Case Facts
The dispute arose from a promise made on 20 March 1869 by William E. Story (the uncle) to his nephew, William E. Story 2d, at a family celebration. The uncle promised that if the nephew refrained from drinking liquor, using tobacco, swearing, and playing cards or billiards for money until he reached the age of 21, the uncle would pay him $5,000. The nephew fully performed his side of the agreement. On 31 January 1875, upon turning 21, he wrote to his uncle claiming the promised sum.
The uncle replied by letter dated 6 February 1875, acknowledging the debt and confirming that the money had been set aside in a bank for the nephew. However, the uncle stated that he wished to retain the money for the time being, at interest, and would hand it over to the nephew when he considered the nephew to be sufficiently mature to use it wisely. The uncle died before the money was paid. The plaintiff, Louisa W. Hamer, was an assignee of the nephew's claim — not the nephew himself — and brought the action against Franklin Sidway as executor of the uncle's estate.
The defendant argued that the agreement was unenforceable for want of consideration on the basis that the nephew had not been harmed but rather benefited by abstaining from tobacco and alcohol, and that there could be no valid consideration unless the promisor himself received some benefit. Two further procedural issues arose: first, whether the original 1869 contract was within the Statute of Frauds (being an agreement not to be performed within one year and not reduced to writing); and second, whether any claim founded on the original 1869 contract would be barred by the Statute of Limitations.
Held
The New York Court of Appeals held that the nephew's forbearance constituted good and sufficient consideration for the uncle's promise, and that the uncle's estate was bound to pay the $5,000.
On the question of consideration, the court firmly rejected the defendant's argument that benefit to the promisor was necessary. The court applied the Exchequer Chamber's 1875 definition: "A valuable consideration in the sense of the law may consist either in some right, interest, profit or benefit accruing to the one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other." Because the nephew had a legal right to drink liquor, use tobacco, swear, and play cards or billiards for money, and had voluntarily refrained from exercising those rights for a period of years in reliance on his uncle's promise, the requirement of consideration was satisfied.
On the Statute of Frauds point, the court held that although the original agreement was technically within its scope, the uncle's letter of 6 February 1875 and his oral statements amounted to a waiver of that defence. In any event, the Statute of Frauds defence had not been pleaded in the defendant's answer, and so could not be relied upon at trial.
On the Statute of Limitations point, the court held that if the action had been founded solely upon the original 1869 promise it would have been time-barred. However, the uncle's letter of 6 February 1875 was treated as creating a fresh basis for the claim, which was not out of time. As of 31 January 1875, the uncle was indebted to the nephew in the sum of $5,000, and the letter effectively revived and restated that obligation. The judgment was accordingly entered in favour of the plaintiff.
Ratio Decidendi
The ratio is that the surrender or restriction of a legal right by the promisee, at the request of the promisor, constitutes valid consideration for the promisor's promise — irrespective of whether the promisor actually receives any benefit, and irrespective of whether the restriction of that right ultimately proves advantageous to the promisee.
The nephew had undoubted legal rights to drink, smoke, swear, and gamble. He restricted the exercise of those rights within prescribed limits upon the strength of his uncle's promise. The court stated that it was irrelevant whether the uncle actually benefited from the nephew's conduct or whether the nephew's health improved as a result. The sole question was whether the promisee had, at the request of the promisor, done something he was not already legally obliged to do — and he had.
The court also cited supporting precedents. In Shadwell v Shadwell [1860], an uncle's promise to pay his nephew an annual sum upon the nephew's intended marriage was held binding.
The ratio of this case is directly applicable to the consideration doctrine as understood in English law. The essential principle — that detriment to the promisee (in the sense of the restriction of a legal liberty) is sufficient consideration, and benefit to the promisor is not required — mirrors the analysis in Currie v Misa (1875), which employs substantially the same definition of consideration.
Obiter Dicta
Not applicable.