Legal Glossary
Typically discussed in the context of the law of charitable subscriptions (that is charitable giving, and gifts), the case of Allegheny College v National Chautauqua County Bank of Jamestown is a good test case for the doctrine of promissary estoppel. Why? The reason mainly is that there is a clearly articulated assent and dissent and given that Herr Professor Supreme Justice Cardozo wrote the opinion and there would be no trivial objection to his highness, both assent and dissent is in fact quite instructive.
The facts are familiar to most who have tangled with estoppel– which by the way for those unfamiliar with the term is applied in cases where there is no obvious consideration for a bargain to nevertheless render a contract good and enforceable. The facts are quite plain. The plaintiff, Allegheny College in the course of drumming up money for its school extracted a promise from a Mrs. Johnston for $5,000 payable upon her death. The specific wording of this promise matters, but the gist of it is that she, Mrs Johnston, expected that this donation would be used to fund young ministers and the like and that they woulds be provided with a scholarship that would be called the Johnston fund, or something like that. Well old Mrs. Johnston gave $1000 toward the promise then changed her mind about the Christian mission or whatever and reneged on the rest. Allegheny brought suit and despite the fact that this was a gift, won on the doctrine of promissory estoppel.
This is remarkable because as we know from many many cases, a gift is typically given without consideration, meaning without thought for an exchange or any demand on the person who receives a gift– that’s why its called a gift. So if the promissor changes her mind– though the language be written and recorded, the promissee has no recourse to the law. A well known early case where this doctrine was espoused is actually another university case, and appropriately another Johnston, or actually Johnson (Why dont the Johnstons and Johnsons just open up their own university?) This case is known as Johnson v Otterbein University (Not to be confused with Eisbein University known for its Schweinehaxe). Anyway, Mr Johnson signed a paper promising to pay to the trustees of Otterbein $100 to the university after five years from the date of the promise, sometime in 1869. Subsequently he refused to pay and said that there was no deal because he received no consideration, that it was a gift and not a contract etc. The court agreed. Otterbein was out of luck. The whole deal was no-go. However the court in its dicta ion the Otterbein case said something of interest that would be applicable to the Johnston v Allegheny case 60 years later, “the liabilities incurred by the institution on the faith of the said promise are not included in the pleadings.” In other words, the lawyer for Otterbein did not say that the trustees or the university had done something to rely on the funds from Mr Johnson and that because of this reliance they were injured. Had they made this case, it is implied there may have been a discussion of promissory estoppel. taht even though there was no consideration given, almost by the back door there was a consideration in the form of an injury to the promissee.
So when it came Allegheny’s turn, they did not lean solely on the contract as did Otterbein, but instead got into the details, which in fact won them a judgment from Cardozo. What was the specific reasoning? Basically Cardozo says that this was not a gift but instead a “bilateral agreement.” Two main reasons for this. The first is that Johnston wanted something in exchange for the money. She wanted a scholarship named after herself… The Mary Yates Johnston Memorial Fund– a craving for posterity according to Cardozo. “The longing for posthumous remembrance is not so weak an emotion as to justify us in saying that its gratification is a negligible good.” The second reason is that she paid $1000 toward the bill and thus generated a situation for the university and the court because this posthumous notoriety would not be 1/5 possible. “the moment the college accepted the $1000 as a payment there was an assumption of duty as to whatever acts were customary”… For the court it became either either pay back the $1000, or give the $4000 more to make $5,000. “Obligation is correlative and mutual.”
So what about the promissory estoppel? The promissory estoppel results from the duty to apply the funds to a specific purpose not mandated under the college charter, the assumption “induced by the belief” that there would be further payments to the fund following the death of the promissor. Notice the word “induce” comes up in the restatement
Here’s the Restatement (section 90 of Laws of Contracts) states:
A promise which the promisor should reasonably expect to induice action or forebearance of a definite and substantial character on the part of the promisee and which does induce such an action or forebearance is binding if injustice can be avoided only by enforcement of the promise.
Now to the dissent:
1) The money offered was termed a “gift” so it was a gift.
2) the fact that the expression “in loving memory of Mary Yates Johnston” maybe grandiose but does not constitute an offer which it would have to do for this to be a bilateral contract
3) the promissor writes “in consideration of my interest in Christian education–” where is the quid pro quo?
4) if there was any intended offer then it was for a unilateral contract
5) no offer, no acceptance of an offer, no contract. donor stipulated for acts not promises
6) the holdinmg suggests that consideration was given to convert the offer into a promise.
in other words, this is not a case of promissory estoppel its merely finding consideration where there is none.
Terms Used: cardozo, charitable giving, dissent, eisbein, estoppel, Johnston and Johnson,