Contracts
Ch. 3
Problem 3-2
Lovejoy and First Church v. Simpson
NO LEGAL RIGHT TO ENFORCE CONTRACT:
A court will likely find that Lovejoy and First Church do not have a legal right to enforce against Simpson
a contract to sell her property. Pursuant to the decision in Berryman v. Kmoch, an option contract
without consideration is merely an offer to sell which may be withdrawn at any time prior to acceptance.
For a promise to have sufficient consideration, it must impose a legal obligation on the offeror. There
may be an offer and a power of acceptance, but if the only consideration is an illusory promise, there is
no contract and no binding option. Simpson’s option contract was made without consideration, in that
her belief in the Church’s mission and previously received spiritual benefit from the church are not sufficient
consideration. Her belief in the mission is a moral consideration and her previously received spiritual benefit
is a past consideration. Therefore, Simpson’s option contract being without consideration amounts to an offer
to sell her property, not a binding contract.
COUNSEL THEM TO PROCEED:
When there is a lack of consideration, plaintiff can seek promissory estoppel for damages. Rather than
attempting to sue for breach of contract, it is possible that Lovejoy and First Church can file a complaint
for promissory estoppel. A court that does not demand a high standard of proof for the existence of a
specific, express promise, may find that First Church is entitled to damages under the doctrine of
promissory estoppel because First Church relied, to its detriment, on the enforcement of Simpson’s offer
to sell her property to the church. K.2d § 90 states: "A promise which the promisor should reasonably
expect to induce action or forbearance on the part of the promisee or a third person and which does
induce such action or forbearance is binding if injustice can be avoided only by enforcement of the
promise. The promise cannot be enforced in this case, since Simpson sold the property to someone else,
so the promissory estoppel doctrine is invoked. Simpson’s offer induced action and forbearance on the
part of First Church—They hired a local architect to draw plans for a potential new building on that site,
employed a professional fund-raising firm to evaluate the church’s potential for raising a capital
investment of this size, and declined another offer from Evergreen Terrace property. However, I’m not
sure that I would advise filing a complaint for promissory estoppel because it is not apparent that
Simpson made a clear and definite promise; however it can be argued that Simpson could have expected
that First Church would rely on her promise (since it was a good deal); and First Church reasonably relied
on the promise to their detriment, whether the detriment was definite and substantial is questionable.
Problem 3-3
Robert McSwain and Church v. City Council
NO BINDING CONTRACT:
The council altered the original proposal, changing a term to provide that the sale of the property would
take place only after donations totaling $1 million had been deposited with the city. K.2d § 37 provides
that “power of acceptance under an option contract is not terminated by rejection or counter-offer or by
revocation.” The final agreed to resolution stated that the city council’s agreement to sell the property
would remain open until June 1, 2023, and would be automatically withdrawn unless the sale were
concluded by that date. Based on this, an option contract, with sufficient consideration was formed.
Consideration was sufficient because McSwain and the church made a binding promise to deposit $1
million to the city in order to purchase the library’s property. Additionally, the city council would benefit
from the agreement by retaining the church in the city and receiving donations to build a new library.
Common law supports “free revocability” except when there is a valid option contract. The city council
was bound by the option contract, and therefore, had a legal obligation to keep their offer available until
June 1, 2023, but after this date, the council had the right to withdraw its offer unless the sale had
concluded by that date. The record does not support that McSwain and the church had secured the
necessary $1 million deposit or finalized the sale by June 1. The city has the right to rescind the
resolution authorizing the sale of the library.
COUNSEL THEM TO PROCEED:
For the above mentioned reason, the promise cannot be enforced in this case, and considering the
public outcry over the true nature of the donations and the final council vote against the proposal, it is
unlikely that McSwain and the church would be successful in raising the necessary $1 million dollars at
any point. McSwain and the church could attempt to sue for damages under the doctrine of promissory
estoppel because McSwain and the church, in reliance upon the city’s promise, rejected the suburban
property offer. The council, expressed clear support, encouragement, and assurance to McSwain about
closing the deal, therefore, they reasonably could have expected McSwain and the church to act in
reliance on the promise. K.2d § 90, states: "A promise which the promisor should reasonably expect to
induce action or forbearance on the part of the promisee or a third person and which does induce such
action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The
council’s promise induced forbearance on the part of McSwain and the church, in that they did not
accept the suburban property offer in time and ended up losing it because of their reliance on the
council’s promise. Whether the detriment of losing the prospect of the suburban property is enough to
invoke promissory estoppel is questionable.
Problem 3-4
Gale v. Branch
BRANCH MADE GALE A FIRM OFFER:
K.2d § 87(1)(b) notes that an offer may be “made irrevocable by statute.” In this situation, UCC Article 2
applies because it is a sale of goods. § 2-205 Firm Offer, states: “An offer by a merchant to buy or sell
goods in a signed writing which by its terms gives assurance that it will be held open is not revocable, for
lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event
may such period of irrevocability exceed three months; but any such term of assurance on a form
supplied by the offeree must be separately signed by the offeror.” Branch, the offeror, made Gale a firm
offer and signed the assurance form. He granted Gale 120 days after June 19 to purchase his horse. In
mid-September, within the 3 month period of irrevocability, Gale had received the required investments
and was prepared to purchase the horse. Branch revoked his offer shortly after, still within the 3 month
period of irrevocability.
COUNSEL THEM TO PROCEED:
Since Branch revoked his offer and sold the horse to someone else, Gale’s best course of action is filing a
complaint for damages under promissory estoppel. Even if Branch alleges that he revoked the offer
outside of the 3 month window of irrevocability, the offer specified a period of firmness of 4 months.
The period of irrevocability is still be limited to three months unless consideration has been given. Gale’s
attempt to interest investors in joining her in the purchase and her success in raising the investments is
sufficient consideration, limiting Branch’s power of revocation within those 4 months.
CANADA
I would have the same answer if Gale’s home was in Ontario, Canada because the CISG takes an even
more expansive attitude toward the possibility of “firm offers” - CISG Art. 16(2)(a) states: “an offer
cannot be revoked if it indicates ‘that it is irrevocable’ by stating a fixed time for acceptance or by other
means.”