideration of other requisites of a contract. It remains the law that noncompetition agreements, like *249other purported contractual arrangements, may be voidable or unenforceable for reasons other than lack of consideration.

IV

Disposition

{¶ 26} Both Columber and his employer had a legal right to terminate their at-will employment relationship when Columber was presented with the noncompetition agreement in 1991. Neither party exercised that legal right to terminate the employment relationship, and, in fact, Columber continued working for the appellant for an additional ten years. Accordingly, the noncompetition agreement is not void for lack of consideration, and summary judgment in Columber’s favor should not have been entered on that basis.

{¶ 27} Although the trial court erred in entering summary judgment based on its determination that the noncompetition agreement lacked consideration, it must yet determine whether the noncompetition agreement is reasonable pursuant to controlling precedent. We therefore reverse the judgment of the court of appeals and remand the cause for further proceedings.

Judgment reversed and cause remanded.

Lundberg Stratton, O’Connor and Handwork, JJ., concur.

Resnick, J., dissents.

F.E. Sweeney, J., dissents.

Pfeifer, J., dissents.

Peter M. Handwork, J., of the Sixth Appellate District, sitting for O’Donnell, J.

Alice Robie Resnick, J.,

dissenting.

{¶ 28} Courts everywhere are sharply divided on the present certified issue. However, I adhere to the principle that continued employment in an at-will situation does not by itself constitute consideration. I respectfully dissent.

{¶ 29} As the majority confirms, “a contract is not binding unless supported by consideration,” which is generally defined as “a detriment to the promisee or a benefit to the promisor.” Thus, in order for the September 1991 noncompetition agreement executed between appellant, Lake Land Employment Group of Akron, LLC, and appellee, Lee Columber, to be binding, either Lake Land must have given something for it or Columber must have received something in return. *250Yet, when all is said and done, the only difference in the parties’ employment relationship before and after September 1991 is the noncompetition agreement.

{¶ 30} The majority’s holding that “[c]onsideration exists to support a noncom-petition agreement when * * * the employer continues an at-will employment relationship * * *” belies itself. If the same at-will employment relationship continues, where is the consideration? The employer has relinquished nothing, since it retains exactly the same preexisting right it always had to discharge the employee at any time, for any reason, for no reason, with or without cause. The employee has gained nothing, for he has not been given or promised anything other than that which he already had, which is “employment which need not last longer than the ink is dry upon [his] signature.” Kadis v. Britt (1944), 224 N.C. 154, 163, 29 S.E.2d 543. It is precisely because the same at-will employment relationship continues that there is no consideration.

{¶ 31} In fact, the majority endeavors to transform this mutual exchange of nothing into consideration by formulating such artful euphemisms as “forbearance on the part of an at-will employer from discharging an at-will employee,” “mutual promises to employ and to be employed on an ongoing at-will basis,” and “a proposal to renegotiate the terms of the parties’ at-will employment.” But in the end, the employer simply winds up with both the noncompetition agreement and the continued right to discharge the employee at will, while the employee is left with the same preexisting “nonright” to be employed for so long as the employer decides not to fire him. The only actual “forbearance,” “proposal,” or “promise” made by the employer in this situation is declining to fire the employee until he executes the noncompetition agreement.

{¶ 32} Moreover, the majority’s holding and supporting rationale would allow the enforcement of a noncompetition agreement that was exacted from an employee who, at the time of execution, had already acquired all the knowledge his or her position affords and who was fired the day after affixing his or her signature to the document. In cryptic fashion, the majority is essentially bolding that a restrictive covenant may henceforth be exacted from an at-will employee without any supporting consideration.

{¶ 33} Thus, as well summarized in one analysis:

{¶ 34} “ ‘A contract by an employee not to divulge information obtained in the employment and not to engage in other employment in a similar business for two years after the cessation of his employment is not supported by a sufficient consideration where it [is] not executed until after he has been in the employment for several years, his position and duties and the nature of the business remain exactly the same as before, and the employer, reserving the right to discharge him at any time, does 'not assume any obligation which he does not already have.’ ” Morgan Lumber Sales Co. v. Toth (1974), 41 Ohio Misc. 17, 19, 70 O.O.2d *25133, 321 N.E.2d 907, quoting Headnote 1 to Kadis v. Britt, supra, as reported in 152 A.L.R. 405.

Waldheger-Coyne Co., L.P.A., Walter F. Ehrnfelt, Mary J. Giganti and Luke F. McConville, for appellant.

Riek & Associates Co., L.P.A., and F. Benjamin Riek III; and Susan Lax, for appellee.

{¶ 35} Since the noncompetition agreement in this case lacked consideration and therefore was unenforceable, I would affirm the judgment of the court of appeals.

Pfeifer, J.,

dissenting.

{¶ 36} I concur with Justice Resnick’s dissent — an employer’s agreement not to terminate an employee if the employee signs a noncompetition agreement does not constitute consideration. It constitutes coercion.

{¶ 37} But the majority has found otherwise. In doing so, the majority must acknowledge that the execution of a noncompetition agreement for which forbearance from discharge is the consideration alters the at-will nature of the employment relationship. Any promise of continued employment removes the employment from the realm of an at-will relationship. For some undefined time, the employer must continue to employ the signer of the agreement. How long a period is enough? The absence of a specified term for the forbearance from discharge will leave courts to determine what is reasonable.

{¶ 38} Employers could prevent noncompetition agreements from intruding into the at-will relationship by not tying consideration to continued employment. A separate, monetary consideration could ensure that the noncompetition agreement stays a separate arrangement.

2.15 Mattei v. Hopper 2.15 Mattei v. Hopper

Supreme Court of California
51 Cal. 2d 119
S. F. No. 19806
1958-10-24

[S. F. No. 19806.

In Bank.

Oct. 24, 1958.]

PETER O. MATTEI, Appellant, v. AMELIA F. HOPPER, Respondent.

*121Jay R. Martin and William F. Sharon for Appellant.

Carlson, Collins, Gordon & Bold, George R. Gordon, John L. Garaventa and Dean Ormsby for Respondent.

SPENCE, J.

Plaintiff brought this action for damages after defendant allegedly breached a contract by failing to convey her real property in accordance with the terms of a deposit receipt which the parties had executed. After a trial without a jury, the court concluded that the agreement was “illusory” and lacking in “mutuality.” From the judgment accordingly entered in favor of defendant, plaintiff appeals.

Plaintiff was a real estate developer. He was planning to construct a shopping center on a tract adjacent to defendant’s land. For several months, a real estate agent attempted to negotiate a sale of defendant’s property under terms agreeable to both parties. After several of plaintiff’s proposals had been rejected by defendant because of the inadequacy of the price offered, defendant submitted an offer. Plaintiff accepted on the same day.

The parties’ written agreement was evidenced on a form supplied by the real estate agent, commonly known as a deposit receipt. Under its terms, plaintiff was required to deposit $1,000 of the total purchase price of $57,500 with the real estate agent, and was given 120 days to “examine the title and consummate the purchase.” At the expiration of that period, the balance of the price was “due and payable upon tender of a good and sufficient deed of the property sold.” The concluding paragraph of the deposit receipt provided: “Subject to Coldwell Banker & Company obtaining leases satisfactory to the purchaser.” This clause and the 120-day period were desired by plaintiff as a means for arranging satisfactory leases of the shopping center buildings prior to the time he was finally committed to pay the balance of the purchase price and to take title to defendant’s property.

Plaintiff took the first step in complying with the agreement by turning over the $1,000 deposit to the real estate agent. While he was in the process of securing the leases and before the 120 days had elapsed, defendant’s attorney notified plaintiff that defendant would not sell her land under the terms *122contained in the deposit receipt. Thereafter, defendant was informed that satisfactory leases had been obtained and that plaintiff had offered to pay the balance of the purchase price. Defendant failed to tender the deed as provided in the deposit receipt.

Initially, defendant’s thesis that the deposit receipt constituted no more than an offer by her, which could only be accepted by plaintiff notifying her that all of the desired leases had been obtained and were satisfactory to him, must be rejected. Nowhere does the agreement mention the necessity of any such notice. Nor does the provision making the agreement “subject to” plaintiff’s securing “satisfactory” leases necessarily constitute a condition to the existence of a contract. Rather, the whole purchase receipt and this particular clause must be read as merely making plaintiff’s performance dependent on the obtaining of “satisfactory” leases. Thus a contract arose, and plaintiff was given the power and privilege to terminate it in the event he did not obtain such leases. (See 3 Corbin, Contracts (1951), § 647, pp. 581-585.) This accords with the general view that deposit receipts are binding and enforceable contracts. (Cal. Practice Hand Book, Legal Aspects of Real Estate Transactions (1956), p. 63.)

However, the inclusion of this clause, specifying that leases “satisfactory” to plaintiff must be secured before he would be bound to perform, raises the basic question whether the consideration supporting the contract was thereby vitiated. When the parties attempt, as here, to make a contract where promises are exchanged as the consideration, the promises must be mutual in obligation. In other words, for the contract to bind either party, both must have assumed some legal obligations. Without this mutuality of obligation, the agreement lacks consideration and no enforceable contract has been created. (Shortell v. Evans-Ferguson Corp., 98 Cal.App. 650, 660-662 [277 P. 519]; 1 Corbin, Contracts (1950), § 152, pp. 496-502.) Or, if one of the promises leaves a party free to perform or to withdraw from the agreement at his own unrestricted pleasure, the promise is deemed illusory and it provides no consideration. (See J. C. Millett Co. v. Park & Tilford Distillers Corp. [N.D. Cal.], 123 F.Supp. 484, 493.) Whether these problems are couched in terms of mutuality of obligation or the illusory hature of a promise, the underlying issue is the same—consideration. (Ibid.)

While contracts making the duty of performance of one of the parties conditional upon his satisfaction would seem *123to give him wide latitude in avoiding any obligation and thus present serious consideration problems, such “satisfaction” clauses have been given effect. They have been divided into two primary categories and have been accorded different treatment on that basis. First, in those contracts where the condition calls for satisfaction as to commercial value or quality, operative fitness, or mechanical utility, dissatisfaction cannot be claimed arbitrarily, unreasonably, or capriciously (Collins v. Tickler Manor, Inc., 47 Cal.2d 875, 882-883 [306 P.2d 783]), and the standard of a reasonable person is used in determining whether satisfaction has been received. (Thomas Haverty Co. v. Jones, 185 Cal. 285, 296 [197 P. 105]; Fielding & Shepley, Inc. v. Dow, 72 Cal.App.2d 18, 21 [163 P.2d 908] ; Fruit Growers Supply Co. v. Goss, 4 Cal.App. 2d 651, 654 [41 P.2d 357]; Scott Co., Inc. v. Rolkin, 133 Cal. App. 209, 212 [23 P.2d 1065] ; Melton v. Story, 113 Cal.App. 609, 612-614 [298 P. 1032]; Jones-McLaughlin, Inc. v. Kelly, 100 Cal.App. 315, 321-325 [279 P. 1076] ; Bruner v. Hegyi, 42 Cal.App. 97, 99 [183 P. 369].) Of the cited eases, two have expressly rejected the arguments that such clauses either rendered the contracts illusory (Collins v. Vickter Manor, Inc., supra) or deprived the promises of their mutuality of obligation. (Melton v. Story, supra.) The remaining cases tacitly assumed the creation of a valid contract. However, it would seem that the factors involved in determining whether a lease is satisfactory to the lessor are too numerous and varied to permit the application of a reasonable man standard as envisioned by this line of eases. Illustrative of some of the factors which would have to be considered in this case are the duration of the leases, their provisions for renewal options, if any, their covenants and restrictions, the amounts of the rentals, the financial responsibility of the lessees, and the character of the lessees’ businesses.

This multiplicity of factors which must be considered in evaluating a lease shows that this case more appropriately falls within the second line of authorities dealing with 11 satisfaction” clauses, being those involving fancy, taste, or judgment. Where the question is one of judgment, the promisor’s determination that he is not satisfied, when made in good faith, has been held to be a defense to an action on the contract. (Tiffany v. Pacific Sewer Pipe Co., 180 Cal. 700, 702-705 [182 P. 428, 6 A.L.R. 1493] ; Brenner v. Redlick Furniture Co., 113 Cal.App. 343, 346-347 [298 P. 62] ; Kendis v. Cohn, 90 Cal.App. 41, 66-68 [265 P. 844]; Schuyler v. *124 Pantages, 54 Cal.App. 83, 85-87 [201 P. 137]; see also Van Demark v. California H. E. Assn., 43 Cal.App. 685, 687-689 [185 P. 866].) Although these decisions do not expressly discuss the issues of mutuality of obligation or illusory promises, they necessarily imply that the promisor’s duty to exercise his judgment in good faith is an adequate consideration to support the contract. None of these cases voided the contracts on the ground that they were illusory or lacking in mutuality of obligation. Defendant’s attempts to distinguish these eases are unavailing, since they are predicated upon the assumption that the deposit receipt was not a contract making plaintiff’s performance conditional on his satisfaction. As seen above, this was the precise nature of the agreement. Even though the “satisfaction” clauses discussed in the above-cited cases dealt with performances to be received as parts of the agreed exchanges, the fact that the leases here which determined plaintiff’s satisfaction were not part of the performance to be rendered is not material. The standard of evaluating plaintiff’s satisfaction—good faith—applies with equal vigor to this type of condition and prevents it from nullifying the consideration otherwise present in the promises exchanged.

Moreover, the secondary authorities are in accord with the California cases on the general principles governing “satisfaction” contracts. “It has been questioned whether an agreement in which the promise of one party is conditioned on his own or the other party’s satisfaction contains the elements of a contract—whether the agreement is not illusory in character because conditioned upon the whim or caprice of the party to be satisfied. Since, however, such a promise is generally considered as requiring a performance which shall be satisfactory to him in the exercise of an honest judgment, such contracts have been almost universally upheld.” (3 Williston, Contracts (rev. ed. 1936), § 675a, p. 1943; see also 3 Corbin, Contracts (1951), §§ 644, 645, pp. 560-572.) “A promise conditional upon the promisor’s satisfaction is not illusory since it means more than that validity of the performance is to depend on the arbitrary choice of the promisor. His expression of dissatisfaction is not conclusive. That may show only that he has become dissatisfied with the contract; he must be dissatisfied with the performance, as a performance of the contract, and his dissatisfaction must be genuine.” (Rest., Contracts (1932), § 265, comment a.)

If the foregoing cases and other authorities were the *125only ones relevant, there would he little doubt that the deposit receipt here should not be deemed illusory or lacking in mutuality of obligation because it contained the “satisfaction” clause. However, language in two recent cases led the trial court to the contrary conclusion. The first ease, Lawrence Block Co. v. Palston, 123 Cal.App.2d 300 [266 P.2d 856], stated that the following two conditions placed in an offer to buy an apartment building would have made the resulting contract illusory “O.P.A. Rent statements to be approved by Buyer” and “Subject to buyer’s inspection and approval of all apartments.” These provisions were said to give the purchaser “unrestricted discretion” in deciding whether he would be bound to the contract and to provide no “standard” which could be used in compelling him to perform. (123 Cal. App.2d at pp. 308-309.) However, this language was not necessary to the decision. The plaintiff in Lawrence Block Company was a real estate broker seeking a commission, his right to which depended upon the existence of a binding agreement between the buyer and seller. The seller had not accepted the buyer’s offer as originally written, but had added other conditions. This change constituted a counter-offer. Since the latter was not accepted by the buyer, no binding contract was created and the broker was not entitled to his commission.

The other case, Pruitt v. Fontana, 143 Cal.App.2d 675 [300 P.2d 371], presented a similar situation. The court concluded that the written instrument with a provision making the sale of land subject to the covenants and easements being “approved by the buyers” was illusory. It employed both the reasoning and language of Lawrence Block Co. in deciding that this clause provided no “objective criterion” preventing the buyers from exercising an “unrestricted subjective discretion” in deciding whether they would be bound. (143 Cal.App.2d at pp. 684-685.) But again, this language was not necessary to the result reached. The buyers in Pruitt refused to approve all of the easements of record, and the parties entered into a new and different oral agreement. The defendant seller was held to be estopped to assert the statute of frauds against this subsequent contract, and the judgment of dismissal entered after the sustaining of demurrers was reversed.

While the language in these two cases might be dismissed as mere dicta, the fact that the trial court relied thereon re*126quires us to examine the reasoning employed. Both courts were concerned with finding an objective standard by which they could compel performance. This view apparently stems from the statement in Lawrence Bloch Company that “The standard ‘as to the satisfaction of a reasonable person’ does not apply where the performance involves a matter dependent on judgment.’’ (123 Cal.App.2d at p. 309.) By making this assertion without any qualification, the court necessarily implied that there is no other standard available. Of course, this entirely disregards those cases which have upheld “satisfaction’’ clauses dependent on the exercise of judgment. In such eases, the criterion becomes one of good faith. Insofar as the language in Lawrence Bloch Company and Pruitt represented a departure from the established rules governing “satisfaction’’ clauses, they are hereby disapproved.

