This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
While, as a general rule, the consideration must be that which is stipulated for by the terms of the contract, and while the voluntary performance, by the promisee, of an act, which is not agreed upon by the parties in the contract as the conventional inducement, is not the consideration for the promise, even though such act is performed in reliance upon the promise,1 there is one exception to this general rule in equity. If a gratuitous promise to convey land has been made, and if the promisee has taken possession of such realty under such promise, and if, in reliance thereon, he has made sufficient valuable improvement to render it inequitable to permit the promisor to oust him from such realty, equity will, in most jurisdictions, grant specific performance of such promise.2 In some cases the promisor may stipulate that the promisee shall make such improvements,3 or furnish materials therefor,4 or that he will refrain from removing to another locality.5 In such cases, a technical consideration exists, but this is not necessary. Equity will prevent the promisor from taking an unfair advantage of the promisee, although no technical consideration exists.
1Kirksey v. Kirksey, 8 Ala. 131; Dunshee v. Dunshee, 255 111. 296, 99 N. E. 593; Brevator v. Creech, 186 Mo. 558, 85 S. W. 527.
2 See Sec. 567.
3 Kirksey v. Kirksey, 8 Ala. 131; Brevator v. Creech, 186 Mo. 558, 85 S. W. 527.
4 Brevator v. Creech, 186 Mo. 558, 85 S. W. 527.
The facts that A has lent money to B which has not been repaid and that A induces her husband X to leave his present place of residence and to return to the home of B his mother to live, and that A sells her own home and moves to B's home to live in reliance upon B's promises, are said not to be consideration for B's promise to pay to A a certain sum of money after A should come with her husband X to live at B's home and to devise certain realty to B." Brevator v. Creech, 186 Mo. 558, 85 S. W. 527.
5 Dunshee v. Dunshee, 255 III. 296, 99 N. E. 593. (The vagueness and uncertainty of A's covenant seem to have influenced the decision as much as the lack of consideration.)
1See Sec. 522.
The improvements must be made upon the property which is the subject of the oral gift. Expenditures of other kinds, though in reliance on the oral gift, will not render it enforceable.6 The fact that the promisee sold other realty and removed to the realty which was the subject of the parol gift does not render the contract enforceable.7
Change of possession alone is not sufficient to render the oral gift enforceable.8
On the other hand, change of possession under the oral promise seems to be necessary, and if the promisee was already in possession, before the oral gift, the fact that he made valuable improvements after such oral gift was made, and in reliance thereon, does not render the oral gift enforceable.9
2 England. Dillwyn v. Llewellyn, 31 L. J. Oh. (N.S.) 658.
Illinois. Harlan v. Harlan, 273 111. 155, 112 N. E. 452.
Iowa. Bevington v. Bevington, 133 la. 351, 9 L. R. A. (N.S.) 508, 110 N. W. 840; Pranger v. Pranger, - la. - , 164 N. W. 607.
Michigan. Welch v. Whelpley, 62 Mich. 15, 4 Am. St. Rep. 810, 28 N. W. 744.
Minnesota. Hayes v. Hayes, 126 Minn. 389, 148 N. W. 125; Trebesch v. Trebesch, 130 Minn. 368, 153 N. W. 754.
New York. Messiah Home v. Rogers, 212 N. Y. 315, 106 N. E. 59.
Oregon. Dwight v. Giebisch, 77 Or. 254, 150 Pac. 749.
Washington. Raymond v. Hattrick, - Wash. - , 177 Pac. 640.
West Virginia. Crim v. England, 46 W. Va. 480, 76 Am. St. Rep. 826, 33 S. E. 310.
3Neale v. Neale, 70 U. S. (9 Wall.) 1, 19 L. ed. 590.
