Illusory promise

Illusory promise

In contract law, an illusory promise is one that courts will not enforce. This is in contrast with a contract, which is a promise that courts will enforce. A promise may be illusory for a number of reasons. In common law countries this usually results from failure or lack of consideration (see also consideration under English law).

Illusory promises are so named because they merely hold the illusion of contract. For example, a promise of the form, "I will give you ten dollars if I feel like it," is purely illusory and will not be enforced as a contract.

It is a general principle of contract law that courts should err on the side of enforcing contracts. Parties entering into the arrangement presumably had the intention of forming an enforceable contract, and so courts generally attempt to follow this intention. [See "Portland Gasoline Co. v. Superior Marketing Co., 150 Tex. 533, 243 S.W.2d 823, 824, (1951"), overruled on other grounds by "Northern Natural Gas Co. v. Conoco, Inc., 986 S.W.2d. 603 (Tex. 1998)".]

Methods of doing so include:
* Implied-in-law "good faith" terms
* Implied-in-fact terms
* Bargaining for a chance

Implied-in-law "good faith" terms

Many contracts include "satisfaction clauses", in which a promisor can refuse to pay if he isn't subjectively satisfied with the promisee's performance. Strictly speaking, this is an illusory promise, since the promisor has no actual legal burden to pay if he chooses not to. However, courts will generally imply in law that the promisor must act in good faith, and only reject the deal if he is genuinely dissatisfied. As another example, if a contract promises a promisee a certain percentage of the proceeds of a promisor's business activities, this is illusory, since the promisor doesn't have to do anything - any percent of zero is zero. However, courts will imply that the promisor promised to use reasonable efforts to try to make money, and cite him for breach of contract if he does absolutely nothing. "Wood v. Lucy, Lady Duff-Gordon", 222 N.Y. 88, 118 N.E. 214 (1917). The U.C.C. in contracts exclusive to both sides requires "best efforts" in such contracts. This is either read to be the same as a good faith effort, but is seen by some courts as a higher duty.

Implied-in-fact terms

Judges will often infer terms into the contract that the parties did not explicitly cite. For instance, in the "satisfaction clause" case, judges might infer that the parties intended a "reasonableness test" - that the clause could be satisfied if a reasonable person would be satisfied by the promisee's performance, regardless of whether the promisor himself asserts he is satisfied. (This interpretation is often used in cases in which a performance can be objectively evaluated, such as with the construction of a warehouse; the implied-in-law interpretation above is preferred where satisfaction is more subjective, as with the painting of a portrait.)

Bargaining for a chance

Many judges would consider the "bargaining for a percentage of the proceeds" example above an enforceable contract, even without an implied-in-fact or implied-in-law good faith term. They would view the opportunity to enter into a business relationship to itself be acceptable consideration. Put differently, the mere possibility that the promisor would do business is a valuable product of the bargain, even if he doesn't do anything. Of course, if the promisor entered into the relationship purely with the intent of fraudulently harming the promisee, he could be cited for fraud or bad faith principles which apply to all contracts.

See Mezzanote v. Freeland - Rule of Law = : A promise conditioned upon an event within the promisors control is not illusory if the promisor also impliedly promises to make reasonable effort to bring the event about or to use good faith and honest judgement in determining whether or not it has in fact occurred.

References


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Look at other dictionaries:

  • illusory promise — see promise Merriam Webster’s Dictionary of Law. Merriam Webster. 1996. illusory promise n …   Law dictionary

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  • illusory promise —    An agreement that is so indefinite that one cannot tell what is to be done or in which the performance is optional (e.g., a promise to stay in a job for a certain length of time, unless one resigns sooner). The other party to such an agreement …   Business law dictionary

  • promise — prom·ise n: a declaration or manifestation esp. in a contract of an intention to act or refrain from acting in a specified way that gives the party to whom it is made a right to expect its fulfillment aleatory promise: a promise (as to compensate …   Law dictionary

  • illusory — il·lu·so·ry /i lü sə rē, zə rē/ adj: likely to mislead or deceive: false deceptive an illusory plea bargain leading to a longer sentence than expected Merriam Webster’s Dictionary of Law. Merriam Webster. 1996 …   Law dictionary

  • illusory — /al(y)uwsariy/°uwz°/ Deceiving by false appearances; nominal, as distinguished from substantial; fallacious; illusive. Bolles v. Toledo Trust Co., 144 Ohio St. 195, 58 N.E.2d 381, 390 @ illusory appointment Nominal, overly restrictive or… …   Black's law dictionary

  • illusory — /al(y)uwsariy/°uwz°/ Deceiving by false appearances; nominal, as distinguished from substantial; fallacious; illusive. Bolles v. Toledo Trust Co., 144 Ohio St. 195, 58 N.E.2d 381, 390 @ illusory appointment Nominal, overly restrictive or… …   Black's law dictionary

  • promise — A declaration which binds the person who makes it, either in honor, conscience, or law, to do or forbear a certain specific act, and which gives to the person to whom made a right to expect or claim the performance of some particular thing. A… …   Black's law dictionary

  • contract — con·tract 1 / kän ˌtrakt/ n [Latin contractus from contrahere to draw together, enter into (a relationship or agreement), from com with, together + trahere to draw] 1: an agreement between two or more parties that creates in each party a duty to… …   Law dictionary

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