We conclude that the contract here was neither illusory nor lacking in mutuality of obligation because the parties inserted a provision in their contract making plaintiff’s performance dependent on his satisfaction with the leases to be obtained by him.

The judgment is reversed.

Gibson, C. J., Shenk, J., Carter, J., Traynor, J., and Schauer, J., concurred.

McComb, J., dissented.

2.16 Wood v. Lucy, Lady Duff-Gordon 2.16 Wood v. Lucy, Lady Duff-Gordon

222 N. Y. 88
OTIS F. WOOD, Appellant,
v.
LUCY, LADY DUFF-GORDON, Respondent.
Appellate Division of the Supreme Court of the State of New York, First Department 

[88] 

Wood v. Duff-Gordon, 177 App. Div. 624, reversed.

(Argued November 14, 1917; decided December 4, 1917.)

APPEAL from a judgment entered April 24, 1917 upon an order of the Appellate Division of the Supreme Court in the first judicial department, which reversed an order of Special Term denying a motion by defendant for judgment in her favor upon the pleadings and granted said motion.

The nature of the action and the facts, so far as material, are stated in the opinion.

[89] John Jerome Rooney for appellant. Assuming that the contract does not contain an express covenant and agreement on the part of the plaintiff to use his best endeavors and efforts to place indorsements, make sales or grant licenses to manufacture, nevertheless such a covenant must necessarily be implied from the terms of the contract itself and all the circumstances. (Booth v. Cleveland Mill Co., 74 N. Y. 15; Wells v. Alexandre, 130 N. Y. 642; Jacquin v. Boutard, 89 Hun, 437; 157 N. Y. 686; Wil- son v. Mechanical Orguinette Co., 170 N. Y. 542; Horton v. Hall & Clarke Mfg. Co., 94 App. Div. 404; Hearn v. Stevens & Bros., Ill App. Div. 101; Baker Transfer Co. v. Merchants' R. I. Mfg. Co., 1 App. Div. 507; Wildman Mfg. Co. v. Adams T. C. M. Co., 149 Fed. Rep. 201.)

Edward E. Hoenig and William M. Sullivan for respondent. The motion for judgment on the pleadings was properly granted and the demurrer properly sustained by the appellate court, as the agreement upon which the action is based is nudum pactum and not binding upon this defendant for lack of mutuality and consideration. (Elliott on Cont. § 231; Grossman v. Schenker, 206 N. Y. 468; Levin v. Dietz, 194 N. Y. 376; Commercial W. & C. Co. v. Northampton P. C. Co., 115 App. Div. 393; 190 N. Y. 1; Wood v. G. F. Ins. Co., 174 App. Div. 834; White v. K. M. C. Co., 69 Misc. Rep. 628; Cook v. Cosier, 87 App. Div. 8; Vogel v. Pekoe, 30 L. R. A. 491; Moran v. Standard Oil Co., 211 N. Y. 189; City of New York v. Poali, 202 N. Y. 18; Barrel S. S. Co. v. Mexican R. R. Co., 134 N. Y. 15; First Presbyterian Church v. Cooper, 112 N. Y. 517; Acker v. Hotchkiss, 97 N. Y. 395; Marie v. Garrison, 43 N. Y. 14; Chicago & G. E. R. Co. v. Dane, 43 N. Y. 240; Jermyn v. Searing, 170 App. Div. 720; Rafolovitz v. Amer. Tobacco Co., 73 Hun, 87; Pollock v. Shubert, 146 App. Div. 628.) The order of the Appellate Division should be affirmed, for under the [90] contract the appellant assumes no obligation and there is no provision therein enforceable as against him. (Commercial W. & C. Co. v. Northampton P. C. Co., 115 App. Div. 393; 190 N. Y. 1; Pollock v. Shubert Theatrical Co., 146 App. Div. 629; Arnot v. P. & E. Coal Co., 68 N. Y. 565; Booth v. Milliken, 127 App. Div. 525; Vogel v. Pekoe, 30 L. R. A. 491.)

CARDOZO, J. The defendant styles herself "a creator of fashions." Her favor helps a sale. Manufacturers of dresses, millinery and like articles are glad to pay for a certificate of her approval. The things which she designs, fabrics, parasols and what not, have a new value in the public mind when issued in her name. She employed the plaintiff to help her to turn this vogue into money. He was to have the exclusive right, subject always to her approval, to place her indorsements on the designs of others. He was also to have the exclusive right to place her own designs on sale, or to license others to market them. In return, she was to have one-half of "all profits and revenues" derived from any contracts he might make. The exclusive right was to last at least one year from April 1, 1915, and thereafter from year to year unless terminated by notice of ninety days. The plaintiff says that he kept the contract on his part, and that the defendant broke it. She placed her indorsement on fabrics, dresses and millinery without his knowledge, and withheld the profits. He sues her for the damages, and the case comes here on demurrer.

The agreement of employment is signed by both parties. It has a wealth of recitals. The defendant insists, however, that it lacks the elements of a contract. She says that the plaintiff does not bind himself to anything. It is true that he does not promise in so many words that he will use reasonable efforts to place the defendant's indorsements and market her designs. [91] We think, however, that such a promise is fairly to be implied. The law has outgrown its primitive stage of formalism when the precise word was the sovereign talisman, and every slip was fatal. It takes a broader view to-day. A promise may be lacking, and yet the whole writing may be "instinct with an obligation," imperfectly expressed (SCOTT, J., in McCall Co. v. Wright, 133 App. Div. 62; Moran v. Standard Oil Co., 211 N. Y. 187, 198). If that is so, there is a contract.

The implication of a promise here finds support in many circumstances. The defendant gave an exclusive privilege. She was to have no right for at least a year to place her own indorsements or market her own designs except through the agency of the plaintiff. The acceptance of the exclusive agency was an assumption of its duties (Phoenix Hermetic Co. v. Filtrine Mfg. Co., 164 App. Div. 424; W. G. Taylor Co. v. Bannerman, 120 Wis. 189; Mueller v. Bethesda Mineral Spring Co., 88 Mich. 390). We are not to suppose that one party was to be placed at the mercy of the other (Hearn v. Stevens & Bro., Ill App. Div. 101, 106; Russell v. Allerton, 108 N. Y. 288). Many other terms of the agreement point the same way. We are told at the outset by way of recital that:

"The said Otis F. Wood possesses a business organization adapted to the placing of such indorsements as the said Lucy, Lady Duff-Gordon has approved."

The implication is that the plaintiff's business organization will be used for the purpose for which it is adapted. But the terms of the defendant's compensation are even more significant. Her sole compensation for the grant of an exclusive agency is to be one-half of all the profits resulting from the plaintiff's efforts. Unless he gave his efforts, she could never get anything. Without an implied promise, the transaction cannot have such business "efficacy, as both parties must have intended that at all events it should have." (BOWEN, L. J., in The Moorcock, 14 P. D. 64, [92] 68). But the contract does not stop there. The plaintiff goes on to promise that he will account monthly for all moneys received by him, and that he will take out all such patents and copyrights and trademarks as may in his judgment be necessary to protect the rights and articles affected by the agreement. It is true, of course, as the Appellate Division has said, that if he was under no duty to try to market designs or to place certificates of indorsement, his promise to account for profits or take out copyrights would be valueless. But in determining the intention of the parties, the promise has a value. It helps to enforce the conclusion that the plaintiff had some duties. His promise to pay the defendant one-half of the profits and revenues resulting from the exclusive agency and to render accounts monthly, was a promise to use reasonable efforts to bring profits and revenues into existence. For this conclusion, the authorities are ample (Wilson v. Mechanical Orguinette Co., 170 N. Y. 542; Phoenix Hermetic Co. v. Filtrine Mfg. Co., supra; Jacquin v. Boutard, 89 Hun, 437; 157 N. Y. 686; Moran v. Standard Oil Co., supra; City of N. Y. v. Paoli, 202 N. Y. 18; McIntyre v. Belcher, 14 C. B. [N. S.] 654; Devonald v. Rosser & Sons, 1906, 2 K. B. 728; W. G. Taylor Co. v. Bannerman, supra; Mueller v. Bethesda Mineral Spring Co., supra; Baker Transfer Co. v. Merchants R. & I. Mfg. Co., 1 App. Div. 507).

The judgment of the Appellate Division should be reversed, and the order of the Special Term affirmed, with costs in the Appellate Division and in this court.

CUDDEBACK, MCLAUGHLIN and ANDREWS, JJ., concur; HISCOCK, Ch. J., CHASE and CRANE, JJ., dissent.

Judgment reversed, etc.

2.17 Gurfein v. Werbelovsky 2.17 Gurfein v. Werbelovsky

Nathan Gurfein vs. Abraham Werbelovsky.

Third Judicial District, New Haven,

June Term, 1922.

Wheeler, C. J., Beach, Curtis, Burpee and Keeler, Js.

While it is undoubtedly true that a so-called “ contract” for the sale of goods in which the buyer retains an unconditional option of cancellation, is no contract at all, since no mutuality exists-.vet if the seller has the right under the contract, for however brief a period, to make a delivery and compel the buyer to take and pay for the goods, there is a promise for a promise and thus a sufficient consideration moving to the seller to make a valid contract in law.

In the present case the plaintiff sought to recover damages of the defendant seller for his refusal to deliver a quantity of glass pursuant to his agreement, one of the terms of which was that the buyer was to “have the option to cancel” his order “before shipment,” which was to be made at any time within three months. The defendant seller demurred to this “averment” on the ground that the plaintiff was not bound to buy and therefore there was no valid contract. Held that inasmuch as the seller had the right to ship the glass at once, or at any time within three months before receiving notice of cancellation, and thus force the buyer to receive and pay for it, there was a legal consideration for the promise to sell, which was all that was necessary to bring the contract into existence, and therefore the trial court erred in sustaining the demurrer.

Whether the contract was so improvident in character that an equitable defense upon that ground fnight have been interposed, presented : a question of fact which could not be raised by demurrer.

Argued June 6th

decided August 4th, 1922.

Action to recover damages for breach of a written agreement to sell to the plaintiff a lot of glass, brought *704to the Superior Court in Fairfield County where a demurrer to the complaint was sustained (Maltbie, J.) and judgment was afterward rendered for the defendant (Haines, J.), from which the plaintiff appealed.

Error and cause remanded.

The complaint alleges that on October 20th, 1919, the defendant made a contract with the plaintiff, doing business under the name of the Bridgeport Glass Company, in the form following:—

“October 29, 1919.

“Bridgeport Glass Co.,

Bdgpt. Conn.

“Gentlemen: We have this day accepted and entered your order for 5 cases of plate glass, the following:

“1 case 60“ wide

Widths 1 “ 70“ “

2 “ 80“ “

1 “ 90“ “

in the following brackets 25 to 50 square feet at .98 cents per sq. ft. and 50/100 at One dollar per sq. ft. F. O. B. N. Y. City.

“The above cases are to be shipped within 3 months from date. You have the option to cancel the above order before shipment.

“Yours truly,

J. H. Werbelovsky’s Son,

By Joseph Rosenblum.”

The complaint further avers that the plaintiff frequently demanded delivery of the goods, but the defendant refused to ship the same though more than three months has elapsed; and'damages based on an increase in the market price over the contract price are demanded.

Defendant demurred to the complaint on the following grounds: “1. Because it appears from said instrument, Exhibit A, that the same was .of the nature of an *705option, and that said option was without consideration and was, therefore, void and of no effect. 2. Because it appears from said instrument Exhibit A that the same was of the nature of an option, but it does not appear that the same was ever properly exercised. 3. Because it appears that said instrument by reason of the uncertainty of the terms and the lack of mutuality in the obligations it purports to create, is unenforceable as a contract, and is wholly invalid, void and of no effect.”

Theodore E. Steiber, for the appellant (plaintiff).

Philo C. Calhoun, for the appellee (defendant).

Beach, J.

The writing sued on is in the form of a letter from the defendant to the plaintiff accepting an antecedent proposal to buy five cases of glass on terms set forth in the acceptance. The final sentence of the letter is as follows: “You have the option to cancel the above order before shipment.” It is this phrase which gives rise to the claim that the contract is void for want of mutuality. The defendant’s acceptance appears to be unconditional, and the objection is that the plaintiff in making his proposal reserved the right to cancel it at will. If that is so, the demurrer must be sustained. “To agree to do something and reserve the right to cancel the agreement at will is no agreement at all.” Ellis v. Dodge Bros., 237 Fed. Rep. 860, 867.

It might be said at the outset that the objection begs the entire question, for it is not clear that the “above order” as originally made contains any reservation at all, but as the case has been briefed and argued on the assumption that the buyer’s privilege of cancellation at any time before shipment is one of the terms of the contract, we proceed to treat it as such and to enquire whether on that understanding an enforcible *706contract ever came into existence; that is, whether the seller ever had any right, the exercise of which the buyer could not prevent or nullify, to compel the buyer to take the goods and pay for them. If so, there was a promise for a promise, and the contract is valid in law; for the question before us is not whether the contract is mutual in the sense in which that adjective is used to influence the discretion of a court of equity in decreeing specific performance, but whether the seller’s promise to sell was with or without a consideration sufficient in in law to support it. Of course, the right to enforce the buyer’s promise to buy is such a consideration, and if that right existed, even for the shortest space of time, it is enough to bring the contract into existence.

On the face of this contract the buyer must exercise his option “before shipment,” otherwise he is bound to take and pay for the goods. No time of shipment is specified otherwise than by the words “to be shipped within three months.” Hence the seller had a right to ¡ ship at any time within the three months, and a ship- , ment made before receiving notice of cancellation would j put an end to the buyer’s option. The seller’s right of - shipment accrued at the moment the contract was formed, and as he might have shipped at the same time that he accepted, there was one clear opportunity to enforce the entire contract, which the buyer could not have prevented or nullified by any attempted exercise of his option. This is all that is necessary to constitute a legal consideration and to bring the contract into existence. If the defendant voluntarily limited his absolute opportunity of enforcing the contract to the shortest possible time, the contract may have been improvident, but it was not void for want of consideration.

Whether it is so improvident that an equitable defense on that ground ought to prevail, is a question of fact which cannot be raised by demurrer. It should, *707however, be said that, in addition to the one clear opportunity to enforce the contract already pointed out, the defendant has had a continuing right to enforce it during its entire term; for it appears from the complaint not only that the plaintiff never attempted to exercise his option, but that he repeatedly demanded performance. In this connection it is important that the contract is framed on the theory that it remains enforcible by either party unless and until the plaintiff brings home notice of cancellation before shipment.

Referring to the authorities cited, it is of course undoubted that a contract for the sale of goods in which one party retains an unconditional option of cancellation is no contract at all, for the reason that no mutual obligation ever arises. Rehm-Zeiher Co. v. Walker Co., 156 Ky. 6, 160 S. W. 777, cited on the defendant’s brief, and American Agricultural Chemical Co. v. Kennedy, 103 Va. 171, 48 S. E. 868, cited in the note to 13 Corpus Juris, 337, are cases of this kind.

In Nicolls v. Wetmore, 174 Iowa, 132, 156 N. W. 319; Velie Motor Co. v. Kopmeier Motor Car Co., 194 Fed. Rep. 324, and Ellis v. Dodge Bros., 237 Fed. Rep. 860, the contracts in suit presented a double aspect. Regarded as contracts for the purchase and sale of motorcars, they were held void for the want of any promise by the maker to sell, and regarded as executory contracts of agency, they were held to be terminable at the option of either party. This was correct, because the agency was not expressed to continue for a definite time or for the accomplishment of a stated purpose. Willcox & Gibbs Sewing Machine Co. v. Ewing, 141 U. S. 627, 12 Sup. Ct. 94.

There is error, the judgment is set aside and the cause remanded for further proceedings according to law.

In this opinion the other judges concurred.

2.18 UCC § 2-306 -- Requirements and Output Contracts 2.18 UCC § 2-306 -- Requirements and Output Contracts

§ 2-306. Output, Requirements and Exclusive Dealings.

(1) A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded.

(2) A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale.

2.19 Feld v. Henry S. Levy & Sons, Inc. 2.19 Feld v. Henry S. Levy & Sons, Inc.

New York Court of Appeals
37 N.Y.2d 466
1975-07-08

Fred Feld, Doing Business as Crushed Toast Co., Appellant-Respondent, v Henry S. Levy & Sons, Inc., Respondent-Appellant.

Argued June 5, 1975;

decided July 8, 1975.

*467 Julius Zizmor for appellant-respondent.

Implicit in the contract is defendant’s obligation of good faith to manufacture bread crumbs and sell them to plaintiff. Defendant may not disengage itself therefrom by mismantling its equipment and selling the ingredients to others because plaintiff refused to increase the contract price to 7 cents per pound. To hold otherwise would transform this contract into a meaningless scrap of paper. (407 East 61st Garage v Savoy Fifth Ave. Corp., 23 NY2d 275; All-Year Golf v Products Investors Corp., 34 AD2d 246; Wood v Duff-Gordon, 222 NY 88; Wells v Alexandre, 130 NY 642.)

