Contracts Hypo- (Unilateral, Illusory, Option, ???) Forum

[musicfor18]

Can someone explain why in the world anything in this hypo would suggest there was a failure of mutual assent?

[swtlilsoni]

To my mind, the key is to see that this isn't black or white. It's actually pretty weird.

Before the deal went through, there was a contingent contract, pretty close to no contract at all, and no obligation, and arguably (arguably, that is), the promisor could have taken the 2 grand and went to Maui, deal-be-dammed. He could then have argued there was no obligation, his promise was illusory, and the P is a poor sap who gave away $2,000 in exchange for no firm assurance.

But once the deal went through, it seems to be the contract converted into an obligation. All the conditions are met. Consideration is in. It's hard for the guy to say "we made no agreement which would indicate I am obligated to give the P anything."

You could say it was a "contingent contract" from the beginning or you could say there was no contract, but once the deal went through, it "became" a contract. The former seems to make more sense, because contracts don't usually "invent" themselves. But it's not really that important how you structure the argument. There is a reasonably strong basis of contractual obligation here.

I now see your pre deal analysis. Actually pretty smart. The way I thought of it was that it IS a unilateral contract because offeree was not obliged to give the 2k, he could choose whether or not he wants to give the 2k. If he gives the 2k he accepts by performance. However I thought the "if the deal goes through" is just a condition on offeror's promise. HOWEVER, I realized that your point is that "if the deal goes through" is UP TO the offeror. He can stop the deal from going through if he wants. He is in no obligation to put his best efforts into making the deal go through. Thus it can be construed as illusory.

The argument against being illusory is that with an illusory promise it is ENTIRELY up to the promisor whether or not it happens. (I'll give you 10k if I feel like it), it is ENTIRELY up to you whether you "feel like it" or not. However whether or not the 10k goes through is not 100% up to the offeror. He can certainly stop it from going through by goin to Hawaii like you said, but at the same time even if he tries to make the deal go through there is no guarantee that it will go through (because the other person in on the deal could back out) so it isn't completely in the offeror's control.

However that all depends on if an illusory promise needs to 100% be in promisor's control, or if it is sufficient for it to partially be in the promisor's control.

Thanks swtlilsoni.

I think you're onto something with the "100% in the promisor's control" analysis. That's where I think the parol --> clarify meaning comes in. The P could say "come on! when he said 'if the deal goes through' he was just trivially saying that the investment might fail, due to powers outside of his control--not that he might blow up the deal himself and go to Maui!" Poster above talked about how "if the deal goes through" seems pretty boilerplate for a lot of PE deals.

The Lady Duff analysis is a stronger way to get the implied good faith. Could work too!

Restatement Section 77 says that a promise is illusory basically if each alternative doesn't individually constitute as consideration. Thus since the alternatives here are (a) the deal goes through, (b) the deal doesn't go through, there doesn't seem to be consideration overall because (a) is consideration, but (b) wouldn't be. So I guess with that analysis it would be illusory.

So does that mean that contracts are never allowed to have a promise that is based on a condition that may or may not happen?

EDIT: actually it says that if the promisor has a choice, each of his choices have to count as consideration. So in this case is choice is whether or not to try to get the deal....and if he doesn't try, that isn't consideration. Thus it is illusory. So then you use Lady Duff Gordon to imply he has to try. That makes much more sense.

[swtlilsoni]

Can someone explain why in the world anything in this hypo would suggest there was a failure of mutual assent?

I think there was mutual assent, but the problem was lack of consideration

[musicfor18]

Ok. Thanks. But I don't think the promise was illusory. Since the promissory has some control over whether or not the condition occurs, courts would probably find an implied promise to use best efforts to make it occur (wood v. Lldf)

[musicfor18]

Restatement Section 77 says that a promise is illusory basically if each alternative doesn't individually constitute as consideration. Thus since the alternatives here are (a) the deal goes through, (b) the deal doesn't go through, there doesn't seem to be consideration overall because (a) is consideration, but (b) wouldn't be. So I guess with that analysis it would be illusory.

So does that mean that contracts are never allowed to have a promise that is based on a condition that may or may not happen?

EDIT: actually it says that if the promisor has a choice, each of his choices have to count as consideration. So in this case is choice is whether or not to try to get the deal....and if he doesn't try, that isn't consideration. Thus it is illusory. So then you use Lady Duff Gordon to imply he has to try. That makes much more sense.

This isn't a case of alternative promises. An example of an alternative promise would be:

A offers to give B his car if B promises to either give B his motorcycle or pay B the $5000 he already owes him. In this case, since one of the alternative promises (the payment of the pre-existing debt) is not sufficient consideration, there is no consideration for A's promise.

[swtlilsoni]

Restatement Section 77 says that a promise is illusory basically if each alternative doesn't individually constitute as consideration. Thus since the alternatives here are (a) the deal goes through, (b) the deal doesn't go through, there doesn't seem to be consideration overall because (a) is consideration, but (b) wouldn't be. So I guess with that analysis it would be illusory.

So does that mean that contracts are never allowed to have a promise that is based on a condition that may or may not happen?

EDIT: actually it says that if the promisor has a choice, each of his choices have to count as consideration. So in this case is choice is whether or not to try to get the deal....and if he doesn't try, that isn't consideration. Thus it is illusory. So then you use Lady Duff Gordon to imply he has to try. That makes much more sense.

This isn't a case of alternative promises. An example of an alternative promise would be:

A offers to give B his car if B promises to either give B his motorcycle or pay B the $5000 he already owes him. In this case, since one of the alternative promises (the payment of the pre-existing debt) is not sufficient consideration, there is no consideration for A's promise.

Hm that's true, but I guess you could argue that this is an alternative promise because Section 76 says:
A promise conditional on a performance by the promisor is a promise of alternative performances within § 77 unless occurrence of the condition is also promised
And in this case, the promise is conditional on whether or not the promisor goes and tries to get the deal or not. And since he didn't promise to do that condition (go and try to get the deal), it could be perceived as a promise of alternative performances? Or maybe I'm reading too much into it. Maybe the condition has to be explicit

[manofjustice]

It's true that "illusory promise" better falls under the rubric of consideration and not mutual assent. The Restatement say so so, so that's a good point.

I think it makes SOME sense to think of it as mutual assent. If I say to you "well, if you promise to paint my room, I intend or expect that I'll give you $500.00," we would think that a case of a failure of mutual assent because the offeror fails to manifest an "intention to be bound." I think the delineation between that and an illusory promise is...illusory. (An illusory promise is actually a promise, syntactically--i.e. "I promise to paint your room, if I feel like it--but I think the distinction is hypertechnical.)

All this aside, the Prof in writing the hypo repeated twice that the promisor conditionalized his promise. First, before the agreement, he said "if the deal materializes," and then at the time of agreement, he said "when/if." I doubt the professor went to such awkward lengths to stress the conditionality of the consideration without expecting a student to talk about it. We have at least three distinct ways to do that...so I think we're all on the right track.

[wsw15]

Regarding consideration, I thought in a unilateral contract, the action is the consideration. So in this case the payment of $2,000 is the consideration. Then the illusory promise issue is sort of a next step issue (which Lady Duff Gordon, peppercorn theory, etc would indicate that a best efforts assumption takes care of the illusory issue.)

Of course the above applies if you can successfully argue that it is a unilateral contract. Which I think it is- because Mr B never promises to pay $2,000. If either does or he doesn't. Mr. B's action of payment is necessary for Mr A to try for the property (or for Mr A's promise to even become relevant). Batsakis, although similar in many ways regarding the illusory issue, was different it that it was a bilateral K.