Contracts: Bargain Theory vs. Gratuitous Promise

Hamer v. Sidway: (Benefit vs. Detriment) (BARGAIN vs. GRATUITOUS PROMISE)

Court of Appeals of New York,

124 N.Y. 538, 27 N.E. 256 (1891)

Issue: Was there valid consideration?

Rule: Consideration, Bargain, Statute of Frauds

Application: Oral promise, made from an uncle to his nephew.

-Defendant argues that the contract was without consideration, and therefore invalid. Further argues that refraining from alcohol and tobacco was for the best of the promisee, independent of the promise.

-A promise can be an abandonment of a legal right, or refraining from exercising a legal right.

-The nephew refrained from exercising his legal right (to drink alcohol and to smoke tobacco), and therefore was a valid promise

-This contract falls under the statute of frauds, but the uncle waived , which he did in his letter and oral statements subsequent to the date of final performance on the part of the promisee.

Conclusion: Yes

Supreme Court Opinion:

-There was not valid consideration, because the promise was only for a gift

-For years before, the deceased had talked about making a gift to the nephew, and by withholding it after the nephew's 21st birthday, it is clear that it was a gift, and not a valid contract.

William E. Story Sr. promised his nephew that if he refrained from drinking, using tobacco, swearing and playing cards or billiards for money until he was 21, he would pay him $5,000.

-After his 21st birthday, the nephew sent a letter to the uncle, to which the uncle responded, saying the money was in a bank account, and would be delivered to him once he thought the nephew was ready to handle it.

-The uncle then died 12 years later, without having turned over the money.

Why did the uncle make this promise?

-Can argue that it was in exchange for the nephews detriment