Herbert Plaut for respondent-appellant.

I. There was no question of fact concerning the meaning of the written contract. (Matter of United Cigar Stores Co. of Amer., 8 F Supp 243, 72 F2d 673, cert den sub nom. Consolidated Dairy Prods. Co. v Irving Trust Co., 293 US 617; Wemple v Stewart, 22 Barb 154.) II. The legal meaning of the contract was that defendant confined its production and sales of bread crumbs to plaintiff. Whatever it manufactured of this item would be plaintiff’s, but there was no obligation to continue to produce it. (Fuller & Co. v Schrenk, 58 App Div 222; Moore v American Molasses Co. of N. Y., 179 App Div 505; Wemple v Stew *468 art, 22 Barb 154; HML Corp. v General Foods Corp., 365 F2d 77; Atwater & Co. v Terminal Coal Corp., 32 F Supp 178, 115 F2d 887; Wells v Alexandre, 130 NY 642; Matter of United Cigar Stores Co. of Amer., 72 F2d 673; Wigand v Bachmann-Bechtel Brewing Co., 222 NY 272; Wood v Duff-Gordon, 222 NY 88; 407 East 61st Garage v Savoy Fifth Ave. Corp., 23 NY2d 275.) III. Economic reasons can justify a curtailment or cessation of production. Increasing costs is a good economic reason. The good faith requirement concerns the obligation to confine whatever output there may be to the promisee, not the stopping of output. (Matter of United Cigar Stores Co. of Amer., 8 F Supp 243; Wemple v Stewart, 22 Barb 154.)

Cooke, J.

Plaintiff operates a business known as the Crushed Toast Company and defendant is engaged in the wholesale bread baking business. They entered into a written contract, as of June 19, 1968, in which defendant agreed to sell and plaintiff to purchase "all bread crumbs produced by the Seller in its factory at 115 Thames Street, Brooklyn, New York, during the period commencing June 19, 1968, and terminating June 18, 1969”, the agreement to "be deemed automatically renewed thereafter for successive renewal periods of one year” with the right to either party to cancel by giving not less than six months notice to the other by certified mail. No notice of cancellation was served. Additionally, pursuant to a contract stipulation, a faithful performance bond was delivered by plaintiff at the inception of the contractual relationship, and a bond continuation certificate was later submitted for the yearly term commencing June 19, 1969.

Interestingly, the term "bread crumbs” does not refer to crumbs that may flake off bread; rather, they are a manufactured item, starting with stale or imperfectly appearing loaves and followed by removal of labels, processing through two grinders, the second of which effects a finer granulation, insertion into a drum in an oven for toasting and, finally, bagging of the finished product.

Subsequent to the making of the agreement, a substantial quantity of bread crumbs, said to be over 250 tons, were sold by defendant to plaintiff but defendant stopped crumb production on about May 15, 1969. There was proof by defendant’s comptroller that the oven was too large to accommodate the drum, that it was stated that the operation was "very uneconomical”, but after said date of cessation no steps were taken to obtain more economical equipment. The toasting oven was *469intentionally broken down, then partially rebuilt, then completely dismantled in the summer of 1969 and, thereafter, defendant used the space for a computer room. It appears, without dispute, that defendant indicated to plaintiff at different times that the former would resume bread crumb production if the contract price of 6 cents per pound be changed to 7 cents, and also that, after the crumb making machinery was dismantled, defendant sold the raw materials used in making crumbs to animal food manufacturers.

Special Term denied plaintiff’s motion for summary judgment on the issue of liability and turned down defendant’s counter-request for a summary judgment of dismissal. From the Appellate Division’s order of affirmance, by a divided court, both parties appeal.

Defendant contends that the contract did not require defendant to manufacture bread crumbs, but merely to sell those it did, and, since none were produced after the demise of the oven, there was no duty to then deliver and, consequently from then on, no liability on its part. Agreements to sell all the goods or services a party may produce or perform to another party are commonly referred to as "output” contracts, and they usually serve a useful commercial purpose in minimizing the burdens of product marketing (see 1 Williston, Contracts [3d ed], § 104A). The Uniform Commercial Code rejects the ideas that an output contract is lacking in mutuality or that it is unenforceable because of indefiniteness in that a quantity for the term is not specified (6 Encyclopedia New York Law, Contracts, § 442, 1974-1975 Supp by Professor Schwartz, p 43). Official Comment 2 to section 2-306 (McKinney’s Cons Laws of NY, Book 62 Vi, Uniform Commercial Code, pp 206-207) states in part: "Under this Article, a contract for output * * * is not too indefinite since it is held to mean the actual good faith output * * * of the particular party. Nor does such a contract lack mutuality of obligation since, under this section, the party who will determine quantity is required to operate his plant or conduct his business in good faith and according to commercial standards of fair dealing in the trade so that his output * * * will approximate a reasonably foreseeable figure.” (See, also, Matter of United Cigar Stores Co. of Amer., 8 F Supp 243, 244, affd 72 F2d 673, cert den sub nom. Consolidated Dairy Prods. Co. v Irving Trust Co., 293 US 617; 9 NY Jur, Contracts, § 10, p 531.)

The real issue in this case is whether the agreement carries *470with it an implication that defendant was obligated to continue to manufacture bread crumbs for the full term. Section 2-306 of the Uniform Commercial Code, entitled "Output, Requirements and Exclusive Dealings” provides:

"(1) A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded.

"(2) A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale.” (Emphasis supplied.)

The Official Comment thereunder reads in part: "Subsection (2), on exclusive dealing, makes explicit the commercial rule embodied in this Act under which the parties to such contracts are held to have impliedly, even when not expressly, bound themselves to use reasonable diligence as well as good faith in their performance of the contract. * * * An exclusive dealing agreement brings into play all of the good faith aspects of the output and requirement problems of subsection (1). It also raises questions of insecurity and right to adequate assurance under this Article.”

Section 2-306 is consistent with prior New York case law (Buerger and O’Connor, Practice Commentaries, McKinney’s Cons Laws of NY, Book 62½, Uniform Commercial Code, § 2-306, p 206). Every contract of this type imposes an obligation of good faith in its performance (Uniform Commercial Code, § 1-203; see Wigand v Bachmann-Bechtel Brewing Co., 222 NY 272, 277; New York Cent. Iron Works Co. v United States Radiator Co., 174 NY 331, 335). Under the Uniform Commercial Code, the commercial background and intent must be read into the language of any agreement and good faith is demanded in the performance of that agreement (Official Comment 1, McKinney’s Cons Laws of NY, Book 62½, Uniform Commercial Code, § 2-306), and, under the decisions relating to output contracts, it is clearly the general rule that good faith cessation of production terminates any further obligations thereunder and excuses further performance by the party discontinuing production (Du Boff v Matam Corp., *471272 App Div 502; HML Corp. v General Foods Corp., 365 F2d 77, 83 [applying New York law]; Matter of United Cigar Stores Co. of Amer., supra; see Neofotistos v Harvard Brewing Co., 341 Mass 684; 6 Encyclopedia New York Law, Contracts, § 442, 1974-1975 Supp by Professor Schwartz, p 44).

This is not a situation where defendant ceased its main operation of bread baking (see Neofotistos v Harvard Brewing Co., supra). Rather, defendant contends in a conclusory fashion that it was "uneconomical” or "economically not feasible” for it to continue to make bread crumbs. Although plaintiff observed in his motion papers that defendant claimed it was not economically feasible to make the crumbs, plaintiff did not admit that as a fact. In any event, "economic feasibility”, an expression subject to many interpretations, would not be a precise or reliable test.

There are present here intertwined questions of fact, whether defendant performed in good faith and whether it stopped its manufacture of bread crumbs in good faith, neither of which can be resolved properly on this record. The seller’s duty to remain in crumb production is a matter calling for a close scrutiny of its motives (1 Hawkland, A Transactional Guide to the Uniform Commercial Code, p 52, see, also, p 48), confined here by the papers to financial reasons. It is undisputed that defendant leveled its crumb making machinery only after plaintiff refused to agree to a price higher than that specified in the agreement and that it then sold the raw materials to manufacturers of animal food. There are before us no componential figures indicating the actual cost of the finished bread crumbs to defendant, statements as to the profits derived or the losses sustained, or data specifying the net or gross return realized from the animal food transactions.

The parties by their contract gave the right of cancellation to either by providing for a six months’ notice to the other. The apparent purpose of such a stipulation was to provide an opportunity to either the seller or buyer to conclude their dealings in the event that the transactions were not as profitable or advantageous as desired or expected, or for any other reason. Correspondingly, such a notice would also furnish the receiver of it a chance to secure another outlet or source of supply, as the case might be. Short of such a cancellation, defendant was expected to continue to perform in good faith and could cease production of the bread crumbs, a single facet of its operation, only in good faith. Obviously, a bankruptcy or *472genuine imperiling of the very existence of its entire business caused by the production of the crumbs would warrant cessation of production of that item; the yield of less profit from its sale than expected would not. Since bread crumbs were but a part of defendant’s enterprise and since there was a contractual right of cancellation, good faith required continued production until cancellation, even if there be no profit. In circumstances such as these and without more, defendant would be justified, in good faith, in ceasing production of the single item prior to cancellation only if its losses from continuance would be more than trivial, which, overall, is a question of fact.

The order of the Appellate Division should be affirmed, without costs.

Chief Judge Breitel and Judges Jasen, Gabrielli, Jones, Wachtler and Fuchsberg concur.

Order affirmed, without costs. Question certified answered in the affirmative.

2.20 Reliance as Ground for Enforcement 2.20 Reliance as Ground for Enforcement

2.21. Restatement (2d) Contracts 90 - Promissory Estoppel

Restatement (2d) Contracts 90 - Promissory Estoppel

2.22 Allegheny College v. National Chautauqua County Bank of Jamestown 2.22 Allegheny College v. National Chautauqua County Bank of Jamestown

246 N. Y. 369
ALLEGHENY COLLEGE, Appellant,
v.
THE NATIONAL CHAUTAUQUA COUNTY BANK OF JAMESTOWN, as Executor of MARY Y. JOHNSTON, Deceased, Respondent.
Supreme Court of New York, Appellate Division, Fourth Department

Allegheny College v. Nat. Chautauqua County Bank, 219 App. Div. 852, reversed.

(Argued October 18, 1927; decided November 22, 1927.) 

APPEAL, by permission, from a judgment of the Appellate Division of the Supreme Court in the fourth judicial department, entered April 13, 1927, unanimously affirming a judgment in favor of defendant entered upon a dismissal of the complaint by the court on trial at an Equity Term. Clarence G. Pickard, C. A. Pickard and Arthur L. Bates for appellant. The subscription paper executed by Mary Yates Johnston was founded upon a legal consideration. (Barnes v. Perine, 12 N. Y. 18; Matter of Conger, 113 Misc. Rep. 129; Eliassof v. DeWandelaer, 30 App. Div. 155; Coyne v. Weaver, 84 X. Y. 386; Ga Nun v. Palmer, 210 N. Y. 603; Roberts v. Cobb, 103 N. Y. 600; Mechanicville War Chest, Inc., v. Butterfield, 110 Misc. Hep. 257; Richmondville Union Seminary v. McDonald, 34 N. Y. 379; Genesee College v. Dodge, 26 N. Y. 213; Locke v. Taylor, 161 App. Div. 44.)

Robert H. Jackson, Harry R. Lewis and Benjamin S. Dean for respondent. The instrument is only a promise to make a gift or subscription and lacks consideration which the law of New York requires for actionability. (Hamilton College v. Stewart, 1 N. Y. 581; Presbyterian Church v. Cooper, 112 N. Y. 517; Twenty-third St. Church v. Cornell, 117 N. Y. 601; Holmes v. Roper, 141 N. Y. 64; Dougherty v. Salt, 227 N. Y. 202; Assets Realization Co. v. Howard, 211 N. Y. 430; Tucker v. Alexander off, 183 U. S. 424; Cottage Church v. Kendall, 121 Mass. 528; Montpelier Seminary v. Smith, 69 Vt. 382; New Jersey Hospital v. Wright, 95 N. J. L. 462; U. of Penn. v. Coxe, 277 Penn. St. 512; Gait v. Swain, 9 Geattan [Va.], 633.)

CARDOZO, Ch. J. The plaintiff, Allegheny College, is an institution of liberal learning at Meadville, Pennsylvania. In June 1921, a "drive" was in progress to secure for it an additional endowment of $1,250,000. An appeal to contribute to this fund was made to Mary Yates Johnston of Jamestown, New York. In response thereto, she signed and delivered on June 15, 1921, the following writing:

"Estate Pledge,
“Allegheny College Second Century Endowment
"JAMESTOWN, N. Y., June 15, 1921."
“In consideration of my interest in Christian Education, and in consideration of others subscribing, I hereby subscribe and will pay to the order of the Treasurer of Allegheny College, Meadville, Pennsylvania, the sum of Five Thousand Dollars; $5,000.
"This obligation shall become due thirty days after my death, and I hereby instruct my Executor, or Administrator, to pay the same out of my estate. This pledge shall bear interest at the rate of . . . per cent per annum, payable annually, from . . . till paid. The proceeds of this obligation shall be added to the Endowment of said Institution, or expended in accordance with instructions on reverse side of this pledge."

“Name MARY YATES JOHNSTON,
“Address 306 East 6th Street,
“Jamestown, N. Y.
“DAYTON E. MCCLAIN Witness
"T. R. COURTIS Witness
to authentic signature."

On the reverse side of the writing is the following indorsement:

"In loving memory this gift shall be known as the Mary Yates Johnston Memorial Fund, the proceeds from which shall be used to educate students preparing for the Ministry, either in the United States or in the Foreign Field.

"This pledge shall be valid only on the condition that the provisions of my Will, now extant, shall be first met.
"MARY YATES JOHNSTON."

The subscription was not payable by its terms until thirty days after the death of the promisor. The sum of $1,000 was paid, however, upon account in December, 1923, while the promisor was alive. The college set the money aside to be held as a scholarship fund for the benefit of students preparing for the ministry. Later, in July, 1924, the promisor gave notice to the college that she repudiated the promise. Upon the expiration of thirty days following her death, this action was brought against the executor of her will to recover the unpaid balance.

The law of charitable subscriptions has been a prolific source of controversy in this State and elsewhere. We have held that a promise of that order is unenforcible like any other if made without consideration (Hamilton College v. Stewart, 1 N. Y. 581; Presb. Church v. Cooper, 112 N. Y. 517; 23rd St. Bap. Church v. Cornell, 117 N. Y. 601). On the other hand, though professing to apply to such subscriptions the general law of contract, we have found consideration present where the general law of contract, at least as then declared, would have said that it was absent (Barnes v. Ferine, 12 N. Y. 18; Presb. Soc. v. Beach, 74 N. Y. 72; Keuka College v. Ray, 167 N. Y. 96; cf. Eastern States League v. Vail, 97 Vt. 495, 508, and cases cited; Y. M. C. A. v. Estill, 140 Ga. 291; Amherest Academy v. Cowls, 6 Pick. 427; Ladies Collegiate Inst. v. French, 16 Gray, 196; Martin v. Meles, 179 Mass. 114; Robinson v. Nutt, 185 Mass. 345; U. of Pa. v. Coxe, 277 Penn. St. 512; Williston, Contracts, § 116).

A classic form of statement identifies consideration with detriment to the promisee sustained by virtue of the promise (Hamer v. Sidway, 124 N. Y. 538; Anson, Contracts [Corbin's ed.], p. 116; 8 Holdsworth, History of English Law, 10). So compendious a formula is little more than a half truth. There is need of many a supplementary gloss before the outline can be so filled in as to depict the classic doctrine. "The promise and the consideration must purport to be the motive each for the other, in whole or at least in part. It is not enough that the promise induces the detriment or that the detriment induces the promise if the other half is wanting" (Wise. & Mich. Ry. Co. v. Powers, 191 U. S. 379, 386; McGovern v. City of N. Y., 234 N. Y. 377, 389; Walton Water Co. v. Village of Walton, 238 N. Y. 46, 51; 1 Williston, Contracts, §139; Langdell, Summary of the Law of Contracts, pp. 82-88). If A promises B to make him a gift, consideration may be lacking, though B has renounced other opportunities for betterment in the faith that the promise will be kept.

