BOARD OF CONTROL OF EASTERN MICHIGAN UNIVERSITY V. BURGESS

45 Mich.App. 183, 206 N.W.2d 256 (p.54)

Facts: ∆, Burgess, signed K extending a 60-day option to purchase his home, with $1 as consideration. Signed a document confirming receipt of the $1, but never received it. π informed the ∆ of intent to purchase, ∆ rejected. π sued for specific performance. Trial judge held that acknowledging receipt of consideration bars ∆ from claiming he didn’t receive it, and held in favor of π.

Issue: Does acknowledgment of the receipt of consideration bar a promisor from claiming he did not receive consideration? If there was no consideration for the option, does the underlying offer to sell the house stand?

Holding: The acknowledgment of receipt of consideration does not estop the defendant from proving he did not receive it. Because plaintiff conceded not tendering consideration, the option contract was unenforceable.

Due to conflicting evidence on the question of when the underlying offer to sell the house was revoked, the appellate court remanded the case to trial court for additional findings of fact.

Legal Reasoning: The lower court failed to contextualize the precedent from which it drew the claim that acknowledging receipt of consideration estopped the defendant from proving otherwise. In that case, the guarantor received substantial benefit, and got “everything she bargained for, save one dollar.” Therefore, the present case is distinguishable, and this defendant was free to prove he received no consideration.

This, however, simply negates the options contract and not necessarily the underlying offer to sell the house. The offeror may revoke his offer at any point until the offer is accepted. In this case, defendant claims he had notified plaintiff within hours of signing the option contract that he wouldn’t sell at the listed price. Plaintiff claims this did not happen until after they had accepted. The appellate court could not do fact-finding, and therefore had to remand the case.

Notes: This is one of the first cases where we’ve been introduced to the concept of nominal consideration. In the name of offering some kind of consideration, a party to a contract might offer a very small promise, such as $1. This may also be viewed as a “pseudo-bargain” and is increasingly frowned upon by modern contract law.

In the case of option contracts– which are collateral contracts designed to make an offer binding for a certain period of time– a relatively small consideration has been considered adequate to secure an option for a very large deal.

Related: RST §25, RST §87, UCC §2-205 (firm offer)