Supp. To § 1.17 Illusory Promises

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(A) The following cases cite this section:

In re Sealed Case, 449 F.3d 118, 2006 U.S. App. LEXIS 12595 (DC Cir. 2006) . The appellant pled guilty to leading a criminal enterprise that distributed significant quantities of heroin. Under a plea agreement, in return, the government promised that in exchange for appellant's assistance, it would file a motion recommending that he be sentenced to a term below the life sentence called for by the relevant sections of the United States Sentencing Guidelines. The appellant complied with his part of the agreement, and based on his substantial assistance, the government filed a downward departure motion pursuant to 18 U.S.C. § 3553(e) and § 5K1.1 of the Sentencing Guidelines. Subsequently, the appellant was sentenced to 360 months in prison. Although this fell below the life sentence that would have been required had the government not filed its motion, the 360 month sentence was more severe than appellant had hoped and, therefore, he challenged his sentence. The appellant claimed that the plea agreement was illusory since it provided that, even if substantial assistance in the investigation or prosecution of another person was provided, the government reserved its right to decline to file a departure motion pursuant to 18 U.S.C. § 3553(e). The appellant claimed that the government's failure to promise to file a § 3553(e) motion made the plea agreement illusory because it left him exposed to the possibility of the statutory minimum sentence that he was seeking to avoid. Thus, he claimed to have received no benefit from the promise. The court, however, noted that, even if the government's promise was illusory when made, the government did file the motion and as Corbin suggests, any possible deficiency was cured by the government's performance.

(2) Vanegas v. American Energy Services, 224 S.W.3d 544 (Tex. App. 2007) . Former at-will employees of AES brought suit against AES and its shareholders asserting it breached an agreement to pay them five percent of the proceeds received in the event of a sale or merger of AES. The defendants claimed that they were entitled to summary judgment because the promise to pay five percent of the proceeds in the event of a sale or merger was illusory since it depended on the continued employment of the employees who were at-will employees. As at-will employees, AES could have terminated their employment at any time which made AES' promise illusory. The trial court granted the shareholders' motions for summary judgment, and the appellate court affirmed. The court noted Corbin's analysis that a promise is illusory when it fails to bind the promisor who retains the option of discontinuing performance. Because an illusory promise fails to bind the promisor under such circumstances, it provides no consideration for a contract. Since the employees were at-will employees, any promise made by either them or their employer that depended upon an additional period of employment was illusory because it was conditioned upon something that was exclusively within the control of the promisor. Thus, an employer's promise of a raise to an at-will employee is illusory because it depends upon a period of continued employment. After making the promise, the employer is free to fire the at-will employee and, therefore, avoid the obligation to perform the promise. The court also explained that AES's illusory promise could not serve as the offer for a unilateral contract, which has only one promisor, and is completed by the promisee's performing the act or acts called for by the promisor, not by the promisee making any reciprocal promise or promises. When the promisee delivers the bargained-for performance, the promisor then becomes bound to provide the promise to benefit. Here, in contrast, the court held that AES's illusory promise was no promise at all since it did not bind AES to do anything. The former employees could not convert AES's illusory promise into a binding non-illusory promise by their performance. Accordingly, the parties did not form a binding unilateral contract.

The court's analysis may attempt to prove too much. The argument that a promise to grant a raise to a terminable-at-will employee is necessarily illusory raises the question, why is an employer's original promise to pay a certain wage to an at-will employee enforceable when the employee performs? The court's analysis would suggest that the employer's promise was never enforceable. If an at-will employee is hired at a promised compensation and performs for some period, the court's analysis would suggest that the promised rate of compensation was never enforceable. If a unilateral contract had been found herein, the implied covenant of good faith would attach. The holding that no contract existed, however, precludes that argument. A petition for review has been filed in this case.

Supplement to Notes in Main Volume

1. Cornejo-Ortega v. United States, 61 Fed. Cl. 371 (2004) . Where a United States reward poster offered a reward ''up to'' $2.2 million, the court cited precedent holding that ''zero'' would be included as its lower limit. In holding that such language gives rise only to an illusory promise, the court quoted the language of the Restatement (Second) of Contracts, § 2, comment e, as quoted in this footnote in the main volume.