Strong v.

Sheffield
Strong v. Sheffield
(Creditor) v. (Guarantor) 144 N.Y. 392, 39 N.E. 330 (1895)
ILLUSORY PROMISES DO NOT CREATE BINDING CONTRACTS
INSTANT FACTS Strong (P) attempts to obtain payment for a note from the guarantor,
although Strong (P) convinced the guarantor to sign the note merely by promising not to
demand payment until he felt like it.
BLACK LETTER RULE In order to be legally binding, a promise must be supported by
consideration and cannot be illusory.
PROCEDURAL BASIS Appeal of reversal of judgment for payment of promissory note.
FACTS Benjamin Strong (P) sold his business on credit to Louisa Sheffields (D)
husband, Gerardus. Strong (P) sought a promissory note from Gerardus for this
antecedent debt, and Strong (P) wanted Louisa (D), his niece, to endorse the note as
security for the debt. Strong (P) promised that he would not put the note away, but rather
that he would keep it until such time as he would demand payment. Strong (P) did not
promise to forbear on collection for any specific period of time. Based on this promise
from Strong (P), Louisa (D) endorsed the note. After the note was executed, Strong (P)
waited for two years before demanding payment. Louisa (D) refused to satisfy her
undertaking, and Strong (P) sued for payment on the note. The trial court granted a
judgment for Strong (P), and the New York Supreme Court reversed. Strong (P)
appeals.
ISSUE Does a promise not to take some action for an unspecified period of time
constitute sufficient consideration to create a contract?
DECISION AND RATIONALE (Andrews, J.) No. A promise not to take some action
for an unspecified period of time does not constitute sufficient consideration to
create a contract. Gerardus debt, secured by the promissory note, was already past
due. The only possible consideration for Louisas (D) endorsement was that Strong (P)
promised to forbear the collection of the debt, and that this promise was followed by a
forbearance of two years. However, at the time of making the promise, Strong (P) did
not promise to forbear for any specific period of time. The note did not extend the period

for paying the debt, as the note was payable on demand at any time. Gerardus and
Louisa (D) may have hoped that Strong (P) would forbear, and indeed he did forbear for
two years. However, there was no agreement to forbear. Consideration must be tested
by the agreement itself, not by what actually occurred under the agreement. This was a
case of mutual promises, with no consideration exchanged for Louisas (D)
endorsement. Accordingly, the endorsement on the note did not create a valid contract.
Affirmed.
ANALYSIS: Although a contract can be formed with a promise exchanged for a promise,
both promises must be valid. This case provides an example of an illusory promise.
Strong (P) made no promise of any substance to the Sheffields (P), because he could
demand payment on the note at any time. Likewise, Strongs (P) promise to forbear
was not sufficient consideration for Louisas (D) endorsement, since Strong (P) did not
agree to any specific period of forbearance. If Louisa (D) had bargained for a two-year
forbearance, and Strong (P) had agreed in order to get Louisa (D) to endorse the note,
then a valid contract most likely would have been created. But promises must have
some substance; they cannot be illusory.

2 Promise; Promisor; Promisee; Beneficiary

(1) A promise is a manifestation of intention to act or refrain from acting in a
specified way, so made as to justify a promisee in understanding that a
commitment has been made.
Comment:
a. Acts and resulting relations. "Promise" as used in the Restatement of this Subject
denotes the act of the promisor. If by virtue of other operative facts there is a legal duty
to perform, the promise is a contract; but the word "promise" is not limited to acts having
legal effect. Like "contract," however, the word "promise" is commonly and quite properly
also used to refer to the complex of human relations which results from the promisor's
words or acts of assurance, including the justified expectations of the promisee and any
moral or legal duty which arises to make good the assurance by performance. The
performance may be specified either in terms describing the action of the promisor or in
terms of the result which that action or inaction is to bring about.

