The elements of a legally enforceable contract are an offer, consideration, acceptance, mutual assent and capacity. Hamer v. Sidway is a humorous way to teach us about the second element, consideration. Consideration in a bilateral contract is a promise to perform a certain action or to refrain from doing something that an individual is legally entitled to do.
On to the good stuff. Uncle William thinks eighteen-year-old Nephew William is up to no good. Uncle promises that if Nephew refrains from smoking, drinking, swearing and gambling until Nephew turns twenty-one, Uncle will pay him $5,000. Nephew agrees. One hundred years ago, the drinking age was 18, so by entering into this agreement with Uncle, Nephew gave up the right to engage in hobbies that he was legally entitled to pursue. On Nephew’s twenty-first birthday, he proudly writes to his uncle that he did in fact abstain from the aforementioned activities for the last three years and it was time for Uncle to pay up. Uncle agreed but replied that he was going to keep the money until he thought Nephew was responsible enough to spend it wisely. Nephew (probably with an eye roll) acquiesced. Unfortunately for Nephew, Uncle dies without having paid Nephew the $5,000. Nephew asks Uncle’s estate for the $5,000. The executor refuses, saying that the agreement by Nephew and Uncle was not an enforceable contract because it lacked consideration.
Was Nephew’s forbearance from his scandalous (but legal) hobbies enough to constitute consideration? The Court said it was. A waiver of any legal right at the request of another party is sufficient consideration for a promise. Applied here, Nephew gave up the right to smoke, drink, swear and gamble because of Uncle’s promise to give him $5,000 (note that the other elements of a contract are present as well, make sure to address those on an exam) so there was an enforceable contract. It mattered neither that it benefitted Nephew’s health to forbear from these activities nor that Uncle probably received no benefit other than the peace of mind that his nephew was on the straight and narrow. Nephew’s forbearance of a legal right was sufficient to satisfy the consideration element as Courts are not in the business of evaluating the subjective value of consideration to a promisor (here, Uncle).
Here are some points to add to your outline:
· The Holding: Adequate consideration exists when one refrains from pursuing an activity that they were legally entitled to pursue.
· How would this case apply in modern contexts? What about a Company’s non-compete clause paying employees for a period of time following the employee’s departure not to take a job with the Company’s competitors?
· How would this ruling change if Nephew agreed to refrain from illegal activities instead of ones he was legally entitled to pursue?
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