with No Comments

Post No.: 0415promise

 

Furrywisepuppy says:

 

Let me try to extend on Fluffystealthkitten’s post on enforceable and unenforceable contracts in Post No.: 0305. I recognise that I may be vastly overstepping my expertise here but hopefully it’ll serve to encourage you to think about these things, and if anything appears relevant to something that’s actually happening or will happen in your life then you’ll look more into it via more qualified sources that are also more applicable to your area’s laws too if different.

 

…So the courts will stand behind promises but only promises that are bargains i.e. where both parties are exchanging things of worth to each other. This is why you sometimes see businesses sold for $1 or similar – it’s not that they’re worth that sum (they’re usually worth far less because of their debt burdens) but it counts as consideration (something of value promised to another).

 

A one-sided promise or obligation is basically an offer where one of the parties hasn’t really concretely agreed to do anything yet (or ever) and their options are still completely open. For example, someone agrees to buy items for a fixed price from a seller, but he/she could still buy none of these items from this seller and go buy them at any time from anywhere else, including if it’s cheaper elsewhere. These deals are not enforceable by law because they’re not bargains yet. It’s something for nothing, or one party tying themselves up for something without the other party tying themselves up for something in return, or one party disproportionately gaining at the expense of the other party. Basically, if one side makes no commitment to the other, then the other side has no commitment to the first side either.

 

But there are some exceptions, such as when there’s ‘detrimental reliance’ (an element of promissory estoppel), where, in order to receive a promise, the receiving party must incur costs or sacrifices that they wouldn’t have otherwise had needed to incur. An example is promising that you’ll pay for someone’s university costs if they completely give up smoking during the next 3 years. Them not smoking isn’t something you’ll receive like some money, good or service in return but it’s still something that the other party otherwise wouldn’t have had to do; even if it’s something that’s ‘only for their sake’ too.

 

The giving party, or promisor, must have requested for those costs or sacrifices to be borne by the receiving party, or promisee – there must be something in it for the promisor that the promisor wanted. And that’s where the mutual consideration or quid pro quo is here, thus making the contract enforceable (with some exceptions to these exceptions e.g. if either party lacked soundness of mind).

 

There are some special cases where if a cost was foreseeable and the promise was serious then that cost doesn’t have to be explicitly requested by the promisor for there to still be detrimental reliance though, thus making the promise enforceable. An example is a promisor promising to give a promisee a free house but then subsequently withdrawing the offer, but the promisee has already incurred many costs to try to move into this new abode, which they wouldn’t have otherwise incurred.

 

So a one-sided promise can sometimes generate a cost for a promisee when they try to obtain what was promised, that was never requested as part of any bargain by the promisor. To the promisor, the promise doesn’t constitute a bargain (exchange) because the promisor doesn’t personally get anything out from the promisee’s costs i.e. the promisor doesn’t obtain any value in the promisee incurring these costs – they arose from the promise but aren’t in exchange of the promise. The promisee relied on the promise to his/her detriment and not to the promisor’s benefit. Nonetheless, since the promisee relied on there being that house for them in the end, the promise of that house is enforceable.

 

If the promisee factored the promise into his/her calculations – if he/she had relied on the promise being fulfilled in order to justify the costs incurred – and if those costs were foreseeable (to a ‘reasonable person’) and the reliance on the promise was reasonable (the promise wasn’t a joke and was seriously relied upon) then it can be argued that it generated detrimental reliance even if nothing was given to or sought by the promisor personally in return. That can be enough to make a one-sided promise or gift enforceable even if the promisor later tries to change his/her mind. Or at least the promisee can recover the objective costs that he/she had incurred that went to waste in pursuit and expectation of receiving what was promised to him/her (e.g. what the promisee lost in abandoning his/her old house, and the expense of moving, fixing and furnishing the house which was promised to him/her).

 

The upshot is that if you promise to make a gift that you haven’t yet delivered, and the promisee suffers detrimental reliance as a result of relying on your promise, then they can sue you for the detrimental reliance. They cannot make you give them that gift you promised in the way they could have if there was a real bargain in place between you both, but they can seek compensation for any costs they incurred that they otherwise wouldn’t have if it weren’t for them expecting you to fulfil your promise to them. The simple takeaway lesson is to never promise anything you likely cannot or will not fulfil! Woof!

 

Another thing is if you have made a straightforward gift to another person then the law won’t be behind you if you later wish to take it back without it being gifted or bargained back to you! This should be obvious – you cannot take something back as if it’s yours or as if you’re entitled to any share of it if you had gifted that thing to someone else. It’s legally their property now.