Illustrations:
1. A, the builder of a house, or the inventor of the material used in part of its
construction, says to B, the owner of the house, "I warrant that this house will never burn
down." This includes a promise to pay for harm if the house should burn down.
2. A, by a charter-party, undertakes that the "good ship Dove," having sailed from
Marseilles a week ago for New York, shall take on a cargo for B on her arrival in New
York. The statement of the quality of the ship and the statement of her time of sailing
from Marseilles include promises to pay for harm if the statement is untrue.
e. Illusory promises; mere statements of intention. Words of promise which by their
terms make performance entirely optional with the "promisor" whatever may happen, or
whatever course of conduct in other respects he may pursue, do not constitute a
promise. Although such words are often referred to as forming an illusory promise, they
do not fall within the present definition of promise. They may not even manifest any
intention on the part of the promisor. Even if a present intention is manifested, the
reservation of an option to change that intention means that there can be no promisee
who is justified in an expectation of performance.
On the other hand, a promise may be made even though no duty of performance can
arise unless some event occurs (see 224, 225(1)). Such a conditional promise is no
less a promise because there is small likelihood that any duty of performance will arise,
as in the case of a promise to insure against fire a thoroughly fireproof building. There
may be a promise in such a case even though the duty to perform depends on a state of
mind of the promisor other than his own unfettered wish (see 228), or on an event
within the promisor's control.

32 Invitation of Promise or Performance

In case of doubt an offer is interpreted as inviting the offeree to accept either by
promising to perform what the offer requests or by rendering the performance, as the
offeree chooses.
COMMENTS & ILLUSTRATIONS
Comment:
a. Promise or performance. In the ordinary commercial bargain a party expects to be
bound only if the other party either renders the return performance or binds himself to
do so either by express words or by part performance or other conduct. Unless the

language or the circumstances indicate that one party is to have an option,

therefore, the usual offer invites an acceptance which either amounts to
performance or constitutes a promise. The act of acceptance may be merely
symbolic of assent and promise, or it may also be part or all of the performance
bargained for. See 2, 4, 18, 19. In either case notification of the offeror may be
necessary. See 54, 56.
The rule of this Section is a particular application of the rule stated in 30(2). The
offeror is often indifferent as to whether acceptance takes the form of words of promise
or acts of performance, and his words literally referring to one are often intended and
understood to refer to either. Where performance takes time, however, the begining of
performance may constitute a promise to complete it. See 62.
Illustrations:
1. A writes B, "If you will mow my lawn next week, I will pay you $ 10." B can accept A's
offer either by promptly promising to mow the lawn or by mowing it as requested.
2. A says to B: "If you finish that table you are making and deliver it to my house today, I
will give you $ 100 for it." B replies, "I'll do it." There is a contract. B could also accept by
delivering the table as requested.
b. Offer limited to acceptance by performance only. Language or circumstances
sometimes make it clear that the offeree is not to bind himself in advance of
performance. His promise may be worthless to the offeror, or the circumstances may
make it unreasonable for the offeror to expect a firm commitment from the offeree. In
such cases, the offer does not invite a promissory acceptance, and a promise is
ineffective as an acceptance. Examples are found in offers of reward or of prizes in a
contest, made to a large number of people but to be accepted by only one. See 29.
Non-commercial arrangements among relatives and friends (see Comment a to
19, Comment c to 21) and offers which leave important terms to be fixed by the
offeree in the course of performance (see 33, 34) provide other examples.
It is a separate question whether the offeree undertakes any responsibility to complete
performance once begun, or whether he takes any responsibility for the quality of the
performance when completed.
Illustrations:
3. A publishes the following offer: "I will pay $ 50 for the return of my diamond bracelet
lost yesterday on State Street." B sees this advertisement and at once sends a letter to
A, saying "I accept your offer and will search for this bracelet." There is no acceptance.

4. A writes to B, his nephew aged 16, that if B will refrain from drinking, using tobacco,
swearing, and playing cards or billiards for money until he becomes 21 years of age, A
will pay B $ 5,000. B makes a written reply promising so to refrain. There is probably no
contract. But if B begins to refrain, A may be bound by an option contract under 45;
and if B refrains until he becomes 21, A is bound to pay him $ 5,000.
c. Shipment of goods. An order or other offer to buy goods for prompt or current
shipment normally invites acceptance either by a prompt promise to ship or by prompt or
current shipment. Uniform Commercial Code 2-206(1)(b). If non-conforming goods are
shipped, the shipment may be an acceptance and at the same time a breach. But there
is no acceptance if the offeror has reason to know that none is intended, as where the
offeree promptly notifies him that non-conforming goods are being shipped and are
offered only as an accommodation to him.
Illustrations:
5. A mails a written order to B, offering to buy specified machinery on specified terms.
The order provides, "Ship at once." B immediately mails a letter to A, saying "I accept
your offer and will ship at once." This is a sufficient acceptance to form a contract. See
Uniform Commercial Code 2-206(1).
6. In Illustration 5, instead of mailing a letter of acceptance, B immediately ships the
machinery as requested. This is a sufficient acceptance to form a contract. If the
machinery is defective, the shipment is both an acceptance forming a contract and a
breach of that contract, unless B promptly notifies A that the shipment is offered only as
an accommodation to A. See Uniform Commercial Code 2-206(1).