The half truths of one generation tend at times to perpetuate themselves in the law as the whole truths of another, when constant repetition brings it about that qualifications, taken once for granted, are disregarded or forgotten. The doctrine of consideration has not escaped the common lot. As far back as 1881, Judge HOLMES in his lectures on the Common Law (p. 292), separated the detriment which is merely a consequence of the promise from the detriment which is in truth the motive or inducement, and yet added that the courts "have gone far in obliterating this distinction." The tendency toward effacement has not lessened with the years. On the contrary, there has grown up of recent days a doctrine that a substitute for consideration or an exception to its ordinary requirements can be found in what is styled " a promissory estoppel " (Williston, Contracts, §§139, 116). Whether the exception has made its way in this State to such an extent as to permit us to say that the general law of consideration has been modified accordingly, we do not now attempt to say. Cases such as Siegel v. Spear & Co. (234 N. Y. 479) and DeCicco v. Schweizer (221 N. Y. 431) may be signposts on the road. Certain, at least, it is that we have adopted the doctrine of promissory estoppel as the equivalent of consideration in connection with our law of charitable subscriptions. So long as those decisions stand, the question is not merely whether the enforcement of a charitable subscription can be squared with the doctrine of consideration in all its ancient rigor. The question may also be whether it can be squared with the doctrine of consideration as qualified by the doctrine of promissory estoppel.

We have said that the cases in this State have recognized this exception, if exception it is thought to be. Thus, in Barnes v. Perine (12 N. Y. 18) the subscription was made without request, express or implied, that the church do anything on the faith of it. Later, the church did incur expense to the knowledge of the promisor, and in the reasonable belief that the promise would be kept. We held the promise binding, though consideration there was none except upon the theory of a promissory estoppel. In Presbyterian Society v. Beach (74 X. Y. 72) a situation substantially the same became the basis for a like ruling. So in Roberts v. Cobb (103 N. Y. 600) and Keuka College v. Ray (167 N. Y. 96) the moulds of consideration as fixed by the old doctrine were subjected to a like expansion. Very likely, conceptions of public policy have shaped, more or less subconsciously, the rulings thus made. Judges have been affected by the thought that "defences of that character" are "breaches of faith toward the public, and especially toward those engaged in the same enterprise, and an unwarrantable disappointment of the reasonable expectations of those interested" (W. F. ALLEN, J., in Barnes v. Perine, supra, page 24; and cf. Eastern States League v. Vail, 97 Vt. 495, 505, and cases there cited). The result speaks for itself irrespective of the motive. Decisions which have stood so long, and which are supported by so many considerations of public policy and reason, will not be overruled to save the symmetry of a concept which itself came into our law, not so much from any reasoned conviction of its justice, as from historical accidents of practice and procedure (8 Holdsworth, History of English Law, 7 et seq.). The concept survives as one of the distinctive features of our legal system. We have no thought to suggest that it is obsolete or on the way to be abandoned. As in the case of other concepts, however, the pressure of exceptions has led to irregularities of form.

It is in this background of precedent that we are to view the problem now before us. The background helps to an understanding of the implications inherent in subscription and acceptance. This is so though we may find in the end that without recourse to the innovation of promissory estoppel the transaction can be fitted within the mould of consideration as established by tradition. The promisor wished to have a memorial to perpetuate her name. She imposed a condition that the "gift" should "be known as the Mary Yates Johnston Memorial Fund." The moment that the college accepted $1,000 as a payment on account, there was an assumption of a duty to do whatever acts were customary or reasonably necessary to maintain the memorial fairly and justly in the spirit of its creation. The college could not accept the money, and hold itself free thereafter from personal responsibility to give effect to the condition (Dinan v. Coneys, 143 N. Y. 544, 547; Brown v. Knapp, 79 N. Y. 136; Gridley v. Gridley, 24 N. Y. 130; Grossman v. Schenker, 206 N. Y. 466, 469; 1 Williston, Contracts, §§90, 370). More is involved in the receipt of such a fund than a mere acceptance of money to be held to a corporate use  (cf. Martin v. Meles, 179 Mass. 114, citing Johnson v. Otterbein University, 41 Ohio St. 527, 531, and Presb. Church v. Cooper, 112 N. Y. 517). The purpose of the founder would be unfairly thwarted or at least inadequately served if the college failed to communicate to the world, or in any event to applicants for the scholarship, the title of the memorial. By implication it undertook, when it accepted a portion of the "gift," that in its circulars of information and in other customary ways, when making announcement of this scholarship, it would couple with the announcement the name of the donor. The donor was not at liberty to gain the benefit of such an undertaking upon the payment of a part and dis- appoint the expectation that there would be payment of the residue. If the college had stated after receiving $1,000 upon account of the subscription that it would apply the money to the prescribed use, but that in its circulars of information and when responding to prospective applicants it would deal with the fund as an anonymous donation, there is little doubt that the subscriber would have been at liberty to treat this statement as the repudiation of a duty impliedly assumed, a repudiation justifying a refusal to make payments in the future. Obligation in such circumstances is correlative and mutual. A case much in point is N. J. Hospital v. Wright (95 N. J. L. 402, 464), where a subscription for the maintenance of a bed in a hospital was held to be enforcible by virtue of an implied promise by the hospital that the bed should be maintained in the name of the subscriber (cf. Bd. of Foreign Missions v. Smith, 209 Tenn. St. 361). A parallel situation might arise upon the endowment of a chair or a fellowship in a university by the aid of annual payments with the condition that it should commemorate the name of the founder or that of a member of his family. The university would fail to live up to the fair meaning of its promise if it were to publish in its circulars of information and elsewhere the existence of a chair or a fellowship in the prescribed subject, and omit the benefactor's name. A duty to act in ways beneficial to the promisor and beyond the application of the fund to the mere uses of the trust would be cast upon the promisee by the acceptance of the money. We do not need to measure the extent either of benefit to the promisor or of detriment to the promisee implicit in this duty. "If a person chooses to make an extravagant promise for an inadequate consideration it is his own affair" (8 Holdsworth, History of English Law, p. 17). It was long ago said that "when a thing is to be done by the plaintiff, be it never so small, this is a sufficient consideration to ground an action" (Sturlyn v. Albany, 1587, Cro. Eliz. 67, quoted by Holdsworth, supra; cf. Walton Water Co. v. Village of Walton, 238 N. Y. 46, 51). The longing for posthumous remembrance is an emotion not so weak as to justify us in saying that its gratification is a negligible good.

We think the duty assumed by the plaintiff to perpetuate the name of the founder of the memorial is sufficient in itself to give validity to the subscription within the rules that define consideration for a promise of that order. When the promisee subjected itself to such a duty at the implied request of the promisor, the result was the creation of a bilateral agreement (Williston, Contracts, §§60-a, 68, 90, 370; Brown v. Knapp, supra; Grossman v. Schenker, supra; Williams College v. Danforth, 12 Pick. 541, 544; Ladies Collegiate Inst. v. French, 16 Gray, 196, 200). There was a promise on the one side and on the other a return promise, made, it is true, by implication, but expressing an obligation that had been exacted as a condition of the payment. A bilateral agreement may exist though one of the mutual promises be a promise "implied in fact," an inference from conduct as opposed to an inference from words (Williston, Contracts, §§90, 22-a; Pettibone v. Moore, 75 Hun, 461, 464). We think the fair inference to be drawn from the acceptance of a payment on account of the subscription is a promise by the college to do what may be necessary on its part to make the scholarship effective. The plan conceived by the subscriber will be mutilated and distorted unless the sum to be accepted is adequate to the end in view. Moreover, the time to affix her name to the memorial will not arrive until the entire fund has been collected. The college may thus thwart the purpose of the payment on account if at liberty to reject a tender of the residue. It is no answer to say that a duty would then arise to make restitution of the money. If such a duty may be imposed, the only reason for its existence must be that there is then a failure of "consideration." To say that there is a failure of consideration is to concede that a consideration has been promised since otherwise it could not fail. No doubt there are times and situations in which limitations laid upon a promisee in connection with the use of what is paid by a subscriber lack the quality of a consideration, and are to be classed merely as conditions (Williston, Contracts, §112; Page, Contracts, §523).

"It is often difficult to determine whether words of condition in a promise indicate a request for consideration or state a mere condition in a gratuitous promise. An aid, though not a conclusive test in determining which construction of the promise is more reasonable is an inquiry whether the happening of the condition will be a benefit to the promisor. If so, it is a fair inference that the happening was requested as a consideration"

(Williston, supra, §112). Such must be the meaning of this transaction unless we are prepared to hold that the college may keep the payment on account, and thereafter nullify the scholarship which is to preserve the memory of the subscriber. The fair implication to be gathered from the whole transaction is assent to the condition and the assumption of a duty to "go forward with performance (DeWolf Co. v. Harvey, 161 Wis. 535; Pullman Co. v. Meyer, 195 Ala. 397, 401; Braniff v. Baier, 101 Kan. 117; cf. Corbin, Offer & Acceptance, 26 Yale L. J. 169, 177, 193; McGovney, Irrevocable Offers, 27 Harv. L. R. 644; Sir Frederick Pollock, 28 L. Q. R. 100, 101). The subscriber does not say: I hand you $1,000, and you may make up your mind later, after my death, whether you will undertake to commemorate my name. What she says in effect is this: I hand you $1,000, and if you are unwilling to commemorate me, the time to speak is now. The conclusion thus reached makes it needless to consider whether, aside from the feature of a memorial, a promissory estoppel may result from the assumption of a duty to apply the fund, so far as already paid, to special purposes not mandatory under the provisions of the college charter (the support and education of students preparing for the ministry), an assumption induced by the belief that other payments sufficient in amount to make the scholarship effective would be added to the fund thereafter upon the death of the subscriber (Ladies Collegiate Inst. v. French, 16 Gray, 196; Barnes v. Perine, 12 N. Y. 18, and cases there cited).

The judgment of the Appellate Division and that of the Trial Term should be reversed, and judgment ordered for the plaintiff as prayed for in the complaint, with costs in all courts.

KELLOGG, J. (dissenting). The Chief Judge finds in the expression "In loving memory this gift shall be known as the Mary Yates Johnston Memorial Fund” an offer on the part of Mary Yates Johnston to contract with Allegheny College. The expression makes no such appeal to me. Allegheny College was not requested to perform any act through which the sum offered might bear the title by which the offeror states that it shall be known. The sum offered was termed a "gift” by the offeror. Consequently, I can see no reason why we should strain ourselves to make it, not a gift, but a trade. Moreover, since the donor specified that the gift was made "In consideration of my interest in Christian education, and in consideration of others subscribing," considerations not adequate in law, I can see no excuse for asserting that it was otherwise made in consideration of an act or promise on the part of the donee, constituting a sufficient quid quo pro to convert the gift into a contract obligation. To me the words used merely expressed an expectation or wish on the part of the donor and failed to exact the return of an adequate consideration. But if an offer indeed was present, then clearly it was an offer to enter into a unilateral contract. The offeror was to be bound provided the offeree performed such acts as might be necessary to make the gift offered become known under the proposed name. This is evidently the thought of the Chief Judge, for he says: "She imposed a condition that the 'gift' should be known as the Mary Yates Johnston Memorial Fund." In other words, she proposed to exchange her offer of a donation in return for acts to be performed. Even so there was never any acceptance of the offer and, therefore, no contract, for the acts requested have never been performed. The gift has never been made known as demanded. Indeed, the requested acts, under the very terms of the assumed offer, could never have been performed at a time to convert the offer into a promise. This is so for the reason that the donation was not to take effect until after the death of the donor, and by her death her offer was withdrawn. (Williston on Contracts, sec. 62.) Clearly, although a promise of the college to make the gift known, as requested, may be implied, that promise was not the acceptance of an offer which gave rise to a contract. The donor stipulated for acts, not promises.

"In order to make a bargain it is necessary that the acceptor shall give in return for the offer or the promise exactly the consideration which the offeror requests. If an act is requested, that very act and no other must be given. If a promise is requested, that promise must be made absolutely and unqualifiedly."

(Williston on Contracts, sec. 73.)

"It does not follow that an offer becomes a promise because it is accepted; it may be, and frequently is, conditional, and then it does not become a promise until the conditions are satisfied; and in case of offers for a consideration, the performance of the consideration is always deemed a condition."

(Langdell, Summary of the Law of Contracts, sec. 4.) It seems clear to me that there was here no offer, no acceptance of an offer, and no contract. Neither do I agree with the Chief Judge that this court  “found consideration present where the general law of contract, at least as then declared, would have said that it was absent" in the cases of Barnes v. Ferine (12 N. Y. 18), Presbyterian Society v. Beach (74 N. Y. 72) and Keuka College v. Ray (167 N. Y. 96). In the Keuka College case an offer to contract, in consideration of the performance of certain acts by the offeree, was converted into a promise by the actual performance of those acts. This form of contract has been known to the law from time immemorial (Langdell, sec. 46) and for at least a century longer than the other type, a bilateral contract. (Williston, sec. 13.) It may be that the basis of the decisions in Barnes v. Perine and Presbyterian, Society v. Beach (supra) was the same as in the Keuka College case. (See Presbyterian Church of Albany v. Cooper, 112 N. Y. 517.) However, even if the basis of the decisions be a so-called " promissory estoppel," nevertheless they initiated no new doctrine. A so-called " promissory estoppel," although not so termed, was held sufficient by Lord MANSFIELD and his fellow judges as far back as the year 1765. (Pillans v. Van Mierop, 3 Burr. 1663.) Such a doctrine may be an anomaly; it is not a novelty. Therefore, I can see no ground for the suggestion that the ancient rule which makes consideration necessary to the formation of every contract is in danger of effacement through any decisions of this court. To me that is a cause for gratulation rather than regret. However, the discussion may be beside the mark, for I do not understand that the holding about to be made in this case is other than a holding that consideration Was given to convert the offer into a promise. With that result I cannot agree and, accordingly, must dissent.

POUND, CRANE, LEHMAN and O'BRIEN, JJ., concur with CARDOZO, Ch. J.; KELLOGG, J. dissents in opinion, in which ANDREWS, J., concurs.

Judgment accordingly.

2.23 Feinberg v. Pfeiffer Co. 2.23 Feinberg v. Pfeiffer Co.

322 S.W. 2d 163

Anna Sacks FEINBERG (Plaintiff), Respondent,
v.
PFEIFFER COMPANY, a Corporation, Formerly Known as S.
Pfeiffer Manufacturing Co., a Corporation
(Defendant), Appellant.

Nos. 30183, 30204.
St. Louis Court of Appeals, Missouri.
March 17, 1959.
Motion for Rehearing or for Transfer to Supreme Court Denied.
April 13, 1959.

[322 S.W.2d 164] Robert S. Allen; Lewis, Rice, Tucker, Allen & Chubb, St. Louis, for appellant.

J. Leonard Kline, Sylvan Agatstein, St. Louis, for respondent.

DOERNER, Commissioner.

This is a suit brought in the Circuit Court of the City of St. Louis by plaintiff, a former employee of the defendant corporation, on an alleged contract whereby defendant agreed to pay plaintiff the sum of $200 per month for life upon her retirement. A jury being waived, the case was tried by the court alone. Judgment below was for plaintiff for $5,100, the amount of the pension claimed to be due as of the date of the trial, together with interest thereon, and defendant duly appealed.

The parties are in substantial agreement on the essential facts. Plaintiff began working for the defendant, a manufacturer of pharmaceuticals, in 1910, when she was but 17 years of age. By 1947 she had attained the position of bookkeeper, office manager, and assistant treasurer of the defendant, and owned 70 shares of its stock out of a total of 6,503 shares issued and outstanding. Twenty shares had been given to her by the defendant or its then president, she had purchased 20, and the remaining 30 she had acquired by a stock split or stock dividend. Over the years she received substantial dividends on the stock she owned, as did all of the other stockholders. Also, in addition to her salary, plaintiff from 1937 to 1949, inclusive, received each year a bonus varying in amount from $300 in the beginning to $2,000 in the later years.

On December 27, 1947, the annual meeting of the defendant's Board of Directors was held at the Company's offices in St. Louis, presided over by Max Lippman, its then president and largest individual stockholder. The other directors present were George L. Marcus, Sidney Harris, Sol Flammer, and Walter Weinstock, who, with Max Lippman, owned 5,007 of the 6,503 shares then issued and outstanding. At that meeting the Board of Directors adopted the following resolution, which, because it is the crux of the case, we quote in full:

The Chairman thereupon pointed out that the Assistant Treasurer, Mrs. Anna Sacks Feinberg, has given the corporation many years of long and faithful service. Not only has she served the corporation devotedly, but with exceptional ability and skill. The President pointed out that although all of the officers and directors sincerely hoped and desired that Mrs. Feinberg would continue in her present position for as long as she felt able, nevertheless, in view of the length of service which she has contributed provision should be made to afford her retirement privileges and benefits which should become a firm obligation of the corporation to be available to her whenever she should see fit to retire from active duty, however many years in the future such retirement may become effective. It was, accordingly, [322 S.W.2d 165] proposed that Mrs. Feinberg's salary which is presently $350.00 per month, be increased to $400.00 per month, and that Mrs. Feinberg would be given the privilege of retiring from active duty at any time she may elect to see fit so to do upon a retirement pay of $200.00 per month for life, with the distinct understanding that the retirement plan is merely being adopted at the present time in order to afford Mrs. Feinberg security for the future and in the hope that her active services will continue with the corporation for many years to come. After due discussion and consideration, and upon motion duly made and seconded, it was —

Resolved, that the salary of Anna Sacks Feinberg be increased from $350.00 to $400.00 per month and that she be afforded the privilege of retiring from active duty in the corporation at any time she may elect to see fit so to do upon retirement pay of $200.00 per month, for the remainder of her life.

