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.I've always wondered about a situation raised in the comments to the last post. It is common in the sale of a home for the contract to provide that the buyer has a certain period (typically, in my experience, one week to 10 days) to inspect the property and to allow him in that period to cancel the contract (either explicitly or implicitly on the grounds that the inspection reveals conditions that cause him to want to do so). It has always been my understanding that during this period the buyer really has the power to cancel for any reason. The reasoning may be that any house will have defects and thus that any effort to dispute the legitimacy of cancellation on the grounds of a defect would be futile, but, at any event, the effect is to create a unilateral right to cancel.
What would happen if the seller cancelled during this period and argued that there was no binding contract because until the inspection period had passed the buyer had made no binding commitment and thus had made only an illusory promise? It's not a purely academic hypothesis -- imagining the seller receiving a better offer soon after the signing of the contract hardly seems unrealistic. My gut tells me a court would enforce the contract simply because the practice is so common and accepted, but I've always wondered how the result could be justified.
A similar problem is raised by the "attorney approval" clauses that also often included in house contracts. These clauses give the buyer a limited amount of time within which to consult an attorney and the right to back out of the deal within that time for any reason discovered by the attorney. Again, the purpose of the clause is to allow the buyer to discover legal issues he hasn't earlier had the knowledge or opportunity to notice, but the effect typically is to give the buyer a unilateral right to back out. See, e.g., Moran v. Erk (N.Y. 2008)(holding that "where a real estate contract contains an attorney approval contingency providing that the contract is 'subject to' or 'contingent upon' attorney approval within a specified time period and no further limitations on approval appear in the contract's language, an attorney for either party may timely disapprove the contract for any reason or for no stated reason.")
As is often the case when you look for a specific factual situation to research, however, the likelihood of finding a case directly on point is low, even if that factual situation is a common one. Remember, reported opinions are a tiny, tiny fraction of all the legal disputes that ever arise -- the vast majority of legal disputes do not become lawsuits. Over 95% of civil lawsuits settle before trial. Another healthy percentage settle after trial. Very, very few are decided by reported appellate decisions.
But in Devine v. Notter, 312 Wis.2d 521, 753 N.W.2d 557 (Ct. App. 2008), review denied,314 Wis.2d 71, 758 N.W.2d 91, 2008 WI 122 (Wis. 2008), the court did address a situation that was almost exactly the one I've always wondered about. In Notter, a home buyer sued sellers for breach of contract after sellers notified buyer ten days before closing that they would not complete the sale. The trial court granted specific performance for buyer, and the Wisconsin Court of Appeals affirmed, holding that the attorney approval agreement signed by the parties did not render the contract illusory by allowing the parties the unlimited right to walk away from the deal.
The sellers argued, as I would have expected, that the contract of sale was illusory because, since the the attorney approval clause allowed "either party to walk away from the deal, the clause left both parties free to do just as they wished." Id. at 525. The court first observed that there is very little, if any, case law on point, It concluded, however, that the contract was enforceable because the obligation to consult with an attorney and to provide notice of cancellation was enough to supply consideration:
The [sellers] are correct that an unlimited right to cancel can render a contract illusory, at least as to future performance, since a party can always avoid any obligations by simply invoking the cancellation right. See 1 Richard A. Lord, Williston on Contracts § 4.27, at 820 (4th ed.2007). Where, however, the right to cancel is limited even in slight ways, courts have found this enough of a detriment to the cancelling party to save the contract from illusoriness. See, e.g., Klug v. Flambeau Plastics Corp., 62 Wis.2d 141, 152, 214 N.W.2d 281 (1974) (“The provision that plaintiff could not terminate the contract except on written, ninety-day notice was itself a sufficient detriment so as to insure mutuality of obligation.”); 1 WILLISTON ON CONTRACTS § 4.27, at 820-25 (“[I]f the party may only cancel upon dissatisfaction, for good cause shown ... upon the giving of reasonable notice, or upon any other condition not within the promisor's control, the promise is nevertheless enforceable.” (Citations omitted.)). Here, the party wishing to cancel the deal was required, at minimum, to consult with an attorney and provide notice within five days. In our view these obligations, though not onerous, are enough to save the deal from being illusory. See also Chicago Fire Brick Co. v. General Roofing Mfg. Co., 133 Ill.App. 269, 1907 WL 1829, *4 (1907)(four-day right of cancellation did not render contract void for lack mutuality where four days had passed and no cancellation was effected).
We therefore hold that the attorney-approval agreement signed by the [sellers and buyers] did not render their contract illusory. Because no objection was made within the five-day window, the contract remains in force and Devine is entitled to specific performance. Because we so hold, we need not consider whether subsequent actions of the parties waived any claim of illusoriness.Devine, 312 Wis.2d.at 528-529. Of course, Devine is a much easier situation than the one I have long wondered about -- where the seller backs out before the cancellation period expires. Once the cancellation period passes, as it had in Devine, the buyer is committed. As the court in Devine observed, while a case in which the cancellation period had not expired before the seller tried to get out of the contract is a "completely different" one, its resolution is also very much open to question:
The issue of whether the parties to a contract containing an attorney-review clause can be held to anything during the review period is a matter of some dispute. See Alice M. Noble-Allgire, Attorney Approval Clauses in Residential Real Estate Contracts-Is Half a Loaf Better Than None?, 48 U. Kan L..Rev. 339, 358-62 (2000). In any case, this is clearly a completely different question than whether a party can escape the contract long after the review period has expired, as the [sellers] are attempting to do here.Devine, 312 Wis.2d at 526, n. 3.