 

A furry promise to give a charitable subscription/gift to an organisation may not be a bargain but if it was made with enough solemnity, deliberation, clarity and formality then it’s enforceable because it’s implicit that the donation would be forthcoming for the charity. Still, to prevent any disputes, the charity might be wise to set up a simple exchange for each promised donation (e.g. the charity promises to put the name of every donor on a plaque).

 

Essentially all contracts about the future involve risk (e.g. the risk of not getting paid or not having the pre-agreed work done in time) – for which this risk itself could be arguably bargained with and compensated for. What makes strongly-enforceable bargains are those that take into account risk and spread risk proportionately (like in maritime contexts, a ‘general average’ or a kind of pro rata risk division and proportional loss sharing), and that account for special and changing circumstances, don’t just allow some parties to benefit from pure luck, and don’t have unequal ‘something for nothing’ exchanges.

 

If you offer a publisher a manuscript and promised them 3 months exclusivity (i.e. you won’t approach any other publishers in that time) but they didn’t promise you anything in return (not to even read it) then it’d be a one-sided promise – there’s a lack of mutuality (no mutual promise or bargain). But without the promise of exclusivity, and the understanding that the law would enforce this one-sided promise of exclusivity, the publisher might not accept the manuscript on his/her desk at all – it might thus create a ‘deadweight loss’ where both sides are potentially worse off than they could’ve been if only they could find a way to confidently make a deal with each other that they feel the courts would uphold in the right way. To get around this, the publisher could offer to buy from you an ‘option’ and therefore make it a real exchange. This could be $5, a business lunch, a promise to read it. When buying a house, it could be $200 in exchange for an option to buy the house at $300k, exercisable until the end of the week. Futures contracts and forward contracts hedge against fluctuating future prices for the buyer, and hedge against uncertain future demand for the seller. An option is basically like a contract for a potential future contract.

 

If a sales agent doesn’t promise to sell any of your products in return for promised exclusivity in a particular territory, then on the one paw there’s no bargain, but on the other it could be said that there’s an implicit (not explicitly written down but implied) good faith on both parties that the sales agent would give his/her ‘best efforts’ to sell your products and promote your brand in the agreed territory, and therefore the deal is enforceable. (Evidence of sales will also help his/her case.)

 

There’s another situation where a one-sided promise can be turned into a more straightforwardly enforceable two-way bargain. Normally something that already has been given or happened in the past cannot be used as part of a present or future bargain, but if there’s a moral obligation for decency or fair play then it could be legally enforceable as a contract. For instance, a reward for having saved another person’s life could be regarded as only a gift (the parties must both agree to give something new/more to each other at the time of agreement for it to form a bargain) but if the hero was badly injured during the heroic act and the reward is to pay him/her an ongoing annuity to compensate for his/her injuries, then it’d be indecent to cut this annuity later on. Here, the law can bend the concepts slightly to argue that the hero’s part of the exchange was indeed given earlier but it created a moral obligation, and the promise to pay the annuity in return for the (valuable) heroic actions, even though it was ‘after-the-fact’, embodied that obligation. Such a promise is enforceable even if the promisor, who intended to keep his/her promise, dies and his/her heirs don’t feel quite so generous in carrying on giving this ‘gift that wasn’t a part of any real exchange’. (Whenever a promisor dies, this is usually when disputes arise from their heirs or executors of estate!)

 

These are rare cases and demonstrate a very tricky area in Contract law where the strict technicality of a bargain or exchange is not present but the contract could still be legally enforceable. Legal matters aren’t always clear-cut. Sometimes the courts get it wrong too (hence the appeals procedure). Sometimes any solution, whatever it may be, will be highly dilemmatic and controversial. The courts have gradually eased up over the centuries though, and have sided more and more with arguments of morality and equity, for laws often evolve with the prevailing culture.

 

If some work was initially agreed for $50 pay in a signed contract, but then coerced under the threat of a strike on the day of work to make it $90 for exactly the same labour in a new signed contract, then the latter contract is not enforceable because the extra $40 was for nothing (nothing extra above and beyond the initial promise of labour i.e. it’s like trying to sell the same thing twice) and therefore there was no bargain made in the second contract. Coerced contracts (taking advantage of one party having no other reasonable option or power but to accept an offer) aren’t enforceable in general. But if a contract is mutually torn up without coercion from either side, and especially if a new contract is agreed upon before the obligations of the original contract had yet begun, then the original contract will be rescinded.

 

Woof. I always believe that knowledge is empowerment, and empowerment reduces stress because we know where we stand – in this case legally. It can also save us from arguing about things when we’re probably wrong!

 

Comment on this post by replying to this tweet:

 

Share this post