At the request of Mr. Lippman his sons-in-law, Messrs. Harris and Flammer, called upon the plaintiff at her apartment on the same day to advise her of the passage of the resolution. Plaintiff testified on cross-examination that she had no prior information that such a pension plan was contemplated, that it came as a surprise to her, and that she would have continued in her employment whether or not such a resolution had been adopted. It is clear from the evidence that there was no contract, oral or written, as to plaintiff's length of employment, and that she was free to quit, and the defendant to discharge her, at any time.

Plaintiff did continue to work for the defendant through June 30, 1949, on which date she retired. In accordance with the foregoing resolution, the defendant began paying her the sum of $200 on the first of each month. Mr. Lippman died on November 18, 1949, and was succeeded as president of the company by his widow. Because of an illness, she retired from that office and was succeeded in October, 1953, by her son-in-law, Sidney M. Harris. Mr. Harris testified that while Mrs. Lippman had been president she signed the monthly pension check paid plaintiff, but fussed about doing so, and considered the payments as gifts. After his election, he stated, a new accounting firm employed by the defendant questioned the validity of the payments to plaintiff on several occasions, and in the Spring of 1956, upon its recommendation, he consulted the Company's then attorney, Mr. Ralph Kalish. Harris testified that both Ernst and Ernst, the accounting firm, and Kalish told him there was no need of giving plaintiff the money. He also stated that he had concurred in the view that the payments to plaintiff were mere gratuities rather than amounts due under a contractual obligation, and that following his discussion with the Company's attorney plaintiff was sent a check for $100 on April 1, 1956. Plaintiff declined to accept the reduced amount, and this action followed. Additional facts will be referred to later in this opinion.

Appellant's first assignment of error relates to the admission in evidence of plaintiff's testimony over its objection, that at the time of trial she was sixty-five and a half years old, and that she was no longer able to engage in gainful employment because of the removal of a cancer and the performance of a colocholecystostomy operation on November 25, 1957. Its complaint is not so much that such evidence was irrelevant and immaterial, as it is that the trial court erroneously made it one basis for its decision in favor of plaintiff. As defendant concedes, the error (if it was error) in the admission of such evidence would not be a ground for reversal, since, this being a jury-waived case, we are constrained by the statutes to review it upon both the law and the evidence, Sec. 510.310 RSMo 1949, V.A.M.S., and to render such judgment as the court below ought [322 S.W.2d 166] to have given. Section 512.160, Minor v. Lillard, Mo., 289 S.W.2d 1; Thumm v. Lohr, Mo.App., 306 S.W.2d 604. We consider only such evidence as is admissible, and need not pass upon questions of error in the admission and exclusion of evidence. Hussey v. Robinson, Mo., 285 S.W.2d 603. However, in fairness to the trial court it should be stated that while he briefly referred to the state of plaintiff's health as of the time of the trial in his amended findings of fact, it is obvious from his amended grounds for decision and judgment that it was not, as will be seen, the basis for his decision.

Appellant's next complaint is that there was insufficient evidence to support the court's findings that plaintiff would not have quit defendant's employ had she not known and relied upon the promise of defendant to pay her $200 a month for life, and the finding that, from her voluntary retirement until April 1, 1956, plaintiff relied upon the continued receipt of the pension installments. The trial court so found, and, in our opinion, justifiably so. Plaintiff testified, and was corroborated by Harris, defendant's witness, that knowledge of the passage of the resolution was communicated to her on December 27, 1947, the very day it was adopted. She was told at that time by Harris and Flammer, she stated, that she could take the pension as of that day, if she wished. She testified further that she continued to work for another year and a half, through June 30, 1949; that at that time her health was good and she could have continued to work, but that after working for almost forty years she thought she would take a rest. Her testimony continued:

Q. Now, what was the reason — I'm sorry. Did you then quit the employment of the company after you — after this year and a half? A. Yes.

Q. What was the reason that you left? A. Well, I thought almost forty years, it was a long time and I thought I would take a little rest.

Q. Yes. A. And with the pension and what earnings my husband had, we figured we could get along.

Q. Did you rely upon this pension? A. We certainly did.

Q. Being paid?

A. Very much so. We relied upon it because I was positive that I was going to get it as long as I lived.

Q. Would you have left the employment of the company at that time had it not been for this pension?

A. No.

Mr. Allen: Just a minute, I object to that as calling for a conclusion and conjecture on the part of this witness.

The Court: It will be overruled.

Q. (Mr. Agatstein continuing): Go ahead, now. The question is whether you would have quit the employment of the company at that time had you not relied upon this pension plan?

A. No, I wouldn't.

Q. You would not have. Did you ever seek employment while this pension was being paid to you —

A. (interrupting): No.

Q. Wait a minute, at any time prior — at any other place?

A. No, sir.

Q. Were you able to hold any other employment during that time?

A. Yes, I think so.

Q. Was your health good?

A. My health was good.

It is obvious from the foregoing that there was ample evidence to support the findings of fact made by the court below.

We come, then, to the basic issue in the case. While otherwise defined in defendant's third and fourth assignments of error, it is thus succinctly stated in the argument in its brief: “. . . whether plaintiff has proved that she has a right to recover from defendant based upon a legally binding [322 S.W.2d 167] contractual obligation to pay her $200 per month for life.”

It is defendant's contention, in essence, that the resolution adopted by its Board of Directors was a mere promise to make a gift, and that no contract resulted either thereby, or when plaintiff retired, because there was no consideration given or paid by the plaintiff. It urges that a promise to make a gift is not binding unless supported by a legal consideration; that the only apparent consideration for the adoption of the foregoing resolution was the “many years of long and faithful service” expressed therein; and that past services are not a valid consideration for a promise. Defendant argues further that there is nothing in the resolution which made its effectiveness conditional upon plaintiff's continued employment, that she was not under contract to work for any length of time but was free to quit whenever she wished, and that she had no contractual right to her position and could have been discharged at any time.

Plaintiff concedes that a promise based upon past services would be without consideration, but contends that there were two other elements which supplied the required element: First, the continuation by plaintiff in the employ of the defendant for the period from December 27, 1947, the date when the resolution was adopted, until the date of her retirement on June 30, 1949. And, second, her change of position, i. e., her retirement, and the abandonment by her of her opportunity to continue in gainful employment, made in reliance on defendant's promise to pay her $200 per month for life.

We must agree with the defendant that the evidence does not support the first of these contentions. There is no language in the resolution predicating plaintiff's right to a pension upon her continued employment. She was not required to work for the defendant for any period of time as a condition to gaining such retirement benefits. She was told that she could quit the day upon which the resolution was adopted, as she herself testified, and it is clear from her own testimony that she made no promise or agreement to continue in the employ of the defendant in return for its promise to pay her a pension. Hence there was lacking that mutuality of obligation which is essential to the validity of a contract. Middleton v. Holecraft, Mo.App., 270 S.W.2d 90; Solace v. T. J. Moss Tie Co., Mo.App., 142 S.W.2d 1079; Aslin v. Stoddard County, 341 Mo. 138, 106 S.W.2d 472; Fuqua v. Lumbermen's Supply Co., 229 Mo.App. 210, 76 S.W.2d 715; Hudson v. Browning, 264 Mo. 58, 174 S.W. 393; Campbell v. American Handle Co., 117 Mo.App. 19, 94 S.W. 815.

But as to the second of these contentions we must agree with plaintiff. By the terms of the resolution defendant promised to pay plaintiff the sum of $200 a month upon her retirement. Consideration for a promise has been defined in the Restatement of the Law of Contracts, Section 75, as:

(1) Consideration for a promise is

(a) an act other than a promise, or

(b) a forbearance, or

(c) the creation, modification or destruction of a legal relation, or

(d) a return promise, bargained for and given in exchange for the promise.

As the parties agree, the consideration sufficient to support a contract may be either a benefit to the promisor or a loss or detriment to the promisee. Industrial Bank & Trust Co. v. Hesselberg, Mo., 195 S.W.2d 470; State ex rel. Kansas City v. State Highway Commission, 349 Mo. 865, 163 S.W.2d 948; Duvall v. Duncan, 341 Mo. 1129, 111 S.W.2d 89; Thompson v. McCune, 333 Mo. 758, 63 S.W.2d 41.

Section 90 of the Restatement of the Law of Contracts states that: “A promise which the promisor should reasonably expect to induce action or forbearance of a [322 S.W.2d 168] definite and substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.” This doctrine has been described as that of “promissory estoppel,” as distinguished from that of equitable estoppel or estoppel in pais, the reason for the differentiation being stated as follows:

It is generally true that one who has led another to act in reasonable reliance on his representations of fact cannot afterwards in litigation between the two deny the truth of the representations, and some courts have sought to apply this principle to the formation of contracts, where, relying on a gratuitous promise, the promisee has suffered detriment. It is to be noticed, however, that such a case does not come within the ordinary definition of estoppel. If there is any representation of an existing fact, it is only that the promisor at the time of making the promise intends to fulfill it. As to such intention there is usually no misrepresentation and if there is, it is not that which has injured the promisee. In other words, he relies on a promise and not on a misstatement of fact; and the term “promissory” estoppel or something equivalent should be used to make the distinction.

Williston on Contracts, Rev. Ed., Sec. 139, Vol. 1.

In speaking of this doctrine, Judge Learned Hand said in Porter v. Commissioner of Internal Revenue, 2 Cir., 60 F.2d 673, 675, that “. . . 'promissory estoppel' is now a recognized species of consideration.”

As pointed out by our Supreme Court in In re Jamison's Estate, Mo., 202 S.W.2d 879, 887, it is stated in the Missouri Annotations to the Restatement under Section 90 that:

"'There is a variance between the doctrine underlying this section and the theoretical justifications that have been advanced for the Missouri decisions.'"

That variance, as the authors of the Annotations point out, is that:

This §90, when applied with §85, means that the promise described is a contract without any consideration. In Missouri the same practical result is reached without in theory abandoning the doctrine of consideration. In Missouri three theories have been advanced as ground for the decisions (1) Theory of act for promise. The induced 'action or forbearance' is the consideration for the promise. Underwood Typewriter Co. v. Century Realty Co. (1909) 220 Mo. 522, 119 S.W. 400, 25 L.R.A., N.S., 1173. See Sec. 76. (2) Theory of promissory estoppel. The induced 'action or forbearance' works an estoppel against the promisor. (Citing School District of Kansas City v. Sheidley (1897) 138 Mo. 672, 40 S. W. 656 [37 L.R.A. 406]) . . . (3) Theory of bilateral contract. When the induced 'action or forbearance' is begun, a promise to complete is implied, and we have an enforceable bilateral contract, the implied promise to complete being the consideration for the original promise.

(Citing cases.)

Was there such an act on the part of plaintiff, in reliance upon the promise contained in the resolution, as will estop the defendant, and therefore create an enforceable contract under the doctrine of promissory estoppel? We think there was. One of the illustrations cited under Section 90 of the Restatement is: “2. A promises B to pay him an annuity during B's life. B thereupon resigns a profitable employment, as A expected that he might. B receives the annuity for some years, in the meantime becoming disqualified from again obtaining good employment. A's promise is binding.” This illustration is objected to by defendant as not being applicable to the case at hand. The reason advanced by it is [322 S.W.2d 169] that in the illustration B became “disqualified” from obtaining other employment before A discontinued the payments, whereas in this case the plaintiff did not discover that she had cancer and thereby became unemployable until after the defendant had discontinued the payments of $200 per month. We think the distinction is immaterial. The only reason for the reference in the illustration to the disqualification of A is in connection with that part of Section 90 regarding the prevention of injustice. The injustice would occur regardless of when the disability occurred. Would defendant contend that the contract would be enforceable if the plaintiff's illness had been discovered on March 31, 1956, the day before it discontinued the payment of the $200 a month, but not if it occurred on April 2nd, the day after? Furthermore, there are more ways to become disqualified for work, or unemployable, than as the result of illness. At the time she retired plaintiff was 57 years of age. At the time the payments were discontinued she was over 63 years of age. It is a matter of common knowledge that it is virtually impossible for a woman of that age to find satisfactory employment, much less a position comparable to that which plaintiff enjoyed at the time of her retirement.

The fact of the matter is that plaintiff's subsequent illness was not the “action or forbearance” which was induced by the promise contained in the resolution. As the trial court correctly decided, such action on plaintiff's part was her retirement from a lucrative position in reliance upon defendant's promise to pay her an annuity or pension. In a very similar case, Ricketts v. Scothorn, 57 Neb. 51, 77 N.W. 365, 367, 42 L.R.A. 794, the Supreme Court of Nebraska said:

. . . According to the undisputed proof, as shown by the record before us, the plaintiff was a working girl, holding a position in which she earned a salary of $10 per week. Her grandfather, desiring to put her in a position of independence, gave her the note accompanying it with the remark that his other grandchildren did not work, and that she would not be obliged to work any longer. In effect, he suggested that she might abandon her employment, and rely in the future upon the bounty which he promised. He doubtless desired that she should give up her occupation, but, whether he did or not, it is entirely certain that he contemplated such action on her part as a reasonable and probable consequence of his gift. Having intentionally influenced the plaintiff to alter her position for the worse on the faith of the note being paid when due, it would be grossly inequitable to permit the maker, or his executor, to resist payment on the ground that the promise was given without consideration.

The Commissioner therefore recommends, for the reasons stated, that the judgment be affirmed.

PER CURIAM. The foregoing opinion by DOERNER, C., is adopted as the opinion of the court. The judgment is, accordingly, affirmed.

WOLFE, P. J., and ANDERSON and RUDDY, JJ., concur.

2.24 Contracts in Intimate Relations 2.24 Contracts in Intimate Relations

2.24.1 Balfour v. Balfour 2.24.1 Balfour v. Balfour

2 K.B. 571

BALFOUR
v.
BALFOUR.

King's Bench Division.
June 24-25, 1919.

Husband and Wife—Contract—Temporary Separation—Allowance for Maintenance of Wife—Domestic Arrangement—No resulting Contract.

The plaintiff sued the defendant (her husband) for money due under an alleged verbal agreement, whereby he undertook to allow her £30 a month in consideration of her agreeing to support herself without calling upon him tor any further maintenance. The parties were married in 1900. The husband was resident in Ceylon, where he held a Government appointment. The plaintiff accompanied him to Ceylon, but in 1915 they returned to England, he being on leave. In 1916 he went back to Ceylon, leaving her in England, where she had to remain temporarily under medical advice. The plaintiff alleged that the defendant before returning to Ceylon entered into the above agreement. The parties remaining apart, the plaintiff subsequently obtained a decree nisi for restitution of conjugal rights, and an order for alimony:

Held, that the alleged agreement did not constitute a legal contract, but was only an ordinary domestic arrangement which could not be sued upon. Mutual promises made in the ordinary domestic relationship of husband and wife do not of necessity give cause for action on a contract.

Decision of Sargant J. reversed.

APPEAL from a decision of Sargant J., sitting as an additional judge of the King's Bench Division. 

The plaintiff sued the defendant (her husband) for money which she claimed to be due in respect of an agreed allowance of £30 a month. The alleged agreement was entered into under the following circumstances. The parties were married in August, 1900. The husband, a civil engineer, had a post under the Government of Ceylon as Director of Irrigation, and after the marriage he and his wife went to Ceylon, and lived there together until the, year 1915, except that in 1906 they paid a short visit to this country, and in 1908 the wife came to England in order to undergo an operation, after which she returned to Ceylon. In November, 1915, she came to this country with her husband, who was on leave. They remained in England until August, 1916, when the husband's leave was up and he had to return. The wife however on the doctor's advice remained in England. On [572] August 8, 1916, the husband being about to sail, the alleged parol agreement sued upon was made. The plaintiff, as appeared from the judge's note, gave the following evidence of what took place: "In August, 1916,defendant's leave was up. I was suffering from rheumatic arthritis. The doctor advised my staying in England for some months, not to go out till November 4. On August 8 my husband sailed. He gave me a cheque from 8th to 31st for £24, and promised to give me £30 per month till I returned." Later on she said: "My husband and I wrote the figures together on August 8; £34 shown. Afterwards he said £30." In cross-examination she said that they had not agreed to live apart until subsequent differences arose between them, and that the agreement of August, 1916, was one which might be made by a couple in amity. Her husband in consultation with her assessed her needs, and said he would send £30 per month for her maintenance. She further said that she then understood that the defendant would be returning to England in a few months, but that he afterwards wrote to her suggesting that they had better remain apart. In March, 1918, she commenced proceedings for restitution of conjugal rights, and on July 30 she obtained a decree nisi. On December 16, 1918, she obtained an order for alimony.  

Sargant J. held that the husband was under an obligation to support his wife, and the parties had contracted that the extent of that obligation should be defined in terms of so much a month. The consent of the wife to that arrangement was a sufficient consideration to constitute a contract which could be sued upon.

