§ 1.17 Illusory Promises

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There are certain forms of expression that have been described as ''illusory promises.'' As this term itself implies, an illusory promise is not a promise at all as that term has been herein defined. If the expression appears to have the form of a promise, this appearance is an illusion. Suppose, for example, that X guarantees payment of P's note in return for C's written promise to forbear from suing P as long as C wishes to forbear. In this case C's words may create the illusion of a promise, but, in fact, C has made no promise.n1 The fundamental element of promise is a promisor's expression of intention that the promisor's future conduct shall be in accord with the present expression, irrespective of what the promisor's will may be when the time for performance arrives. In the supposed case, the words used by C are not such as may reasonably be relied upon by P. The clear meaning of the expression is that C's future conduct will be in accord with his or her own future will, just as it would have been had nothing at all been said.n2

An early illustration of a bilateral agreement that was illusory on both sides was given by John Selden, the great Seventeenth Century legal scholar:n3

''Lady Kent articled with Sir Edward Herbert that he should come to her when she sent for him, and stay with her as long as she would have him, to which he set his hand; then he articled with her that he should go away when he pleased and stay away as long as he pleased, to which she set her hand.''

Nat Nal Service Stations v. Wolf illustrates that illusory promises can be cured by performance. The defendant promised to pay a rebate on all orders sent in by plaintiff that should be accepted by defendant. The illusion disappeared, however, as soon as an order was sent in and accepted.n4 Although plaintiff's promise was illusory in that plaintiff made no commitment to buy anything, once the order was given and filled, the plaintiff had earned the promised rebate.

The complaint that a promise is illusory often comes in rather poor grace from the addressee of the allegedly illusory promise, particularly where the addressor is ready and willing to carry out the expression of intention. For this reason, courts are quite properly prone to examine the context to conclude that the escape hatch was intended to be taken only ''in good faith'' or in the ''exercise of a reasonable discretion'' or upon some other condition not wholly within the control of the promisor. In which case, the conclusion is that the promise is not illusory.n5 This matter is discussed at length in § 145 below.

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For related research and practice materials, see the following legal topics:

Contracts LawContract InterpretationGeneral OverviewContracts LawContract Conditions & ProvisionsGeneral OverviewContracts LawConsiderationEnforcement of PromisesGeneral OverviewContracts LawPerformanceIllusory PromisesContracts LawConsiderationGeneral Overview

FOOTNOTES:

(n1)Footnote 1. The Restatement of Contracts (Second) § 2 comment e provides: ''Words of promise which by their terms make performance entirely optional with the 'promisor' whatever may happen, or whatever course of conduct in other respects he may pursue, do not constitute a promise. Although such words are often referred to as forming an illusory promise, they do not fall within the present definition of promise.''

(n2)Footnote 2. For cases in which an illusory promise have been found, see:

Conn. -In Marsh v. Bridgeport, 75 Conn. 495, 54 A. 196 (1903) , the defendant city leased premises of the plaintiff at a specified rent, with the express provision that the rent was not to be payable unless the city council should thereafter appropriate money to pay it. This was rightly held to create no duty to appropriate or to pay without appropriating. There was no promise to pay rent.

Fla. - Rosenberg v. Lawrence, 541 So.2d 1204 (Fla.App.1988) , review denied, 542 So.2d 1334 . An agreement by parties to a divorce to provide equally for their children's college educations was found to be illusory promise in spite of language specifying that the parties were not ''obligated for any material, unusual or extraordinary expense to which [they do] not consent.'' The outcome may possibly have been influenced by the fact that expenses for one child attending college for slightly more than one year were asserted to amount to $43,616.38. The case might better have been analyzed as a case of indefiniteness.

Ga. - Automatic Sprinkler Corp. of America v. Anderson, 243 Ga. 867, 257 S.E.2d 283 (1979) . The agreement provided ''the award of any direct incentive is entirely within the discretion of the corporation and nothing herein will be construed to the contrary.'' It was held that the presence or absence of good faith in the exercise of discretion is irrelevant.

Ky. - Rehm-Zeiher Co. v. F.G. Walker Co., 156 Ky. 6, 160 S.W. 777 (1913) , promise to buy a specified quantity unless ''for any unforeseen reason'' the buyer should desire otherwise.

Mich. - Mastaw v. Naiukow, 105 Mich.App. 25, 306 N.W.2d 378 (1981) . Mastaw agreed to take $9,000 to settle his false arrest case and to, by a writing, make the police payment contingent on approval by the Detroit Common Council. A co-plaintiff refused to settle, gaining a jury verdict for $100,000, and at trial evidence came out that police files corroborated plaintiffs' version of the events. Mastaw said the deal was off, but the judge below refused to allow him to withdraw. Held, reversed. The court quoted this § 1.17 to show that the city's obligation was illusory. Under § 2.3's analysis of ''home office'' clauses, this was just an offer by Mastaw to the city; the council's approval was its acceptance. Mastaw could withdraw before the city accepted.

Mo. -In Middleton v. Holecroft, 270 S.W.2d 90 (Mo.App.1954) , the following words of an employer were held to be merely an illusory promise: ''I propose to employ you to work for me for 15 months at my option.''

In Kalivas v. Hauck, 365 Mo. 923, 290 S.W.2d 94 (1956) a supposed ''option'' to buy land, for which the plaintiff paid $200, was said to be wholly illusory because it was conditional upon the execution within 30 days of a written contract of sale on terms still to be agreed on. The case is really one of indefiniteness.

