COMMON LAW- ILLUSORY PROMISES

Question 1

Illusory Promises

Answer 1

i. A promise is illusory if it does not restrict the promisor’s future
right of action;
ii. A promise is illusory if it gives the promisor unfettered
discretion to perform or not perform the promise; or
iii. A promise is illusory if it does not restrict the promisor’s
autonomy (independence)
iv. Courts will enforce
v. To constitute consideration, a performance, return promise, or
forbearance must be bargained for.
1. Something is deemed “bargained for” if it is sought by
the promisor in exchange for his/her promise, and give by the promise for that promise.

Question 2

Two other concepts that influence the courts’ determination of whether particular promises are illusory:

Answer 2

a. Good faith:
i. Courts»»>every contract includes an
implied duty of good faith, and courts have used this to enforce what otherwise would appear to be illusory promises.

b. Reasonableness or reasonable efforts
i. Courts»»>contracting parties have a duty
of reasonableness and have used these implied obligations to enforce promises that might otherwise appear to be illusory.

Question 3

Elements of Illusory Promise

Answer 3

a. The language of the promise;
b. The promise leaves the promisor entirely free to perform or not at the
promisor’s discretion (i.e. without liability for breach of contract)
“Unfettered discretion
c. The promise cannot be interpreted to restrict the promisor’s
discretion, by implying duties of good faith, reasonable efforts or reasonableness.
i. Test: If you are unable to prove a breach of contract due to the language of the contract, the promise will be deemed illusory.

Question 4

HARRIS V BLOCKBUSTER CASE LAW

Answer 4

RULE: If nothing in a contract prevents the promisor from unilaterally changing parts of the contract, it is illusory. /The ability to change the rules at any time makes a contract illusory.

Question 5

OMNI V SEATTLE 1ST BANK CASE LAW

Answer 5

RULE:
1. A contractor can, by the use of clear and appropriate
words, make his own duty expressly conditional upon his own personal satisfaction with the quality of the performance for which he has bargained and in return for which his promise is given. Such a limitation is not so great as to make his own promise illusory.

2. The promisor’s duty to exercise his judgment in good faith is an adequate consideration to support the contract.
3. Such provisions are valid and do not render the promisor’s promise illusory if, where the option can be exercised upon the occurrence of specified conditions.

Question 6

WOOD V LUCY CASE LAW

Answer 6

RULE: Mutuality or a return promise may be implied from the circumstances surrounding the contract and the nature of the whole writing.