He accordingly, gave judgment for the plaintiff.

The husband appealed.

Barrington-Ward K.C. and Du Parcq for the appellant.

Where husband and wife are only temporarily living apart an agreement like that ill the present case confers no contractual rights. There was no agreement for a separation. The agreement here was a purely domestic arrangement intended to take effect until the wife should rejoin her husband. It [573] cannot be regarded as a binding contract. The wife gave no consideration for the promise.

On the evidence it is submitted that this was a temporary domestic arrangement caused by the absence of the husband abroad, and was not intended to have a contractual operation.

Hawke K.C. and Tebbs for the respondent.

Where a husband and wife are living together the wife is as capable of contracting with her husband that he shall give her a particular sum as she is of contracting with any other person.

Where husband and wife separate by mutual consent, the wife making her own terms as to her income and that income proves insufficient for her support, the wife has no authority to pledge her husband's credit: Eastland v. Burchell.[1]

[DUKE L.J. That may be because they must be taken to have agreed not to live as husband and wife.]

Living apart is a question of fact. If the parties live apart by mutual consent the right of the wife to pledge her husband's credit arises. If, however, instead of doing so she agrees to give up that right and to accept an allowance instead, she is entitled to sue for it.

The agency of the wife arises either where the husband leaves her wrongfully, or where the parties are by mutual consent living apart.

In Lush on Husband and Wife, 3rd ed., p. 404, it is stated that: "If the wife is living apart from her husband either (a) on account of the husband's misconduct, the wife being left without adequate means; (b) or by mutual consent; and the husband has agreed to make her an allowance, and neglects to pay it, the law gives her an absolute authority to pledge his credit for suitable necessaries."

[DUKE L.J. Are not those cases where the parties are matrimonially separated?]

[WARRINGTON L.J. referred to Lush on Husband and Wife, 3rd ed., p. 386.]

The agency arises where there is a separation in fact. The [574] consideration for the promise by the husband to pay the allowance was that she gave up her right to pledge his credit.

[DUKE L.J. The husband has a right to withdraw the authority to pledge his credit. The wife's consent, therefore, cannot be treated as consideration to support such a contract as this.]

Where a husband leaves his wife in England and goes abroad it is no longer at his will that she shall have authority to pledge his credit. If there be a separation in fact (except for the wife's guilt) the agency of necessity arises. The parties here intended to enter into a binding contract.

WARRINGTON L.J. (after stating the facts). Those being the facts we have to say whether there is a legal contract between the parties, in other words, whether what took place between them was in the domain of a contract or whether it was merely a domestic arrangement such as may be made every day between a husband and wife who are living together in friendly intercourse. It may be, and I do not for a moment say that it is not, possible for such a contract as is alleged in the present case to be made between husband and wife. The question is whether such a contract was made. That can only be determined either by proving that it was made in express terms, or that there is a necessary implication from the circumstances of the parties, and the transaction generally, that such a contract was made. It is quite plain that no such contract was made in express terms, and there was no bargain on the part of the wife at all. All that took place was this: The husband and wife met in a friendly way and discussed what would be necessary for her support while she was detained in England, the husband being in Ceylon, and they came to the conclusion that £30 a month would be about right, but there is no evidence of any express bargain by the wife that she would in all the circumstances, treat that as in satisfaction of the obligation of the husband to maintain her. Can we find a contract from the position of the parties? It seems to me it is quite impossible. If we were to imply such a contract in this case we should be [575] implying on the part of the wife that whatever happened and whatever might be the change of circumstances while the husband was away she should be content with this £30 a month, and bind herself by an obligation in law not to require him to pay anything more; and on the other hand we should be implying on the part of the husband a bargain to pay £30 a month for some indefinite period whatever might be his circumstances. Then again it seems to me that it would be impossible to make any such implication. The matter really reduces itself to an absurdity when one considers it, because if we were to hold that there was a contract in this case we should have to hold that with regard to all the more or less trivial concerns of life where a wife, at the request of her husband, makes a promise to him, that is a promise which can be enforced in law. All I can say is that there is no such contract here. These two people never intended to make a bargain which could be enforced in law. The husband expressed his intention to make this payment, and he promised to make it, and was bound in honour to continue it so long as he was in a position to do so. The wife on the other hand, so far as I can see, made no bargain at all. That is in my opinion sufficient to dispose of the case.

It is unnecessary to consider whether if the husband failed to make the payments the wife could pledge his credit or whether if he failed to make the payments she could have made some other arrangements. The only question we have to consider is whether the wife has made out a contract which she has set out to do. In my opinion she has not.

I think the judgment of Sargant J. cannot stand, the appeal ought to be allowed and judgment ought to be entered for the defendant.

DUKE L.J. I agree. This is in some respects an important case, and as we differ from the judgment of the Court below I propose to state concisely my views and the grounds which have led me to the conclusion at which I have arrived. Substantially the question is whether the promise of the husband to the wife that while she is living absent from [576] him he will make her a periodical allowance involves in law a consideration on the part of the wife sufficient to convert that promise into a binding agreement. In my opinion it does not. I do not dissent, as at present advised, from the proposition that the spouses in this case might have made an agreement which would have given the plaintiff a cause of action, and I am inclined to think that the promise of the wife in respect of her separate estate could have founded an action in contract within the principles of the Married Women's Property Act, 1882. But we have to see whether here is evidence of any such exchange of promises as would make the promise of the husband the basis of an agreement. It was strongly urged by Mr. Hawke that the promise being absolute in form ought to be construed as one of the mutual promises which make an agreement. It was said that a promise and an implied undertaking between strangers, such as the promise and implied undertaking alleged in this case would have founded an action on contract. That may be so, but it is impossible to disregard in this case what was the basis of the whole communications between the parties, under which the alleged contract is said to have been formed. The basis of their communications was their relationship of husband and wife, a relationship which creates certain obligations, but not that which is here put in suit. There was a discussion between the parties while they were absent from one another, whether they should agree upon a separation. In the Court below the plaintiff conceded that down to the time of her suing in the Divorce Division there was no separation, and that the period of absence was a period of absence as between husband and wife living in amity. An agreement for separation when it is established does involve mutual considerations.

That was why in Eastland v. Burchell[1] the agreement for separation was found by the learned judge to have been of decisive consequence. But in this case there was no separation agreement at all. The parties were husband and wife, and subject to all the conditions, in point of law, involved in that [577] relationship. It is impossible to say that where the relationship of husband and wife exists, and promises are exchanged, they must be deemed to be promises of a contractual nature. In order to establish a contract there ought to be something more than mere mutual promises having regard to the domestic relations of the parties. It is required that the obligations arising out of that relationship shall be displaced before either of the parties can found a contract upon such promises. The formula which was stated in this case to support the claim of the lady was this: In consideration that you will agree to give me £30 a month I will agree to forego my right to pledge your credit. In the judgment of the majority of the Court of Common Pleas in Jolly v. Rees,[1] which was affirmed in the decision of Debenham v. Mellon[2] Erle C.J. states this proposition[3]: "But taking the law to be, that the power of the wife to charge her husband is in the capacity of his agent, it is a solecism in reasoning to say that she derives her authority from his will, and at the same time to say that the relation of wife creates the authority against his will, by a presumptio juris et de jure from marriage." What is said on the part of the wife in this case is that her arrangement with her husband that she should assent to that which was in his discretion to do or not to do was the consideration moving from her to her husband. The giving up of that which was not a right was not a consideration. The proposition that the mutual promises made in. the ordinary domestic relationship of husband and wife of necessity give cause for action on a contract seems to me to go to the very root of the relationship, and to be a possible fruitful source of dissension and quarrelling. I cannot see that any benefit would result from it to either of the parties, but on the other hand it would lead to unlimited litigation in a relationship which should be obviously as far as possible protected from possibilities of that kind. I think, therefore, that in point of principle there is no foundation for the claim which is made here, and I am satisfied that there was no consideration [578] moving from the wife to the husband or promise by the husband to the wife which was sufficient to sustain this action founded on contract. I think, therefore, that the appeal must be allowed.

ATKIN, L.J. The defence to this action on the alleged contract is that the defendant, the husband, entered into no contract with his wife, and for the determination of that it is necessary to remember that there are agreements between parties which do not result in contracts within the meaning of that term in our law. The ordinary example is where two parties agree to take a walk together, or where there is an offer and an acceptance of hospitality. Nobody would suggest in ordinary circumstances that those agreements result in what we know as a contract, and one of the most usual forms of agreement which does not constitute a contract appears to me to be the arrangements which are made between husband and wife. It is quite common, and it is the natural and inevitable result of the relationship of husband and wife, that the two spouses should make arrangements between themselves—agreements such as are in dispute in this action—agreements for allowances, by which the husband agrees that he will pay to his wife a certain sum of money, per week, or per month, or per year, to cover either her own expenses or the necessary expenses of the household arid of the children of the marriage, and in which the wife promises either expressly or impliedly to apply the allowance for the purpose for which it is given. To my mind those agreements, or many of them, do not result in contracts at all, and they do not result in contracts even though there may be what as between other parties would constitute consideration for the agreement. The consideration, as we know, may consist either in some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other. That is a well-known definition, and it constantly happens, I think, that such arrangements made between husband and wife are arrangements in which there are mutual promises, or in which there [579] is consideration in form within the definition that I have mentioned. Nevertheless they are not contracts, and they are not contracts because the parties did not intend that they should be attended by legal consequences. To my mind it would be of the worst possible example to hold that agreements such as this resulted in legal obligations which could be enforced in the Courts. It would mean this, that when the husband makes his wife a promise to give her an allowance of 30s. or £2 a week whatever he can afford to give her, for the maintenance of the household and children, and she promises so to apply it, not only could she sue him for his failure in any week to supply the allowance, but he could sue her for non-performance of the obligation, express or implied, which she had undertaken upon her part. All I can say is that the small Courts of this country would have to be multiplied one hundredfold if these arrangements were held to result in legal obligations. They are not sued noon, not because the parties are reluctant to enforce their legal rights when the agreement is broken, but because the parties, in the inception of the arrangement, never intended that they should be sued upon.  Agreements such as these are outside the realm of contracts altogether. The common law does not regulate the form of agreements between spouses. Their promises are not sealed with seals and sealing wax. The consideration that really obtains for them is that natural love and affection which counts for so little in these cold Courts. The terms may be repudiated, varied or renewed as performance proceeds or as disagreements develop; and the principles of the common law as to exoneration and discharge and accord and satisfaction are such as find no place in the domestic code. The parties themselves are advocates, judges, Courts, sheriff's officer and reporter. In respect of these promises each house is a domain into which the King's writ does not seek to run, and to which his officers do not seek to be admitted. The only question in this case is whether or not this promise was of such a class or not. For the reasons given by my brethren it appears to me to be plainly established that the promise here was [580] not intended by either party to be attended by legal consequences. I think the onus was upon the plaintiff, and the plaintiff has not established any contract. The parties were living together, the wife intending to return. The suggestion is that the husband bound himself to pay £30 a month under all circumstances, and she bound herself to be satisfied with that sum under all circumstances, and, although she was in ill-health and alone in this country, that out of that sum she undertook to defray the whole of the medical expenses that might fall upon her, whatever might be the development of her illness, and in whatever expenses it might involve her. To my mind neither party contemplated such a result. I think that the parol evidence upon which the case turns does not establish a contract. I think that the letters do not evidence such a contract, or amplify the oral evidence which was given by the wife, which is not in dispute. For these reasons I think the judgment of the Court below was wrong and that this appeal should be allowed.

Appeal allowed.

Solicitors for appellant: Lewis & Lewis.

Solicitors for respondent: Sawyer & Withall, for John C. Buckwell, Brighton.

G. A. S.

[1] (1878) 3 Q.B.D. 432.

[1] 3 Q.B.D. 432.

[1] (1864) 15 C. B. (N. S.) 628.

[2] (1880) 6 App. Cas. 24.

[3] 15 C. B. (N. S.) 641.

2.24.2 Hewitt v. Hewitt 2.24.2 Hewitt v. Hewitt

Illinois Supreme Court
77 Ill. 2d 49
No. 51264
1979-09-19

(No. 51264.

VICTORIA L. HEWITT et al., Appellees, v. ROBERT M. HEWITT, Appellant.

Opinion filed September 19, 1979.

*52Marshall J. Auerbach, Michael J. Rovell, Joan B. Gottschall, Don R. Sampen, and Robert T. Markowski (Jenner & Block, of Chicago, and Robert I. Auler, of Urbana, of counsel), for appellant.

Burt Greaves, of Greaves, Lemer & Gadau, of Champaign, for appellee.

MR. JUSTICE UNDERWOOD

delivered the opinion of the court:

The issue in this case is whether plaintiff Victoria Hewitt, whose complaint alleges she lived with defendant Robert Hewitt from 1960 to 1975 in an unmarried, family-like relationship to which three children have been born, may recover from him “an equal share of the profits and properties accumulated by the parties” during that period.

Plaintiff initially filed a complaint for divorce, but at a hearing on defendant’s motion to dismiss, admitted that no marriage ceremony had taken place and that the parties have never obtained a marriage license. In dismissing that complaint the trial court found that neither a ceremonial nor a common law marriage existed; that since defendant *53admitted the paternity of the minor children, plaintiff need not bring a separate action under the Paternity Act (Ill. Rev. Stat. 1975, ch. 106 3/4, par. 51 et seq.) to have the question of child support determined; and directed plaintiff to make her complaint more definite as to the . nature of the property of which she was seeking division.

Plaintiff thereafter filed an amended complaint alleging the following bases for her claim: (1) that because defendant promised he would “share his life, his future, his earnings and his property” with her and all of defendant’s property resulted from the parties’ joint endeavors, plaintiff is entitled in equity to a one-half share; (2) that the conduct of the parties evinced an implied contract entitling plaintiff to one-half the property accumulated during their “family relationship”; (3) that because defendant fraudulently assured plaintiff she was his wife in order to secure her services, although he knew they were not legally married, defendant’s property should be impressed with a trust for plaintiff’s benefit; (4) that because plaintiff has relied to her detriment on defendant’s promises and devoted her entire life to him, defendant has been unjustly enriched.

The factual background alleged or testified to is that in June 1960, when she and defendant were students at Grinnell College in Iowa, plaintiff became pregnant; that defendant thereafter told her that they were husband and wife and would live as such, no formal ceremony being necessary, and that he would “share his life, his future, his earnings and his property” with her; that the parties immediately announced to their respective parents that they were married and thereafter held themselves out as husband and wife; that in reliance on defendant’s promises she devoted her efforts to his professional education and his establishment in the practice of pedodontia, obtaining financial assistance from her parents for this purpose; that she assisted defendant in his career with her own special *54skills and although she was given payroll checks for these services she placed them in a common fund; that defendant, who was without funds at the time of the marriage, as a result of her efforts now earns over $80,000 a year and has accumulated large amounts of property, owned either jointly with her or separately; that she has given him every assistance a wife and mother could give, including social activities designed to enhance his social and professional reputation.

The amended complaint was also dismissed, the trial court finding that Illinois law and public policy require such claims to be based on a valid marriage. The appellate court reversed, stating that because the parties had outwardly lived a conventional married life, plaintiff’s conduct had not “so affronted public policy that she should be denied any and all relief” (62 Ill. App. 3d 861, 869), and that plaintiff’s complaint stated a cause of action on an express oral contract. We granted leave to appeal. Defendant apparently does not contest his obligation to support the children, and that question is not before us.

The appellate court, in reversing, gave considerable weight to the fact that the parties had held themselves out as husband and wife for over 15 years. The court noted that they had lived “a most conventional, respectable and ordinary family life” (62 Ill. App. 3d 861, 863) that did not openly flout accepted standards, the “single flaw” being the lack of a valid marriage. Indeed the appellate court went so far as to say that the parties had “lived within the legitimate boundaries of a marriage and family relationship of a most conventional sort” (62 Ill. App. 3d 861, 864), an assertion which that court cannot have intended to be taken literally. Noting that the Illinois Marriage and Dissolution of Marriage Act (Ill. Rev. Stat. 1977, ch. 40, par. 101 et seq.) does not prohibit nonmarital cohabitation and that the Criminal Code of *551961 (Ill. Rev. Stat. 1977, ch. 38, par. 11 — 8(a)) makes fornication an offense only if the behavior is open and notorious, the appellate court concluded that plaintiff should not be denied relief on public policy grounds.

