- 22 Ill.36 N.Y. St. Rptr. 888, 124 N.Y. 538, 27 N.E. 256, 1891 N.Y. LEXIS 1396
- February 24, 1891, Argued
- April 14, 1891, Decided
- Court of Appeals of New York
Hamer v. Sidway: Introduction
Hamer v. Sidway was a noted case decided by the New York Court of Appeals, which is the highest court of the New York state. This issue arose from the contract that an uncle and his nephew created in 1869. William E. Story promised to pay his nephew, William E. Story II, five thousand dollars in case he would forbear from the use of nicotine, alcohol, gambling, and swearing until his 21st birthday. However, when the nephew became twenty-one, an uncle explained that he would set aside the money for interest. In 12 years, Story died without paying him back. The nephew decided to sue his uncle’s executor for refusing giving his money and interest. In general, the denial of any legal right at the request of another party is a sufficient consideration for contractual obligation. Hamer v. Sidway is an important case in the American contract law, which established that voluntarily restraining from one’s legal rights on promises of future benefit made by other parties constitutes functional consideration.
William E. Story Sr. (Uncle) promised to give his Nephew, William E. Story II, (Story) $5,000 if he promised to refrain from “drinking, using tobaccos, swearing, and playing cards or billiards for money” until he turned twenty-one. Once Story turned twenty-one, he wrote his uncle stating that he had refrained from drinking and gambling. In response, Story’s uncle wrote that Story was entitled to the $5,000, but it would remain in a bank account until the uncle felt Story was mature enough and “capable of taking care” of the money. Story assigned Hamer $5,000 to be paid out of the funds due to Story. The money remained in the bank. Before withdrawing the money, Story’s uncle died. Louisa Hamer brought a claim against Sidway, the executor of the uncle’s estate, to recover the 5,000 promised to her by Story.
Hamer, the plaintiff, presented a claim to the executor of Story for five thousand dollars and interest from 1875. The executor, in his turn, rejected this claim. Hamer, the assignee of Story II, sued the executor of Story’s estate, Sidway, in trial court. However, the executor appealed the judgment to the intermediate court of appeal where his decision was upheld. In return, his assignee brought an appeal to the New York Court of Appeals.
Disputed Issue in the Case
The nephew left his money in the care of his uncle who held it for the next 20 years. When the uncle died, the executor of uncle’s estate refused to pay five thousand dollar claim brought by the third party, Louisa Hamer, to whom the promise had been assigned. Sidway claimed that the contract was invalid due to the lack of sufficient consideration to support it (Carper et al., 2008). He also stated that the uncle did not receive this money, and the nephew benefitted by fulfilling his promise. Therefore, the defendant contended that no contract existed.
Given the fact that the lower court upheld Sidway’s decision on this case, the New York Court of Appeals came to a decision to take this case for the further proceedings and resolve the dispute whether a waiver of a legal right at the party’s request is a sufficient consideration for a promise. Another issue was whether the nephew’s forbearance constitutes consideration. However, there were also issues not disputed by the court. For instance, the court did not mention whether it is possible to enforce the agreement in case it was oral and not written. Moreover, an issue whether the family relationship between Story and Story II precluded an intention to form a contract was not discussed.
Holdings and Rule
Judge Parker delivered the Court’s opinion that the refusal of a legal right at the party’s request is a sufficient consideration for a promise (Hamer v. Sidway, 1891). Valuable consideration may consist of right, interest, profit, or benefit accumulating to one party, for whom the other one gives an act of omission, suffers a damage or loss, or undertakes responsibility (Kunz & Chomsky, 2013). To follow the defendant’s position would mean to leave open the controversy whether a consideration was erased by a detriment given by a promisee, Story II. Moreover, the letter in which Story explained that he would set aside his nephew’s money changed their relationship from debtor-creditor to trustee-beneficiary.
Overall, the court concluded that Story II had a legal right to drink liquor and smoke cigarettes occasionally. However, due to the uncle’s will, he proved the strength of his promise and earned five thousand dollars. Thus, he restricted his lawful freedom of action within a certain interval to fulfill the uncle’s wish. Despite the upholding of Sidway’s position by lower court, the New York Court of Appeals reversed and ruled in favor of Hamer, the plaintiff (Hamer v. Sidway, 1891).
The court decided that the uncle made a promise to his nephew. Any damage or forbearance was significant for fulfilling of Story’s will. Even though Story II had legal right to use tobacco, alcohol and even occasionally gamble, the promise he made refrained him from these actions and made him deny his own rights. Moreover, there was no mentioning that Story did not obtain benefit from money he held in trust. The last letter of 6 February proved that the money he set aside accumulated interest (Carper et al., 2008). Therefore, it was legal to give the nephew his money promised by his uncle.
Furthermore, the defendant, Sidway, claimed that the contract did not include consideration that would support it because Story II was not damaged from refraining himself from using alcohol, tobacco, and gambling. He added that the nephew only benefited from his forbearance. However, according to the definition of consideration provided by the Exchequer Chamber, the court would not be interested in whether the thing that formed the consideration benefited any of the parties. The Exchequer Chamber was formed in 1822 as an English intermediate appellate court that heard cases from the following common law courts: the Court of Exchequer, the Court of Common Pleas, and the Court of King’s Bench (Kunz & Chomsky, 2013). The appeals could be taken from this court of appeals to the House of Lords.
Moreover, most of the contracts’ definitions note that consideration is abandoning legal rights and freedoms. Story II gave up his freedom of using alcohol and tobacco for a certain time (Kunz & Chomsky, 2013). If there would be no letters, in which Story II and Story discuss the contract, it would be barred by the Statue of Limitations. Therefore, they changed their relationship from debtor-creditor to the trust one. The uncle created a valid trust through the correspondence, and Story II, in his turn, agreed to it.
Importance of this Case
Although Hamer v. Sidway was decided more than a hundred years ago, the principles formulated by the court remain relevant nowadays and may be applied to the current contracts. This significant case in the contract law of the United States of America established that an act of omission of legal rights and freedoms on promise of future privileges made by other parties composes valid consideration. Moreover, Hamer v. Sidway assists in the formation of contracts, especially those formed online. However, its validity and binding requires legal consideration.
Furthermore, Hamer v. Sidway is incorporated into the freshmen contract courses at most of law schools of the United States. They view the contracts through the theory of consideration, a benefit-damage one, the example of which may be the definition of the Exchequer Chamber. However, the beginning of the 20th century has replaced this theory by the bargain one. According to it, the promisee offers the consideration, which stimulates another party to make a promise. After the induction of promise, the latter provides the consideration. Thus, the court decided Hamer v. Sidway using the new theory together with the legal one. However, the contemporary courts may view the similar cases in a different way.
Conclusion: Subjective Analysis
In Hamer v. Sidway, Story should have provided money to his nephew after he fulfilled his promise. Initially, he should not have withheld money from Story II. The agreement stated that the nephew should have forborne from his unhealthy lifestyle only until he reached twenty-one. Thus, if Story could have immediately provided money as it was stated in the promise, there would be no lawsuits and appeals.
Overall, Hamer v. Sidway is an important case for both class members and businesses because it discusses the contract law. People should remember that all the contracts are promises, and there is a need of consideration to make them enforceable. As a part of legal education, it is important to learn what promises are legally enforceable and develop intuitions about them. Moreover, this is an intermediate case because the promise was neither formal nor casual. People trained in law should learn about the promises in cases that fall between these two.
Hamer v. Sidway established that the forbearance of a legal right constitutes adequate consideration, valid to form an enforceable contract. Whether or not the promise made confers a benefit on the other party is not a legal requirement for valid consideration.