Batsakis v. Demotsis

Batsakis v. Demotsis, 226 S.W.2d 673 (Court of Appeals of Texas, El Paso), was a 1949 decision by the Texas Court of Appeals, United States. In the case, Batsakis (Plaintiff) sued Demotsis (Defendant) to collect on a promise Demotsis had made, in 1942 in war-torn Greece, to give Batsakis $2,000 dollars in exchange for 500,000 drachmae. On appeal, the court found for Batsakis.

Facts and case history

"Background: In 1942, during the German occupation of Greece in World War II, Demotsis was in severe financial straits. This period in Greek history was marked by extensive starvation and malnutrition--hundred of thousands of Greeks died as a result of wartime living conditions. [http://lawprofessors.typepad.com/contractsprof_blog/2005/11/today_in_histor_11.html] According to scholars, the apparent contract made between the two parties would most likely have resulted in punishment or even death at the hands of the Germans. [http://www.aalscontracts.org/Cases/Batsakis.htm] "

Demotsis asked Batsakis for money, which she needed to buy food for her family. In exchange, Demotsis promised in writing (in the form of a letter) to give Batsakis $2,000 dollars, plus 8% annual interest, after the war, or sooner, if she was able to regain access to her assets in the United States (Demotsis held property and funds in Texas but had no direct access to them as a result of the war). In the putative letter from Demotsis to Batsakis, Demotsis stated that she had received $2,000 from Batsakis. What she had received in actuality, however, was 500,000 Greek drachmae, which had a market exchange value of $25 at the time.

After Demotsis refused to pay back the loan once the war was over, Batsakis sued. Demotsis's defense was that the contract was unenforceable due to a lack of consideration (the element of exchange generally necessary to make a contract valid in common law systems). Demotsis claimed that Batsakis's delivery of 500,000 drachmae, with a putative value of $25, could not be adequate consideration for her promise of $2,000, making the contract unenforceable.

Decision of the court

The trial court declared the contract enforceable and awarded Batsakis $750, plus interest. Batsakis appealed the judgment.

The Court of Appeals affirmed the trial court's decision, but modified the damages to $2,000 "with interest thereon at the rate of 8% per annum from April 2, 1942. Such judgment will bear interest at the rate of 8% per annum until paid on $2,000.00 thereof and on the balance interest at the rate of 6% per annum." The Court of Appeals reasoned that the consideration given by Demotsis for Batsakis's promise of 500,000 drachmae could not be considered inadequate, as she had received "exactly what she contracted for."

The appeals court found the consideration legally sufficient. It went on to state that the adequacy or inadequacy of the consideration did not bear on the enforceability, as " [m] ere inadequacy of consideration will not void a contract." In common law systems, courts generally review the legal sufficiency of the consideration in a contract, but have historically refused, ordinarily, to inquire into the adequacy of the consideration (whether the transaction was generally a fair or equivalent exchange).

External references

* [http://lawprofessors.typepad.com/contractsprof_blog/2005/11/today_in_histor_11.html ContractsProf Blog: Today in History: "Batsakis v. Demotsis"]
* [http://www.law.berkeley.edu/faculty/rubinfeldd/LS145/Batsakis.html "Batsakis v. Demotsis"] (at University of California, Berkeley Law School - Boalt Hall)
* [http://www.aalscontracts.org/Cases/Batsakis.htm "Batsakis"] (discussion on Association of American Law Schools, Section on Contracts website)