In finding that plaintiff’s complaint stated a cause of action on an express oral contract, the appellate court adopted the reasoning of the California Supreme Court in the widely publicized case of Marvin v. Marvin (1976), 18 Cal. 3d 660, 557 P.2d 106, 134 Cal. Rptr. 815, quoting extensively therefrom. In Marvin, Michelle Trióla and defendant Lee Marvin lived together for 7 years pursuant to an alleged oral agreement that while “the parties lived together they would combine their efforts and earnings and would share equally any and all property accumulated as a result of their efforts whether individual or combined.” (18 Cal. 3d 660, 666, 557 P.2d 106, 110, 134 Cal. Rptr. 815, 819.) In her complaint she alleged that, in reliance on this agreement, she gave up her career as a singer to devote herself full time to defendant as “companion, homemaker, housekeeper and cook.” (18 Cal. 3d 660, 666, 557 P.2d 106, 110, 134 Cal. Rptr. 815, 819.) In resolving her claim for one-half the property accumulated in defendant’s name during that period the California court held that “The courts should enforce express contracts between nonmarital partners except to the extent that the contract is explicitly founded on the consideration of meretricious sexual services” and that “In the absence of an express contract, the courts should inquire into the conduct of the parties to determine whether that conduct demonstrates an implied contract, agreement of partnership or joint venture, or some other tacit understanding between the parties. The courts may also employ the doctrine of quantum meruit, or equitable remedies such as constructive or resulting trusts, when warranted by the facts of the case.” (18 Cal. 3d 660, 665, 557 P.2d 106, 110, 134 Cal. Rptr. 815, 819.) The court *56reached its conclusions because:

“In summary, we believe that the prevalence of nonmarital relationships in modem society and the social acceptance of them, marks this as a time when our courts should by no means apply the doctrine of the unlawfulness of the so-called meretricious relationship to the instant case. *** ***
The mores of the society have indeed changed so radically in regard to cohabitation that we cannot impose a standard based on alleged moral considerations that have apparently been so widely abandoned by so many.” 18 Cal. 3d 660, 683-84, 557 P.2d 106, 122, 134 Cal. Rptr. 815, 831.

It is apparent that the Marvin court adopted a pure contract theory, under which, if the intent of the parties and the terms of their agreement are proved, the psuedoconventional family relationship which impressed the appellate court here is irrelevant; recovery may be had unless the implicit sexual relationship is made the explicit consideration for the agreement. In contrast, the appellate court here, as we understand its opinion, would apply contract principles only in a setting where the relationship of the parties outwardly resembled that of a traditional family. It seems apparent that the plaintiff in Marvin would not have been entitled to recover in our appellate court because of the absence of that outwardly appearing conventional family relationship.

The issue of whether property rights accrue to unmarried cohabitants can not, however, be regarded realistically as merely a problem in the law of express contracts. Plaintiff argues that because her action is founded on an express contract, her recovery would in no way imply that unmarried cohabitants acquire property rights merely by cohabitation and subsequent separation. *57However, the Marvin court expressly recognized and the appellate court here seems to agree that if common law principles of express contract govern express agreements between unmarried cohabitants, common law principles of implied contract, equitable relief and constructive trust must govern the parties ’ relations in the absence of such an agreement. (18 Cal. 3d 660, 678, 557 P.2d 106, 118, 134 Cal. Rptr. 815, 827; 62 Ill. App. 3d 861, 867-68.) In all probability the latter case will be much the more common, since it is unlikely that most couples who live together will enter into express agreements regulating their property rights. (Bruch, Property Rights of De Facto Spouses, Including Thoughts on the Value of Homemakers’ Services, 10 Earn. L.Q. 101, 102 (1976).) The increasing incidence of nonmarital cohabitation referred to in Marvin and the variety of legal remedies therein sanctioned seem certain to result in substantial amounts of litigation, in which, whatever the allegations regarding an oral contract, the proof will necessarily involve details of the parties’ living arrangements.

Apart, however, from the appellate court’s reliance upon Marvin to reach what appears to us to be a significantly different result, we believe there is a more fundamental problem. We are aware, of course, of the increasing judicial attention given the individual claims of unmarried cohabitants to jointly accumulated property, and the fact that the majority of courts considering the question have recognized an equitable or contractual basis for implementing the reasonable expectations of the parties unless sexual services were the explicit consideration. (See cases collected in Annot., 31 A.L.R.2d 1255 (1953) and A.L.R.2d Later Case Service supplementing vols. 25 to 31.) The issue of unmarried cohabitants’ mutual property rights, however, as we earlier noted, cannot appropriately be characterized solely in terms of contract law, nor is it limited to considerations of equity or fairness *58as between the parties to such relationships. There are major public policy questions involved in determining whether, under what circumstances, and to what extent it is desirable to accord some type of legal status to claims arising from such relationships. Of substantially greater importance than the rights of the immediate parties is the impact of such recognition upon our society and the institution of marriage. Will the fact that legal rights closely resembling those arising from conventional marriages can be acquired by those who deliberately choose to enter into what have heretofore been commonly referred to as “illicit” or “meretricious” relationships encourage formation of such relationships and weaken marriage as the foundation of our family-based society? In the event of death shall the survivor have the status of a surviving spouse for purposes of inheritance, wrongful death actions, workmen’s compensation, etc.? And still more importantly: what of the children bom of such relationships? What are their support and inheritance rights and by what standards are custody questions resolved? What of the sociological and psychological effects upon them of that type of environment? Does not the recognition of legally enforceable property and custody rights emanating from nonmarital cohabitation in practical effect equate with the legalization of common law marriage — at least in the circumstances of this case? And, in summary, have the increasing numbers of unmarried cohabitants and changing mores of our society (Brunch, Property Rights of De Facto Spouses Including Thoughts on the Value of Homemakers’ Services, 10 Fam. L.Q. 101, 102-03 (1976); Nielson, In re Cary: A Judicial Recognition of Illicit Cohabitation, 25 Hastings L.J. 1226 (1974)) reached the point at which the general welfare of the citizens of this State is best served by a return to something resembling the judicially created common law marriage our legislature outlawed in 1905?

Illinois’ public policy regarding agreements such as the *59one alleged here was implemented long ago in Wallace v. Rappleye (1882), 103 Ill. 229, 249, where this court said: “An agreement in consideration of future illicit cohabitation between the plaintiffs is void.” This is the traditional rule, in force until recent years in all jurisdictions. (See, e.g., Gauthier v. Laing (1950), 96 N.H. 80, 70 A.2d 207; Grant v. Butt (1941), 198 S.C. 298, 17 S.E.2d 689.) Section 589 of the Restatement of Contracts (1932) states, “A bargain in whole or in part for or in consideration of illicit sexual intercourse or of a promise thereof is illegal.” See also 6A Corbin, Contracts sec. 1476 (1962), and cases cited therein.

It is true, of course, that cohabitation by the parties may not prevent them from forming valid contracts about independent matters, for which it is said the sexual relations do not form part of the consideration. (Restatement of Contracts secs. 589, 597 (1932); 6A Corbin, Contracts sec. 1476 (1962).) Those courts which allow recovery generally have relied on this principle to reduce the scope of the rule of illegality. Thus, California courts long prior to Marvin held that an express agreement to pool earnings is supported by independent consideration and is not invalidated by cohabitation of the parties, the agreements being regarded as simultaneous but separate. (See, e.g., Trutalli v Meraviglia (1932), 215 Cal. 698, 12 P.2d 430; see also Annot., 31 A.L.R.2d 1255 (1953), and cases cited therein.) More recently, several courts have reasoned that the rendition of housekeeping and homemaking services such as plaintiff alleges here could be regarded as the consideration for a separate contract between the parties, severable from the illegal contract founded on sexual relations. [Kozlowski v. Kozlowski (1979), 80 N.J. 378, 403 A.2d 902; Marvin v. Marvin (1976), 18 Cal. 3d 660, 670 n.5, 557 P.2d 106, 113 n.5, 134 Cal. Rptr. 815, 822 n.5; Tyranski v. Piggins (1973), 44 Mich. App. 570, 205 N.W.2d 595, 597; contra, Rehak v. *60 Mathis (1977), 239 Ga. 541, 238 S.E.2d 81.) In Latham v. Latham (1976), 274 Or. 421, 547 P.2d 144, and Carlson v. Olson (Minn. 1977), 256 N.W.2d 249, on allegations similar to those in this case, the Minnesota Supreme Court adopted Marvin and the Oregon court expressly held that agreements in consideration of cohabitation were not void, stating:

“We are not validating an agreement in which the only or primary consideration is sexual intercourse. The agreement here contemplated all the burdens and amenities of married life.” 274 Or. 421, 427, 547 P.2d 144, 147.

The real thrust of plaintiff’s argument here is that we should abandon the rule of illegality because of certain changes in societal norms and attitudes. It is urged that social mores have changed radically in recent years, rendering this principle of law archaic. It is said that because there are so many unmarried cohabitants today the courts must confer a legal status on such relationships. This, of course, is the rationale underlying some of the decisions and commentaries. (See, e.g., Marvin v. Marvin (1976), 18 Cal. 3d 660, 683, 557 P.2d 106, 122, 134 Cal. Rptr. 815, 831; Beal v. Beal (1978), 282 Or. 115, 577 P.2d 507; Kay & Amyx, Marvin v. Marvin: Preserving the Options, 65 Cal. L. Rev. 937 (1977).) If this is to be the result, however, it would seem more candid to acknowledge the return of varying forms of common law marriage than to continue displaying the naivete we believe involved in the assertion that there are involved in these relationships contracts separate and independent from the sexual activity, and the assumption that those contracts would have been entered into or would continue without that activity.

Even if we were to assume some modification of the rule of illegality is appropriate, we return to the fundamental question earlier alluded to: If resolution of this *61issue rests ultimately on grounds of public policy, by what body should that policy be determined? Marvin, viewing the issue as governed solely by contract law, found judicial policy-making appropriate. Its decision was facilitated by California precedent and that State’s no-fault divorce law. In our view, however, the situation alleged here was not the kind of arm’s length bargain envisioned by traditional contract principles, but an intimate arrangement of a fundamentally different kind. The issue, realistically, is whether it is appropriate for this court to grant a legal status to a private arrangement substituting for the institution of marriage sanctioned by the State. The question whether change is needed in the law governing the rights of parties in this delicate area of marriage-like relationships involves evaluations of sociological data and alternatives we believe best suited to the superior investigative and fact-finding facilities of the legislative branch in the exercise of its traditional authority to declare public policy in the domestic relations field. (Strukoff v. Strukoff (1979), 76 Ill. 2d 53;Siegallv. Solomon (1960), 19 Ill. 2d 145.) That belief is reinforced by the fact that judicial recognition of mutual property rights between unmarried cohabitants would, in our opinion, clearly violate the policy of our recently enacted Illinois Marriage and Dissolution of Marriage Act. Although the Act does not specifically address the subject of nonmarital cohabitation, we think the legislative policy quite evident from the statutory scheme.

The Act provides:

“This Act shall be liberally construed and applied to promote its underlying purposes, which are to:
(1) provide adequate procedures for the solemnization and registration of marriage;
(2) strengthen and preserve the integrity of marriage and safeguard family relationships.” (Ill. Rev. Stat. 1977, ch. 40, par. 102.)

We cannot confidently say that judicial recognition of *62property rights between unmarried cohabitants will not make that alternative to marriage more attractive by allowing the parties to engage in such relationships with greater security. As one commentator has noted, it may make this alternative especially attractive to persons who seek a property arrangement that the law does not permit to marital partners. (Comment, 90 Harv. L. Rev. 1708, 1713 (1977).) This court, for example, has held void agreements releasing husbands from their obligation to support their wives. (Vock v. Vock (1937), 365 Ill. 432; VanKoten v. VanKoten (1926), 323 Ill. 323; see also Rhodes v. Rhodes (1967), 82 Ill. App. 2d 435, 225 N.E.2d 802; Restatement of Contracts sec. 587 (1932); Weitzman, Legal Regulation of Marriage: Tradition and Change, 62 Cal. L. Rev. 1169, 1259-63 (1974).) In thus potentially enhancing the attractiveness of a private arrangement over marriage, we believe that the appellate court decision in this case contravenes the Act’s policy of strengthening and preserving the integrity of marriage.

The Act also provides: “Common law marriages contracted in this State after June 30, 1905 are invalid.” (Ill. Rev. Stat. 1977, ch. 40, par. 214.) The doctrine of common law marriage was a judicially sanctioned alternative to formal marriage designed to apply to cases like the one before us. In Port v. Port (1873), 70 Ill. 484, this court reasoned that because the statute governing marriage did not “prohibit or declare void a marriage not solemnized in accordance with its provisions, a marriage without observing the statutory regulations, if made according to the common law, will still be a valid marriage.” (70 Ill. 484, 486.) This court held that if the parties declared their present intent to take each other as husband and wife and thereafter did so a valid common law marriage existed. (Cartwright v. McGown (1887), 121 Ill. 388, 398.) Such marriages were legislatively abolished in 1905, presumably because of the problems earlier noted, and the above-*63quoted language expressly reaffirms that policy.

While the appellate court denied that its decision here served to rehabilitate the doctrine of common law marriage, we are not persuaded. Plaintiff’s allegations disclose a relationship that clearly would have constituted a valid common law marriage in this State prior to 1905. The parties expressly manifested their present intent to be husband and wife; immediately thereafter they assumed the marital status; and for many years they consistently held themselves out to their relatives and the public at large as husband and wife. Revealingly, the appellate court relied on the fact that the parties were, to the public, husband and wife in determining that the parties living arrangement did not flout Illinois public policy. It is of course true, as plaintiff argues, that unlike a common law spouse she would not have full marital rights in that she could not, for example, claim her statutory one-third share of defendant’s property on his death. The distinction appears unimpressive, however, if she can claim one-half of his property on a theory of express or implied contract.

Further, in enacting the Illinois Marriage and Dissolution of Marriage Act, our legislature considered and rejected the “no-fault” divorce concept that has been adopted in many other jurisdictions, including California. (See Uniform Marriage and Divorce Act secs. 302, 305.) Illinois appears to be one of three States retaining fault grounds for dissolution of marriage. (Ill. Rev. Stat. 1977, ch. 40, par. 401; Comment, Hewitt v. Hewitt, Contract Cohabitation and Equitable Expectations Relief for Meretricious Spouses, 12 J. Mar. J. Prac. & Proc. 435, 452-53 (1979).) Certainly a significantly stronger promarriage policy is manifest in that action, which appears to us to reaffirm the traditional doctrine that marriage is a civil contract between three parties — the husband, the wife and the State. (Johnson v. Johnson (1942), 381 Ill. 362; *64 VanKoten v. VanKoten (1926), 323 Ill. 323.) The policy of the Act gives the State a strong continuing interest in the institution of marriage and prevents the marriage relation from becoming in effect a private contract terminable at will. This seems to us another indication that public policy disfavors private contractual alternatives to marriage.

Lastly, in enacting the Illinois Marriage and Dissolution of Marriage Act, the legislature adopted for the first time the civil law concept of the putative spouse. The Act provides that an unmarried person may acquire the rights of a legal spouse only if he goes through a marriage ceremony and cohabits with another in the good-faith belief that he is validly married. When he learns that the marriage is not valid his status as a putative spouse terminates; common law marriages are expressly excluded. (Ill. Rev. Stat. 1977, ch. 40, par. 305.) The legislature thus extended legal recognition to a class of nonmarital relationships, but only to the extent of a party’s good-faith belief in the existence of a valid marriage. Moreover, during the legislature’s deliberations on the Act Marvin was decided and received wide publicity. (See Note, 12 J. Mar. J. Prac. & Proc. 435, 450 (1979).) These circumstances in our opinion constitute a recent and unmistakeable legislative judgment disfavoring the grant of mutual property rights to knowingly unmarried cohabitants. We have found no case in which recovery has been allowed in the face of a legislative declaration as recently and clearly enacted as ours. Even if we disagreed with the wisdom of that judgment, it is not for us to overturn or erode it. Davis v. Commonwealth Edison Co. (1975), 61 Ill. 2d 494, 496-97.

Actually, however, the legislative judgment is in accord with the history of common law marriage in this country. “Despite its judicial acceptance in many states, the doctrine of common-law marriage is generally frowned on in this country, even in some of the states that have *65accepted it.” (52 Am. Jur. 2d 902 Marriage sec. 46 (1970).) Its origins, early history and problems are detailed in In re Estate of Soeder (1966), 7 Ohio App. 2d 271, 220 N.E.2d 547, where that court noted that some 30 States did not authorize common law marriage. Judicial criticism has been widespread even in States recognizing the relationship. (See, e.g., Baker v. Mitchell (1941), 143 Pa. Super. 50, 54, 17 A.2d 738, 741, “a fruitful source of perjury and fraud ***”; Sorensen v. Sorensen (1904), 68 Neb. 500, 100 N.W. 930.) “It tends to weaken the public estimate of the sanctity of the marriage relation. It puts in doubt the certainty of the rights of inheritance. It opens the door to false pretenses of marriage and the imposition on estates of suppositious heirs.” 7 Ohio App. 2d 271, 290, 220 N.E.2d 547, 561.

