Gift Promises and Reliance

While it is true that an enforceable contract must be supported by valid consideration, there are some instances where you will commonly argue that there is no supporting consideration. Under the common law, one of those instances is a gift or gratuitous promise. Generally a gift promise lacks consideration because gifts are not bargained for and they are usually not given in exchange for something else.

An Example

Let’s look at the common law rule for gift promises. There was this one time that my rich aunt Cynthia promised to give me $1,000 on my birthday. I happily told her that I accepted her generosity. When my aunt Cynthia reneged on her promise I tried to take her to court for breach of contract. The judge ruled in my Aunt Cynthia’s favor and said that her promise was not enforceable. He went on to explain that because my aunt Cynthia had not sought a return promise or performance from me then it was not enforceable because the promise lacked consideration.

Sometimes in order to obtain a gift you may have to do something. In those instances parties who have been promised gifts have tried to argue that the action they took to obtain the gift – in law school we call this action reliance - should qualify as supporting consideration.

It’s sort of like that one time Super Cool, my alter ego, promised Big Steve he’d give him a signed autograph photo of Justin Beiber; don’t ask. In order to get the photo he told Steve that he’d have to drive over to Super Cool’s place which for him is a pretty long commute. Well, when Big Steve showed up Super Cool had a change of heart and refused to give up the signed photo for the money.

When Big Steve took Super Cool to court the judge concluded that because traveling to Super Cool’s place was only incidental to the true nature of the gift then Steve’s action was insufficient to amount to consideration. The judge explained that the key to determining whether an act is merely incidental is to look at whether Super Cool made the promise in order to get some benefit in exchange or whether the act just made it more convenient for Super Cool to complete the gift. The judge thought that the requirement that Steve come to Super Cool’s place to pick up the signed photo wasn’t his attempt to get something in exchange but it just made the exchange more convenient.

In situations such as this Steve’s actions are not reliant enough to constitute enough consideration to make a gift promise enforceable. In other instances enough reliance can make a gift promise enforceable and you’ll about some of them in your casebook.

Now that you’ve got the big picture, read your cases, listen in lecture and get practice analyzing gift promises and consideration with practice problems.