Summaries

The Netherlands: The promise is enforceable in all three cases. Nevertheless, if the option were so long term as to be unfair, a court would likely give relief by interpreting it as revocable or by finding that its exercise is a violation of good faith. Also, if there were an abrupt rise in the market price and Realty wants the land for resale, exercise of the option might be a violation of good faith.

Spain: The promise is enforceable in all three cases. Nevertheless, if Realty wants to buy the land not to develop it but to resell it, it is likely the contract is not enforceable on the ground that the original purpose of the transaction is no longer being achieved (teoria de la base del negocio).

Portugal: The promise is unenforceable in all three cases but only because they concern sale of land which requires a notarial formality.

Italy: According to the case law and many scholars, these promises are enforceable. According to some scholars, however, if an option is not paid for, it is an offer irrevocable for a fixed term. According to the case, such an option is irrevocable only if the promisor expressly says that it is; it is not enough if he says it is valid for a fixed term. By this view, these promises would be irrevocable only if the promisor said so expressly.

In Case 13(b), the option is probably valid because the length of time was probably justified by Realty’s business needs – for example, conducting a complex study – but if an option is for an excessive period, a court will hold it to be revocable or reduce the period to what is appropriate.

In Case 13(c), a court would hold that Realty does not have an absolute right to decline the contract but a right that must be exercised in good faith.

Austria: In Cases 13(a) and 13(b), the promises are options and enforceable without a formality. They are not deemed to be gifts because they are not so intended. The promise in Case 13(c) is enforceable as well although it is considered, not an option, but a sales contract that Realty has the right to cancel. If there is an abrupt rise in the market price, however, Simon may be able to cancel on account of changed circumstances. A party does have the right to void a contract if the price is more or less than half the value of the object sold, but the disparity between value and price must exist at the time the contract is concluded.

Germany: Options are enforceable even if nothing is paid for them, but these options must comply with the formalities required to transfer real estate. The option in Case 13(b) would be void if it is for such a long time as to offend common decency. In evaluating whether it does, a court will take into account the amount that was paid for it. Here, the option might

298 the enforceabilit y of promises

be valid if Simon had an interest of his own in the deal. The promise in Case 13(c) is valid. Realty would have to exercise its right in good faith, but a court would find that it did not do so only under very exceptional circumstances.

Greece: Options are enforceable even if nothing is paid for them, but these options must comply with the formalities required to transfer real estate. Scotland: This promise concerns an interest in land and so is unenforceable unless it is in writing. If it were in writing, it would be enforceable.

England: In Cases 13(a) and 13(b), the promises are not binding because they lack consideration. It is not clear whether the promise in Case 13(c) is binding, but a court might well decide that it is because Realty had agreed to do a survey and it can refuse to go forward only on the basis of its view of the economic prospects.

Ireland: It would seem that the promises are not binding because they lack consideration, but consideration might be found if the promisee was to do something such as make a survey. The promise in Case 13(c) might be held to be binding because Realty can refuse to go forward only on the basis of its view of the economic prospects, but the matter is not clear.

Preliminary comparisons

No civil law jurisdiction considered these promises to be gifts but in several jurisdictions they would be unenforceable for failure to comply with the formalities required in transfers of land (Portugal, Germany, Greece, and Scotland). In Italy, the promisor might have to state expressly that the promise is irrevocable rather than to say it is valid for a fixed term. In England and Ireland, the promises in Cases 13(a) and 13(b) are unenforceable because they lack consideration, although, as the Irish reporter noted, they would be enforceable if Realty promised to do something such as make a survey. The promise in Case 13(c) might be enforceable because Realty’s right to withdraw depended on its view of the economic prospects.

Some reporters thought that if the term of the option was too long, a court would require it to be exercised in good faith (the Netherlands) or would hold it to be revocable or reduce the term (Italy, and Germany if the length of the term offends ‘common decency’).

If exercise of the option were seriously unfair, for example if there were an abrupt price rise and Realty decided to buy the land for resale, relief might be given on a variety of grounds: because of a severe disparity in value and contract price at the time the option is exercised (lésion) (France

and Belgium); for failure to act in good faith (the Netherlands, Italy, and Germany); because the purpose of the original transaction is no longer achieved (teoria de la base del negocio) (Spain); or for changed circumstances (Austria).