Neb. - De Los Santos v. Great Western Sugar Co., 217 Neb. 282, 348 N.W.2d 842 (1984) . The agreement provided that the Contractor ''shall transport in the Contractor's trucks such tonnage of beets as may be loaded by the Company.'' It was held that there was no contract as the Company had not promised to load any beets.

Nev. - Sala & Ruthe Realty, Inc. v. Campbell, 89 Nev. 483, 515 P.2d 394, 396 (1973) . The real estate agent had produced a buyer who agreed to buy conditioned on his approval of an accounting and inventory of Campbell's books and stock, which was never completed. The agent sued for its commission, claiming to have produced a buyer ''ready, willing and able'' to buy on the terms agreed. The court held that the contract was illusory, citing this section, since it did not bind the buyer, and therefore could not bind the seller. The court concluded that the buyer was thus not shown to have been ready, willing and able.

The court was right in concluding that the buyer was not ready, willing and able, but wrong in concluding that the contract was illusory. If the accounting and inventory had been completed, the buyer would have been bound to use a good faith judgment in determining whether the books and inventory were satisfactory; and a court would not find it difficult to conclude that buyer was acting in bad faith if a reasonable person would have been satisfied. Even if the contract were properly interpreted as resting on condition of personal (including unreasonable requirements no reasonable person would impose) satisfaction of the buyer, this condition does not make the contract illusory. See § 161 post.

The reason why the buyer was not ready, willing and able to buy was that there was a condition precedent that was not fulfilled. See Ch. 31. The agreement itself showed that the buyer was not willing to buy unless the condition was complied with.

N.Y. - Strong v. Sheffield, 144 N.Y. 392, 39 N.E. 330 (1895) , ''I will hold it [the note of a third person, without pressing for payment] until such time as I want my money.''

Wash. - Spooner v. Reserve Life Ins. Co., 47 Wash.2d 454, 287 P.2d 735 (1955) , noted herein at length under § 201, holding that an employer's bulletin, announcing a proposed bonus schedule, contained only the illusion of a promise, so that refusal to pay the bonus was not a breach of contract.

Eng. -Great Northern R.R. v. Witham, L.R. 9 C.P. 16 (1873), ''I am instructed to inform you that my directors have accepted your tender, dated, etc., to supply this company at Doncaster station any quantity they may order during the period ending October 31.''

(n3)Footnote 3. John Selden, Table Talk (under heading ''Contracts''), in English Belles-Lettres 163, 169 (Universal Classics Library; A.W. Dunne, Washington & London 1901).

(n4)Footnote 4. 304 N.Y. 332, 107 N.E.2d 473 (1952) .

(n5)Footnote 5.

U.S. -Where a subcontract contained a provision that ''bridges deemed necessary by the contractor will be constructed by the contractor without cost to the subcontractor,'' such provision was not a mere ''illusory'' promise. The contractor's duty to build was conditional on the contractor's own personal judgment as to ''necessity''; but he was bound to exercise that judgment honestly and in good faith. E.J. Albrecht Co. v. New Amsterdam Cas. Co., 164 F.2d 389 (7th Cir.1947) . See further chapter 25 on Implication in the chapter on Interpretation; also § 644, Promises Conditional on Personal Satisfaction.

Del. -In American University v. Todd, 39 Del. 449, 1 A.2d 595 (1938) , the promise of a subscriber to pay a sum of money ''at my convenience'' was held to be enforceable and not illusory. The phrase merely made the duty conditional on ability to pay without financial difficulty or inconvenience.

N.C. - Mezzanotte v. Freeland, 20 N.C.App. 11, 200 S.E.2d 410 (1973) . ''This agreement is contingent upon parties of the second part being able to secure a second mortgage from North Carolina National Bank on such terms and conditions as are satisfactory to them ....'' The quoted clause did not make the promise of the buyers illusory. They undertook to make an honest good faith effort to acquire financing satisfactory to themselves. The opinion collects many of the cases finding implied promises that limit the party's apparent ability to thwart performance on his or her own whim.

N.Y. - Richard Bruce & Co. v. J. Simpson & Co., 40 Misc.2d 501, 243 N.Y.S.2d 503 (1963) . The plaintiff, an underwriter, had the power to terminate, ''if prior to the effective date the Underwriter, in its absolute discretion, shall determine that market conditions or the prospects of the public offering are such as to make it undesirable or inadvisable to make or continue the public offering hereunder.'' The court held that the quoted language did not make the plaintiff's promise illusory, saying: ''The term 'absolute discretion' must be interpreted in context and means under these circumstances a discretion based upon fair dealing and good faith-a reasonable discretion.'' See also Seymour Grean & Co. v. Grean, 274 A.D. 279, 82 N.Y.S.2d 787 (1948) (''sole judgment'').

Or. - Wyss v. Inskeep, 73 Or.App. 661, 699 P.2d 1161 (1985) , review denied, 300 Or. 64, 707 P.2d 582 held that the discretion reserved to the promisor must be exercised in good faith. See also Furrer v. International Health Assurance Co., 256 Or. 429, 474 P.2d 759 (1970) . (''to spend such time as he personally sees fit'').

Wash. - Omni Group, Inc. v. Seattle-First Nat'l Bank, 32 Wash.App. 22, 645 P.2d 727 (1982) . ''Sole discretion'' must be exercised in conformity with the obligation of good faith and fair dealing.