Restat 2d of Contracts, 30
(2) Unless otherwise indicated by the language or the circumstances, an offer invites
acceptance in any manner and by any medium reasonable in the circumstances.
77 Illusory and Alternative Promises
A promise or apparent promise is not consideration if by its terms the promisor or
purported promisor reserves a choice of alternative performances unless
(a) each of the alternative performances would have been consideration if it alone
had been bargained for;
Comment:

a. Illusory promises. Words of promise which by their terms make performance entirely
optional with the "promisor" do not constitute a promise. See Comment e to 2;
compare 76. In such cases there might theoretically be a bargain to pay for the
utterance of the words, but in practice it is performance which is bargained for. Where
the apparent assurance of performance is illusory, it is not consideration for a return
promise. A different rule applies, however, where performance is optional, not by the
terms of the agreement, but by virtue of a rule of law. See 5 (defining "term"), 78.
Illustrations:
1. A offers to deliver to B at $ 2 a bushel as many bushels of wheat, not exceeding
5,000, as B may choose to order within the next 30 days. B accepts, agreeing to buy at
that price as much as he shall order from A within that time. B's acceptance involves no
promise by him, and is not consideration. Compare 31, 34.
2. A promises B to act as B's agent for three years from a future date on certain terms;
B agrees that A may so act, but reserves the power to terminate the agreement at any
time. B's agreement is not consideration, since it involves no promise by him.
b. Alternative promises. A promise in the alternative may be made because each of the
alternative performances is the object of desire to the promisee. Or the promisee may
desire one performance only, but the promisor may reserve an alternative which he may
deem advantageous. In either type of case the promise is consideration if it cannot be
kept without some action or forbearance which would be consideration if it alone were
bargained for. But if the promisor has an unfettered choice of alternatives, and one
alternative would not have been consideration if separately bargained for, the promise in
the alternative is not consideration.
U.C.C. 2-306
(2) A lawful agreement by either the seller or the buyer for exclusive dealing in the kind
of goods concerned imposes unless otherwise agreed an obligation by the seller to use
best efforts to supply the goods and by the buyer to use best efforts to promote their
sale.
5. Subsection (2), on exclusive dealing, makes explicit the commercial rule embodied in
this Act under which the parties to such contracts are held to have impliedly, even when
not expressly, bound themselves to use reasonable diligence as well as good faith in
their performance of the contract. Under such contracts the exclusive agent is required,
although no express commitment has been made, to use reasonable effort and due
diligence in the expansion of the market or the promotion of the product, as the case

may be. The principal is expected under such a contract to refrain from supplying any
other dealer or agent within the exclusive territory. An exclusive dealing agreement
brings into play all of the good faith aspects of the output and requirement problems of
subsection (1). It also raises questions of insecurity and right to adequate assurance
under this Article.

U.C.C. 2-309
(3) Termination of a contract by one party except on the happening of an agreed event
requires that reasonable notification be received by the other party and an agreement
dispensing with notification is invalid if its operation would be unconscionable.
8. Subsection (3) recognizes that the application of principles of good faith and sound
commercial practice normally call for such notification of the termination of a going
contract relationship as will give the other party reasonable time to seek a substitute
arrangement. An agreement dispensing with notification or limiting the time for the
seeking of a substitute arrangement is, of course, valid under this subsection unless the
results of putting it into operation would be the creation of an unconscionable state of
affairs.
9. Justifiable cancellation for breach is a remedy for breach and is not the kind of
termination covered by the present subsection.
10. The requirement of notification is dispensed with where the contract provides for
termination on the happening of an "agreed event." "Event" is a term chosen here to
contrast with "option" or the like.