In our judgment the fault in the appellate court holding in this case is that its practical effect is the reinstatement of common law marriage, as we earlier indicated, for there is no doubt that the alleged facts would, if proved, establish such a marriage under our pre-1905 law. (Cartwright v. McGown (1887), 121 Ill. 388.) The concern of both the Marvin court and the appellate court on this score is manifest from the circumstance that both courts found it necessary to emphasize marital values (“the structure of society itself largely depends upon the institution of marriage ” (Marvin v. Marvin (1976), 18 Cal. 3d 660, 684, 557 P.2d 106, 122, 134 Cal. Rptr. 815, 831) and to deny any intent to “derogate from” (18 Cal. 3d 660, 684, 557 P.2d 106, 122, 134 Cal. Rptr. 815, 831) or “denigrate” (Hewitt v. Hewitt (1978), 62 Ill. App. 3d 861, 868) that institution. Commentators have expressed greater concern: “[T] he effect of these cases is to reinstitute common-law marriage in California after it has been abolished by the legislature.” (Clark, The New Marriage, Williamette L.J. 441, 449 (1976).) “[Hewitt] is, if not a direct resurrection of *66common-law marriage contract principles, at least a large step in that direction.” Reiland, Hewitt v. Hewitt: Middle America, Marvin and Common-Law Marriage, 60 Chi. B. Rec. 84, 88-90 (1978).

We do not intend to suggest that plaintiff’s claims are totally devoid of merit. Rather, we believe that our statement in Mogged v. Mogged (1973), 55 Ill. 2d 221, 225, made in deciding whether to abolish a judicially created defense to divorce, is appropriate here:

“Whether or not the defense of recrimination should be abolished or modified in Illinois is a question involving complex public-policy considerations as to which compelling arguments may be made on both sides. For the reasons stated hereafter, we believe that these questions are appropriately within the province of the legislature, and that, if there is to be a change in the law of this State on this matter, it is for the legislature and not the courts to bring about that change.”

We accordingly hold that plaintiff’s claims are unenforceable for the reason that they contravene the public policy, implicit in the statutory scheme of the Illinois Marriage and Dissolution of Marriage Act, disfavoring the grant of mutually enforceable property rights to knowingly unmarried cohabitants. The judgment of the appellate court is reversed and the judgment of the circuit court of Champaign County is affirmed.

Appellate court reversed; circuit court affirmed.

2.24.3 Morone v. Morone 2.24.3 Morone v. Morone

50 N.Y.2d 481 (1980)

Frances Morone, Also Known as Frances Cross, Appellant,
v.
Frank Morone, Respondent.

Court of Appeals of the State of New York.

Argued March 28, 1980.
Decided June 6, 1980.

 

Joel R. Brandes, Robert W. Kahn, P. C., Andrew F. Capoccia, P. C., and Peter K. Levine for appellant.

James H. Doran for respondent.

Chief Judge COOKE and Judges GABRIELLI, WACHTLER and FUCHSBERG concur with Judge MEYER; Judge JONES dissents in part and votes to affirm in a separate opinion in which Judge JASEN concurs.

[484] MEYER, J.

Presented by this appeal are the questions whether a contract as to earnings and assets may be implied in fact from the relationship of an unmarried couple living together and whether an express contract of such a couple on those subjects is enforceable. Finding an implied contract such as was recognized in Marvin v Marvin (18 Cal 3d 660) to be conceptually so amorphous as practically to defy equitable enforcement, and inconsistent with the legislative policy enunciated in 1933 when common-law marriages were abolished in New York, we decline to follow the Marvin lead. Consistent with our decision in Matter of Gorden (8 N.Y.2d 71), however, we conclude that the express contract of such a couple is enforceable. Accordingly, the order of the Appellate Division dismissing the complaint should be modified to dismiss only the first (implied contract) cause of action and as so modified should be affirmed, with costs to plaintiff.

On a motion to dismiss a complaint we accept the facts alleged as true (219 Broadway Corp. v Alexander's Inc., 46 N.Y.2d 506, 509) and determine simply whether the facts alleged fit within any cognizable legal theory (see Rovello v Orofino Realty, 40 N.Y.2d 633).

Plaintiff alleges that she and defendant have lived together and held themselves out to the community as husband and wife since 1952 and that defendant acknowledges that the two children born of the relationship are his. Her first cause of action alleges the existence of this long-continued relationship and that since its inception she has performed domestic duties and business services at the request of defendant with the expectation that she would receive full compensation for them, and that defendant has always accepted her services [485] knowing that she expected compensation for them. Plaintiff suggests that defendant has recognized that their economic fortunes are united, for she alleges that they have filed joint tax returns "over the past several years." She seeks judgment in the amount of $250,000.

The second cause of action begins with the repetition and reallegation of all of the allegations of the first cause of action. Plaintiff then alleges that in 1952 she and the defendant entered into a partnership agreement by which they orally agreed that she would furnish domestic services[1] and defendant was to have full charge of business transactions, that defendant "would support, maintain and provide for plaintiff in accordance with his earning capacity and that defendant further agreed on his part to take care of the plaintiff and do right by her," and that the net profits from the partnership were to be used for and applied to the equal benefit of plaintiff and defendant. Plaintiff avers that defendant commanded that she not obtain employment or he would leave her, and that since 1952 the defendant has collected large sums of money "from various companies and business dealings." Finally, plaintiff states that since December of 1975 defendant has dishonored the agreement, has failed to provide support or maintenance, and has refused her demands for an accounting. She asks that defendant be directed to account for moneys received by him during the partnership.

Special Term dismissed the complaint, concluding that no matter how liberally it was construed it sought recovery for "housewifely" duties within a marital-type arrangement for which no recovery could be had. The Appellate Division affirmed because the first cause of action did not assert an express agreement and the second cause of action, though asserting an express partnership agreement, was based upon the same arrangement which was alleged in the first cause of action and was therefore "contextually inadequate". The dissenting Justice was of the view that while the first cause of action was legally insufficient as premised upon an implied contract, the second, expressing as it does an explicit agreement, should have been sustained.

Development of legal rules governing unmarried couples has quickened in recent years with the relaxation of social customs [486] (Douthwaite, Unmarried Couples and the Law, ch 4, passim). It has not, however, been a development free of difficult problems: Is the length of time the relationship has continued a factor? Do the principles apply only to accumulated personal property or do they encompass earnings as well? If earnings are to be included how are the services of the homemaker to be valued? Should services which are generally regarded as amenities of cohabitation be included? Is there unfairness in compensating an unmarried renderer of domestic services but failing to accord the same rights to the legally married homemaker? Are the varying types of remedies allowed mutually exclusive or cumulative? (See, generally, Douthwaite, supra; and CLARK, J., concurring and dissenting in Marvin v Marvin, supra.)

New York courts have long accepted the concept that an express agreement between unmarried persons living together[2] is as enforceable as though they were not living together (Rhodes v Stone, 63 Hun 624, opn in 17 NYS 561; Vincent v Moriarty, 31 App Div 484), provided only that illicit sexual relations were not "part of the consideration of the contract" (Rhodes v Stone, supra, at 17 NYS, p 562, quoted in Matter of Gorden, 8 N.Y.2d 71, 75, supra). The theory of these cases is that while cohabitation without marriage does not give rise to the property and financial rights which normally attend the marital relation, neither does cohabitation disable the parties from making an agreement within the normal rules of contract law (Matter of Gorden, supra, at p 75; see Ann., 94 ALR3d 552, 559).

Even an express contract presents problems of proof, however, as Matter of Gorden illustrates. There Ann Clark and Oliver Gorden moved from Brooklyn to West Fulton, in Schoharie County, where Gorden acquired a tavern in his own name. For seven years Clark and Gorden operated the tavern without other employees, she performing both the work required by her duties in the tavern and by their home life. They lived together and were known in the community as husband and wife until he died. Clark then filed a claim against the estate predicated upon an oral contract pursuant [487] to which Gorden agreed to compensate her for the value of her services, to marry her, to grant her the same rights as she would have as his wife, and to make a will to compensate her. The Surrogate denied the claim because of the "meretricious" relationship. The Appellate Division, finding no proof that there was any relationship between the duties performed in the operation of the inn and the fact that the parties lived together, reversed and awarded claimant $9,000. We reversed, because the evidence was not of the clear and convincing character required to establish a claim against a decedent's estate, but expressly adopted the rationale of Rhodes v Stone that the unmarried state of the couple did not bar an express contract between them. Ironically, part of the basis for holding the evidence less than clear and convincing was that "If she had been working as an employee instead of a de facto wife, she would not have labored from 8 o'clock in the morning until after midnight without demanding pay or without being paid" (8 NY2d, at p 75).

While accepting Gorden's concept that an unmarried couple living together are free to contract with each other in relation to personal services, including domestic or "housewifely" services, we reject the suggestion, implicit in the sentence quoted above, that there is any presumption that services of any type are more likely the result of a personal, rather than a contractual, bond, or that it is reasonable to infer simply because the compensation contracted for may not be payable in periodic installments that there was no such contract.

Changing social custom has increased greatly the number of persons living together without solemnized ceremony and consequently without benefit of the rules of law that govern property and financial matters between married couples. The difficulties attendant upon establishing property and financial rights between unmarried couples under available theories of law other than contract (see Douthwaite, loc. cit.) warrant application of Gorden's recognition of express contract even though the services rendered be limited to those generally characterized as "housewifely" (Matter of Adams, 1 AD2d 259, affd 2 N.Y.2d 796; cf. Dombrowski v Somers, 41 N.Y.2d 858). There is, moreover, no statutory requirement that such a contract as plaintiff here alleges be in writing (cf. General [488] Obligations Law, § 5-701, subd a, pars 1, 3). The second cause of action is, therefore, sustained.[3]

The first cause of action was, however, properly dismissed. Historically, we have required the explicit and structured understanding of an express contract and have declined to recognize a contract which is implied from the rendition and acceptance of services (Rhodes v Stone, supra; Vincent v Moriarty, 31 App Div 484, supra; see, also, Matter of Adams, supra). The major difficulty with implying a contract from the rendition of services for one another by persons living together is that it is not reasonable to infer an agreement to pay for the services rendered when the relationship of the parties makes it natural that the services were rendered gratuitously (Matter of Adams, supra, at p 262; Robinson v Munn, 238 N.Y. 40, 43). As a matter of human experience personal services will frequently be rendered by two people living together because they value each other's company or because they find it a convenient or rewarding thing to do (see Marvin v Marvin, 18 Cal 3d, 660, 675-676, n 11, supra). For courts to attempt through hindsight to sort out the intentions of the parties and affix jural significance to conduct carried out within an essentially private and generally noncontractual relationship runs too great a risk of error. Absent an express agreement, there is no frame of reference against which to compare the testimony presented and the character of the evidence that can be presented becomes more evanescent. There is, therefore, substantially greater risk of emotion-laden afterthought, not to mention fraud, in attempting to ascertain by implication what services, if any, were rendered gratuitously and what compensation, if any, the parties intended to be paid.

Similar considerations were involved in the Legislature's abolition by chapter 606 of the Laws of 1933 of common-law marriages in our State. Writing in support of that bill, Surrogate [489] FOLEY informed Governor Lehman that it was the unanimous opinion of the members of the Commission to Investigate Defects in the Law of Estates that the concept of common-law marriage should be abolished because attempts to collect funds from decedents' estates were a fruitful source of litigation. Senate Minority Leader Fearon, who had introduced the bill, also informed the Governor that its purpose was to prevent fraudulent claims against estates and recommended its approval. The consensus was that while the doctrine of common-law marriage could work substantial justice in certain cases, there was no built-in method for distinguishing between valid and specious claims and, thus, that the doctrine served the State poorly.

The notion of an implied contract between an unmarried couple living together is, thus, contrary to both New York decisional law and the implication arising from our Legislature's abolition of common-law marriage. The same conclusion has been reached by a significant number of States other than our own which have refused to allow recovery in implied contract (see Ann., 94 ALR3d 552, 559). Until the Legislature determines otherwise, therefore, we decline to recognize an action based upon an implied contract for personal services between unmarried persons living together.

For the foregoing reasons, the order of the Appellate Division should be modified in accordance with this opinion and, as so modified, should be affirmed, with costs to plaintiff.

JONES, J. (dissenting).

I am in agreement with the majority that the first cause of action, seeking recovery of money damages predicated on an implied agreement between cohabiting persons not married to each other, fails to state a ground for relief under the law of this jurisdiction and that dismissal is appropriate. I would go further, however, and make similar disposition of the second cause of action, on the ground that the express agreement alleged is too vague and indefinite to be enforced.

The terms of the contract in the second cause of action are set forth in paragraph 15 of the complaint where it is alleged that "it was orally agreed and understood by and between the parties hereto that plaintiff would perform the work, services and labor of a domestic nature on her part as requested by the defendant, and that the defendant would support, maintain and provide for plaintiff in accordance with his earning capacity [490] and that defendant further agreed on his part to take care of the plaintiff and do right by her". Thus, defendant's obligation is alleged first as one to support, maintain and provide for plaintiff in accordance with his earning capacity and, additionally, to take care of and do right by plaintiff. The latter segment of the purported undertaking is on its face patently indefinite and unenforceable; as we recently held in Dombrowski v Somers (41 N.Y.2d 858, 859) the words "to take care of" are "too vague to spell out a meaningful promise" — nothing of substance is added by the words "to do right by plaintiff". The former segment — imposing an apparent obligation to support, maintain and provide for in accordance with (defendant's) earning capacity — is similarly nebulous and indeterminate. A reference of more substance is required than simply one to the provider's earning capacity to describe what it is to which the parties are agreeing. What is notably lacking is any statement of the standard of support and maintenance to be provided or of what relationship is to furnish the measure of the allegedly agreed-on life-style. Assuming a provider whose earning capacity places ample funds at his disposal, the level of support and maintenance he will provide for his wife and children will of course vary substantially from the level he will provide for a household retainer living within his residence. Is it the former style of maintenance or the latter — or some other, such as might be extended to a favorite, impoverished aunt living outside the family establishment — to which the defendant binds himself by the alleged agreement?[*] By its terms the promise is indefinite and uncertain and it runs afoul of the basic premise of contract law — viz., "It is a necessary requirement in the nature of things that an agreement in order to be binding must be sufficiently definite to enable a court to give it an exact meaning" (1 Williston, Contracts [3d ed], § 37).

The majority dismisses the problem of vagueness by reliance on the allegation included in the second pleaded cause of [491] action that "the net profits from the agreement and partnership of the plaintiff and defendant were to be used for and applied to the equal benefit of plaintiff and defendant", apparently accepting this as a sufficiently definite statement of the obligation now sought to be enforced. But, rather than clarifying the ambiguity, this allegation only confounds the confusion. What are "net profits from the agreement and partnership" is wholly unelucidated and, when the agreement as described in paragraph 15 of the complaint is examined, the term seems strange indeed, for the compact is only that plaintiff will perform domestic services and defendant will support her to the undefined extent previously discussed. Although there is an allegation in paragraph 16 that defendant "was to have full charge of the business", no reference to any business appears elsewhere in the pleading and nowhere is it alleged that defendant bound himself to operate or carry on any profit-making activity. Surely it cannot be said that the domestic work for which plaintiff engaged would produce profits. How the "profits" — not to mention the "net profits" — from such an agreement are to be determined is a conundrum; as a consequence any provision for their application to the equal benefit of the parties is fatally vague and indefinite. Plaintiff invites our attention to no case in which courts have undertaken to enforce an agreement approaching the indefiniteness of that allegedly made by the parties to this litigation.

Because the second cause of action seeks recovery on the basis of an agreement the terms of which are too uncertain to admit of its enforcement, this action, like the first cause of action, should be dismissed.

Order modified, etc.

[1] Paragraph 9, one of the realleged allegations, avers that "plaintiff performed work, labor and services for the defendant in the nature of domestic duties and business services at the request of the defendant" (emphasis supplied).

[2] Much of the case law speaks of such a relationship as "meretricious". Defined as "Of or pertaining to a prostitute; having a harlot's traits" (Webster's Third New International Dictionary Unabridged, p 1413), that word's pejorative sense makes it no longer, if it ever was, descriptive of the relationship under consideration, and we, therefore, decline to use it.

[3] We have not overlooked the holding of Dombrowski v Somers (41 N.Y.2d 858, 859) that the words "take care of" are too vague to spell out a meaningful promise. In the instant complaint we regard those words as surplusage in light of the further allegation that the profits of the partnership were to be used and applied for the equal benefit of both plaintiff and defendant. Nor can we accept the dissent's concept that there need necessarily be "profits" from the domestic services. Plaintiff alleges an express agreement of partnership under which she was to contribute services in return for which she was to share in the profits from the business conducted by defendant; more is not required to make defendant accountable for profits of the partnership.

[*] If the agreement alleged were to be interpreted as committing defendant to support plaintiff, within his earning capacity, in the style of a wife, and were to be so enforced, the result would be largely to vitiate the statutory ban on common-law marriages at least with respect to the parties to the arrangement themselves (L 1933, ch 606, amdg Domestic Relations Law, § 11). Nevertheless, the infirmity of the alleged agreement lies not in its potential for impairment of the statute but in its inherent vagueness. Respect for the legislative determination manifested in the statute, however, precludes resort to marital standards of support to supply the definiteness which the agreement of the parties otherwise lacks.