Hamer vs. Sidway
Louisa W. Hamer, Plaintiff-Appellant,
Franklin Sidway, an executor of William E. Story, Defendant-Appellant
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 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.
The defendant, Franklin Sidway, was an executor of Story’s estate. Story promised his nephew, Story II, that he would pay him five thousand dollars (nearly seventy-five thousand dollars in today’s dollars) in case he abstained from drinking alcohol, smoking cigarettes, gambling, and sweating until he becomes twenty-one (Kunz & Chomsky, 2013). In 1875, after his twenty-first birthday, Story II informed Story that he fulfilled his part of the contract and he wanted to get his money. Story II took his promise seriously and even refused taking prescribed medicine with alcohol in it. His uncle answered that he was afraid that Story II could dissipate all his money and set it aside for him at interest. 12 years later, Story died and did not pay more than five thousand dollars to his nephew (Carper, McKinsey, & West, 2008).
Some scholars claimed that Story only used this deal to help his nephew cut out bad habits. Story II assigned his rights for money to his wife who, in her turn, assigned hers to Louisa Hamer. The latter decided to breach a contact when Sidway, an executor, refused to pay money to Story II. He claimed that Story II neither gave consideration nor suffered a detriment. In fact, the promise that he had given to his uncle benefitted his physical and mental health.
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.
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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 the 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.
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.
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Hamer v. Sidway is one of the most noticeable cases in the contract law of the US. Even the judge Parker claimed that this disputed issue provoked the discussions by counsel. However, it was a long and difficult fight for the truth. After the defendant rejected a claim resented by plaintiff, the latter sent an appeal to the highest court in the New York state, the New York Court of Appeals. After studying the evidence, namely the letters that the uncle sent to his nephew claiming that he would set aside his money for interest, the court reversed the previous decision supporting the defendant. The main reason for such a decision is that the refrain from legal rights and freedoms is valid consideration due to which a plaintiff can get his money promised by uncle. Interestingly enough, all the justices filed concurring opinions.