Academic journal article Northwestern University Law Review

The Peppercorn Reconsidered: Why a Promise to Sell Blackacre for Nominal Consideration Is Not Binding, but Should Be

Academic journal article Northwestern University Law Review

The Peppercorn Reconsidered: Why a Promise to Sell Blackacre for Nominal Consideration Is Not Binding, but Should Be

Article excerpt

INTRODUCTION

Suppose a wealthy uncle wishes to convey a portion of his real estate holdings to his nephew. Although very pleased to hear the good news, the nephew asks whether his uncle might put the promise in writing. To satisfy his nephew's skepticism, the uncle drafts a document stating that "for valuable consideration of $1, receipt of which is hereby acknowledged," he promises to pledge "Blackacre" to the nephew. The purported consideration of $1 is never paid. The uncle signs and notarizes the document, affixes his own personal seal to it (handily ordered off of the internet for $99), and writes in block letters at the top of the document: "THIS PROMISE IS A LEGALLY ENFORCEABLE OBLIGATION." The nephew promptly takes the document to an attorney and asks if the promise is indeed binding.

What should the attorney tell him? What factors in the above example are relevant? This Comment discusses the various issues this hypothetical raises and provides recommended answers that may be of use to practitioners faced with a similar situation. But in addition to the descriptive task of stating the possible answers to the questions posed by this hypothetical, this Comment addresses a prescriptive question: should the promise be binding? Although the doctrine of nominal consideration cannot claim any special relationship to the question of whether gratuitous promises should be enforced-or rather, under what circumstances gratuitous promises should be enforced-this Comment endeavors to show that a firm return to the rule that "a peppercorn is sufficient consideration" to uphold the enforcement of a gratuitous promise can nevertheless rectify the problems caused by courts overanxious to use the consideration doctrine as a merciless gatekeepr.1

Part I traces the history of the seal and of comparable formalities and demonstrates that no formalities presently exist that suffice to bind gratuitous promises.2 With that background in place, Part I first surveys the doctrine of nominal consideration at work in the common law, including its treatment in the First and Second Restatements.3 Second, it returns to the hypothetical posed above and explores the various state rules to determine appropriate answers to the (rightfully) skeptical nephew's question. Part I then argues that the doctrine of nominal consideration functions as a legally significant formality in the context of options and guaranty contracts, but is not a formality sufficient to bind a gratuitous promise. That is, a peppercorn is not "sufficient consideration" to uphold a promise to convey Blackacre. Thus, if the uncle's promise to his nephew is to be legally enforceable, the deal must be retructured to allow for new ("bargained for") consideration. Such consideration would, however, take the promise out of the realm of a gratuitous promise.

Part II surveys the modern theoretical underpinning to the law of gifts and of promises. Part II argues that a promisor may have a selfish interest not only in delivering a gift, but also in making a binding gratuitous promise to deliver a gift. However, under existing law, promisors are powerless to make a binding gratuitous promise no matter how strong the desire or how clear the intention. Part II concludes by arguing, first, that this is an unacceptable result because a regime of enforceability increases the value of a promise to both the promisee and the promisor. Second, applying the insights of recent contract law scholarship focused on enforceability regimes to the doctrinal winkle in contract law caused by current judicial treatment of nominal consideration, Part II endorses enforceability regimes and argues that nominal consideration would fundtion as an effective formality in the context of enforcing gratuitous promises. Such use of formalities, moreover, serves the same functional ends as the consideration doctrine itself. Thus, a promise to sell Blackacre for one dollar, to put the point simply, should be binding. …

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