Traditionally, gift promises are unenforceable because they are not supported by consideration.
Examples:
(1) Aunt says to niece, "Because today is your birthday, I promise to give you $1,000."
Niece says, " I accept your gracious gift." If the aunt does not pay, her promise cannot be enforced as a contract because it was only a gift promise. That is, she did not seek any return promise or action by the niece when she made her promise. There was no "bargain" between the aunt and the niece.
(2)Completed Gift Not Affected by Lack of Consideration
Note that a lack of consideration only makes a gift promise unenforceable. If the promisor has already made the gift to the promisee, the rights of the promisor potentially to reclaim it are governed by the laws of property, not of contract.
Friday, July 25, 2008
Bilateral Contracts: A Promissory Exchange
Pamela says to Clemente, "I will buy your kayak from you provided that it is watertight. I will give you a check for $600 immediately." Clemente replies, " It is watertight. I accept. Give me the check and take the kayak."
Though the parties immediately exchange the check and kayak, the delivery doe snot end their duty of performance. Clemente has made a promise concerning the kayak's condition, which will allow Pamela recourse if it doe snot meet the agreed standard of "watertight." Similarly, Pamela's check is not an immediate payment, but it is a commitment that her bank will pay the money upon presentation of the check.Thus, promises exist on both sides after the moment of agreement, and a bilateral contract exists.
Note that market usually impose on the seller, the obligation to warrant the fitness of what he sells. Here, without Clemente disavowing a presumption of fitness, i.e. selling the kayak "as is", his sale of the kayak gives rise to an implied promise that the kayak is watertight.
Though the parties immediately exchange the check and kayak, the delivery doe snot end their duty of performance. Clemente has made a promise concerning the kayak's condition, which will allow Pamela recourse if it doe snot meet the agreed standard of "watertight." Similarly, Pamela's check is not an immediate payment, but it is a commitment that her bank will pay the money upon presentation of the check.Thus, promises exist on both sides after the moment of agreement, and a bilateral contract exists.
Note that market usually impose on the seller, the obligation to warrant the fitness of what he sells. Here, without Clemente disavowing a presumption of fitness, i.e. selling the kayak "as is", his sale of the kayak gives rise to an implied promise that the kayak is watertight.
Unilateral and Bilateral Contracts Compared
Uniltaeral Contract
Anders makes an offer to enter into a unilateral contract with Daniel, promising to pay him $1,000 for his watch. If Daniel gives Anders his watch in exchange for his promise to pay $1,000 (thereby accepting the offer). Anders' promise to pay $1,000 is enforceable under the benefit/detriment theory. That is, Daniel, the promisee, suffered a legal detriment (i.e. she gave up possession of his watch), and Anders, the promisor, received a legal benefit (i.e. he obtained possession of the watch). Further, the detriment and benefit were given in exchange for Anders' promise to pay $1,000. Thus, the parties have entered into a valid, enforceable contract with a promissory offer, an acceptance by conduct, and consideration to enforce Anders' promise to pay.
Bilateral Contract
Assume that instead of immediately handing the watch to Anders in response to his offer to pay $1,000 for his watch, Daniel promises to give Anders his watch at a later point.
Anders' promise to pay is enforceable, for Daniel suffered legal detriment (he promised to give up possession of the watch), and Anders obtained a legal benefit (he was promised possession of the watch) in exchange for his promise of the $1,000 payment.
Note that Daniel's promise to give up the watch is also enforceable. Anders suffered a legal detriment, payment of $1,000. Daniel obtained a legal benefit (receipt of Anders' promise to pay), in exchange for Daniel's promise to tender the watch. As such, the parties have entered into a valid, enforceable bilateral contract, with a promissory offer, a promissory acceptance,and consideration to support the executory promises.
Anders makes an offer to enter into a unilateral contract with Daniel, promising to pay him $1,000 for his watch. If Daniel gives Anders his watch in exchange for his promise to pay $1,000 (thereby accepting the offer). Anders' promise to pay $1,000 is enforceable under the benefit/detriment theory. That is, Daniel, the promisee, suffered a legal detriment (i.e. she gave up possession of his watch), and Anders, the promisor, received a legal benefit (i.e. he obtained possession of the watch). Further, the detriment and benefit were given in exchange for Anders' promise to pay $1,000. Thus, the parties have entered into a valid, enforceable contract with a promissory offer, an acceptance by conduct, and consideration to enforce Anders' promise to pay.
Bilateral Contract
Assume that instead of immediately handing the watch to Anders in response to his offer to pay $1,000 for his watch, Daniel promises to give Anders his watch at a later point.
Anders' promise to pay is enforceable, for Daniel suffered legal detriment (he promised to give up possession of the watch), and Anders obtained a legal benefit (he was promised possession of the watch) in exchange for his promise of the $1,000 payment.
Note that Daniel's promise to give up the watch is also enforceable. Anders suffered a legal detriment, payment of $1,000. Daniel obtained a legal benefit (receipt of Anders' promise to pay), in exchange for Daniel's promise to tender the watch. As such, the parties have entered into a valid, enforceable bilateral contract, with a promissory offer, a promissory acceptance,and consideration to support the executory promises.
A Promise v. an Offer: You need Consideration for a Contract
Pacta sunt servanda (agreements must be kept)
However, under United States common law, not all promises made in offers and acceptances are enforceable. The doctrine of consideration is the theory that separates those promises in offers and acceptances that will be enforced by the courts from those that will not. If an agreement is not supported by valid consideration, that agreement is not an enforceable contract.However, certain promises in an otherwise unenforceable agreement may be enforced under a promissory estoppel theory.
How Consideration is Defined:
The definition of consideration varies. No one version is accepted as covering the breadth of the doctrine.
1. The Benefit/Detriment Theory
Under this theory, a promise is deemed supported by consideration (and this enforaceable), whenever:
(1) The promisee either acts, or promises to act, in exchange for the promisor's promise; and
(2) The promisee's act or promised act is either a legal detriment to the promisee or a legal benefit to the promisor.
However, under United States common law, not all promises made in offers and acceptances are enforceable. The doctrine of consideration is the theory that separates those promises in offers and acceptances that will be enforced by the courts from those that will not. If an agreement is not supported by valid consideration, that agreement is not an enforceable contract.However, certain promises in an otherwise unenforceable agreement may be enforced under a promissory estoppel theory.
How Consideration is Defined:
The definition of consideration varies. No one version is accepted as covering the breadth of the doctrine.
1. The Benefit/Detriment Theory
Under this theory, a promise is deemed supported by consideration (and this enforaceable), whenever:
(1) The promisee either acts, or promises to act, in exchange for the promisor's promise; and
(2) The promisee's act or promised act is either a legal detriment to the promisee or a legal benefit to the promisor.
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