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.
If a contract between A and B is one in which the consideration is a promise on each side, a provision in the contract that A may terminate liability at his own uncontrolled discretion and without his giving up any legal right in consideration of his terminating such contract, does not impose any legal liability upon A; and, accordingly, A's promise is not a consideration for B's promise, and the transaction is not a contract.1 If a "default could be held as satisfaction of the consideration, the instrument would be without consideration, and therefore void;"2 A promise which contains a provision that it is subject to cancellation by one of the parties at any time, imposes no liability upon such party; and, accordingly, it does not amount to a contract.3 A promise of employment which provides that the employer may remove the employe at will, does not amount to a contract.4 A contract for the sale of goods which contains a clause to the effect that the seller will take such goods from the purchaser at the market price upon the day fixed for delivery, imposes no liability; and it is said to be invalid for want of mutuality.5 A contract which provides that one party may be released if, "for any unforeseen reason," he is unable to perform, imposes no liability upon him, and is invalid.6 A contract by which A grants to B the exclusive right to sell A's automobiles in certain territory, but A reserves the right to cancel the contract at any time, is without consideration.7 The same rule applies where this is the legal effect of the contract, though not its express stipulation. Thus where A had a right to cancel a contract of employment on sixty days' notice for "good cause," the expression, for "good cause," was held so indefinite that A could end the contract at will. A's promise was therefore no consideration.8 The same result follows where A reserves the right to cancel for "just cause."9
Michigan. Wardwell v. Williams, 62 Mich. 50, 4 Am. St. Rep. 814, 28 N. W. 796; Goldberg v. Drake, 145 Mich. 5, 108 N. W. 367.
Minnesota. Stout v. Watson, 45 Minn. 454, 48 N. W. 195; Libby v. Parry, 98 Minn. 366, 108 N. W. 299; Mason v. Cedar Lake Ice Co., 123 Minn. 401, 143 N. W. 1125.
Ohio. George Wiedemann Brewing Co. v. Maxwell, 78 O. S. 54, 84 N. E. 695.
Pennsylvania. Yerkes v. Richards, 153 Pa. St. 646, 34 Am. St. Rep. 721, 26 Atl. 221; Boyer v. Nesbitt, 227 Pa. St. 398, 76 Atl. 103.
Tennessee. Bradford v. Foster, 87 Tenn. 4, 9 S. W. 195.
Virginia. Carter v. Hook, 116 Va. 812, 83 S. £. 386.
Washington. Conner v. Clapp, 42 Wash. 642, 85 Pac. 342.
West Virginia. Barrett v. McAllister, 33 W. Va. 738, 11 S. E. 220; Car-aegie Natural Gas Co. v. South Penn Oil Co., 56 W. Va. 402, 49 S. E. 548.
24 Smith v. Bangham, 156 Cal. 359, 104 Pac. 689.
25 Clark v. Cagle, 141 Ga. 703, L. R. A. 1915A, 317, 82 S. E. 21; Thompson v. Wilkinson (Okla.), 148 Pac. 177.
26 Clark v. Cagle, 141 Ga. 703, L. R.
A. 1915A, 317, 82 S. E. 21; Thompson v. Wilkinson (Okla.), 148 Pac. 177.
1 United States. Velie Motor Car Co. v. Kopmeier Motor Car Co., 194 Fed. 324; Ellis v. Dodge Bros., 237 Fed. 860.
Arkansas. El Dorado Ice & Planing Mill Co. v. Kinard, 96 Ark. 184, 131 S. W. 460; Skeen v. Ellis, 105 Ark. 513, 152 S. W. 153.
Illinois. Vogel v. Pekoc, 157 111. 339, 30 L. R. A. 491, 42 N. E. 386; Joliet Bottling Co. v. Joliet Citizens' Brewing Co., 254 111. 215, 98 N. E. 263.
North Dakota. Great Northern Ry. Co. v. Sheyenne Telephone Co., 27 N. D. 256, 14S N. W. 1062.
Ohio. Woodland Oil Co. v. Crawford, 55 O. S. 161, 34 L. R. A. 62, 44 N. E. 1093.
Virginia. American Agricultural Chemical Co. v. Kennedy, 103 Va. 171, 48 S. E. 868.
West Virginia. Hinton Foundry Machine & Plumbing Co. v. Lilly Lumber Co., 73 W. Va. 477, 80 S. E, 773; Nei-kirk v. Williams (W. Va.)', L. R. A. 1918F, 665, 94 S. E. 947.