4 Gove v. Gove, 88 Vt. 115, 92 Atl. 10.
5 White v. Poole, 74 N. H. 71, 65 Atl. 255.
6 Swan Oil Co. v. Linder, 123 Ga. 550, 51 S. E. 622.
8 Price v. Lloyd, 31 Utah 86, 8 L. R. A. (N.S.) 870, 86 Pac. 767.
9 Christensen v. Christensen, 265 111. 170, 106 N. E. 627.
See also Inman v. Tucker, 138 Tenn. 512, 198 S. W. 247.
Whether equity does not regard this transaction as a contract at all, but as a case in which the promisor will perpetrate a practical fraud upon the promisee if equity refuses relief to the promisee; or whether equity regards this transaction as a contract, and thus either denies the legal doctrine of consideration in this particular case, or else makes "consideration" mean something in equity that it does not mean at law, is a question upon which there has been some difference of opinion. From the nature of the case, this difference is manifest chiefly in obiter. In some jurisdictions equity seems to admit that this transaction is not a contract and that it is giving relief outside of the ordinary principles of contract law.10 In other jurisdictions equity seems to regard such a transaction as a contract supported "by a consideration that is sufficient in equity but not at law.11 The former explanation is probably the better one. If we adopt the latter explanation, we must admit that "contract" and "consideration" mean one thing at law, and, in this particular case, they mean another thing in equity.
10 "The principle applied in such cases is, that where one party by his contract, or his conduct outside of contract, which was well calculated to mislead another relying thereon, does mislead him to his harm, and thereby obtains an unjust and unconscientious advantage over the Latter, he will not be allowed to reap the benefit of his wrongdoing. The cause of action in such cases is not the refusal to perform a contract, or keep a promise or engagement upon which another relied, but it is the consequent unjust infliction of loss or injury upon one party, and the consequent benefit and advantage resulting to the other, from the violation or breach of a faith and confidence which, under the circumstances, a court of equity deems to have been rightly reposed in him." Wainwright v. Talcott, 60 Conn. 43, 22 Atl. 484.
"When a gift has led to the expenditure of money or labor on the land given, in making permanent improvements of considerable extent, the gift becomes irrevocable in equity, as it would operate a fraud on the donee to allow the donor to avoid the performance of his undertaking." Hardesty v. Richardson, 44 Md. 617. (Quoted in Whitaker v. McDaniel, 113 Md. 388, 78 Atl. 1.)
"A voluntary agreement will not be completed or assisted by a court of equity; in cases of mere gift, if anything be wanting to complete the title of the donee, a court of equity will not assist him in obtaining it, for a mere donee can have no right to claim more than he has received. But the subsequent acts of the donor may give the donee that right or ground of claim which he did not acquire from the original gift. Thus, if A gives a house to B, but makes no formal conveyance, and the house is afterwards on the marriage of B included, with the knowledge of A, in the marriage settlement of B, A would be bound to complete the title of the parties claiming under that settlement; so if A puts B in possession of a piece of land, and tells him, 'I give it to you that you may build a house on it,' and B, on the strength of that promise, with the knowledge of A, expends a large sum of money in building a house accordingly, I can not doubt that the donee acquires a right from the subsequent transaction to call on the donor to perform that contract which arises therefrom, and to complete the imperfect donation which was made." Dillwyn v. Llewellyn, 31 L. J. Ch. (N.S.) 658.
A case at law which goes much farther than the foregoing cases in equity is one in which A gave to his relative, B, A's note so that B need not work any more, if she did not wish to do so. It was not stipulated that B should resign her position, but B did so after the delivery of the note. The court held that if no consideration really existed, there were at least principles of equitable estoppel which made the note enforceable.12 If these cases are to be explained on the theory of estoppel, it is necessary to formulate a new concept of estoppel. In its normal use estoppel is based on a misrepresentation of fact. In this use it is based on a broken gratuitous promise. If such promise can be enforced on the theory of estoppel, the necessity of consideration disappears as soon as action in reliance on the promise has been taken. Whether we call such performance "consideration," or whether we say that it gives rise to an "estoppel," the result is the same, and that is, that gratuitous promises have become enforceable.