Contra, where the managers of a syndicate may terminate it at will, apparently for the benefit of the subscribers. White v. McCullagh, 74 W. Va. 160, 81 S. E. 720.
A promise by A to furnish beer to B, "of satisfactory quality," the amount not being fixed, is not binding, since B might refuse to order any, might order more than A could furnish, or might reject the beer on the ground that it was not satisfactory.10 A contract for the sale of future crops which may be terminated by the purchaser if, "according to the judgment" of the purchaser or of his agent, the crop is of quality inferior to that contracted for or is in unfit condition, has been held to be valid, since this provision requires the buyer to exercise his honest judgment and does not give to him the power to discharge the contract at his option.11
2 Woodland Oil Co. v. Crawford, 55 O. S. 161, 34 L. R. A. 62, 44 N. E. 1093.
3 American Agricultural Chemical Co. v. Kennedy, 103 Va. 171, 48 S. E. 868.
4 Missouri, K. & T. Ry. Co. v. Smith, 98 Tex. 47, 81 8. W. 22.
5 Rankin v. Mitchem, 141 N. Car. 277, 53 S. E. 854.
6Rehm-Zeiher Co. v. F. G. Walker Co., 156 Ky. 6, 49 L. R. A. (N.S.) 694, 160 S. W. 777.
7Velie Motor Car Co. v. Kopmeier Motor Car Co., 194 Fed. 324.
8 Cummer v. Butts, 40 Mich. 322, 29 Am. Rep. 530.
9 Oakland Motor Car Co. v. Indiana Automobile Co., 201 Fed. 499, 121 C. C. A. 319.
10Joliet Bottling Co. v. Joliet Citizens' Brewing Co., 254 111. 215, 98 N. E. 263.
If a promise does not by its terms impose any liability upon the promisee, and such promise is by its terms to extend over a period of time, and the consideration is by the terms of the contract apportioned to the various acts done thereunder, the fact that the promisee has performed for a part of the time fixed by the promise does not render such contract enforceable for the future.12 A con-tract for reimbursing the adversary party in case of default by the promisor does not give the promisor the power to end the contract at will.13
If the promisee has given something of value for the promise, his reservation of the right to terminate the contract at will does not render it gratuitous.14 Such a case is to be governed by the principles which control an option for value.15 If A agrees to end a contract with X, and to enter into a similar contract with B, A's termination of his contract with X is a valuable consideration, which prevents such contract from being rendered gratuitous by the fact that A reserves the right to discontinue such contract at will.16 If a valuable consideration is given for a lease, such as an oil lease or for a gas lease, the fact that the lessee reserves the right to terminate liability either after a certain time or on payment of an additional amount, does not render the lease or contract gratuitous if the lessee prefers to retain possession of the premises and to refrain from exercising his right to terminate his lease.17
If, by the terms of the contract, A reserves the right to withdraw from the contract if he elects to do so within a specified time, such transaction amounts to a contract if the time within which A may avoid liability has passed and neither party has elected to avoid such transaction.18 In such case, notice of A's election to withdraw must actually be delivered to B in order to be operative.19
11 Livesley v. Johnston, 45 Or. 30, 65 L. R. A. 783, 76 Pac. 946.
For the effect of a covenant to perform to the satisfaction of the adversary party as a consideration, see also Sec. 584 and ch. LXXX.
12Rehm-Zeiher Co. v. F. G. Walker Co., 156 Ky. 6, 49 L. R. A. (N.S.) 694, 160 S. W. 777.
13 Jones v. Stainton, - Mich. - , 166 N. W. 966.
14 Western Newspaper Union v. Kitchel, - Mich. - , 166 N. W. 1021.
18 See Sec. 122 et seq.
16 Western Newspaper Union v. Kitchel, - Mich. - , 166 N. W. 1021.
17Gadbury v. Ohio & Indiana Natural & Illuminating Gas Co., 162 Ind. 9, 62 L. R. A. 895, 67 N. E. 259; Pittsburg Vitrified Paving & Building Brick Co. v. Bailey, 76 Kan. 42, 12 L. R. A. (N.S.) 745, 90 Pac. 803; Central Ohio Natural Gas & Fuel Co. v. Eckert, 70 O. S. 127, 71 N. E. 281.
Contra, Brown v. Wilson, - Okla. - L. R. A. 1917B, 1184, 160 Pac. 94.