HAMER v. SIDWAY International Business Law 14 May 2014 TANG, Cai Hong (Gwen) Y2012462149

Facts 20 Mar 1869 William E. Story Sr. promised his nephew, William E. Story Jr., $5,000* (‘offer’) if he refrains from drinking, using tobacco, swearing and playing cards or billiards for money until he reaches age 21 (conditions). William E. Story Jr. “assented” (‘acceptance’). William E. Story Jr. was 15 at this point in time. * $5,000 would be worth approximately $128,205 in 2013.

Facts (Cont’d) 31 Jan – 6 Feb 1875 William E. Story Jr. fulfilled the conditions and requested for his entitlement at age 21. Uncle William E. Story Sr. agreed, but stated that he would prefer to wait till William E. Story Jr. is older before handing over the (then) extremely large sum of money. And, interest would accrue on the withheld money. Again, William E. Story Jr. “consented”.

Facts (Cont’d) 1887 Uncle William E. Story Sr. unfortunately passed away before any payment. Hamer, as a representative, sought to claim the payment of $5,000 + interest from Sidway (the executor of Story Sr.’s estate). Sidway rejected the claim on the grounds that the contract was without consideration.

Plaintiff / Defendant Plaintiff: Hamer (representing William E. Story Jr.) Defendant: Sidway (executor of William E. Story Sr.’s estate) Trial Court  Court of Appeals  Supreme Court Verdict: In favor of Hamer. Sidway to pay. Sidway appealed. Appellate Court reversed; i.e. Sidway won. Hamer appealed. Verdict: ? Oct 1889 - 1891

Defendant’s Argument Sidway argued that: There was no consideration to support the contract  invalid. William E. Story Jr. had benefited by abstaining from alcohol and tobacco. It was in his best interests (healthy), independent of his uncle’s promise. Unless his uncle (the promisor) had benefited, the contract was without consideration. Oct 1889 - 1891

Issue The issue is whether William E. Story Jr.’s forbearance from his legal rights* (to fulfill the conditions set out by his uncle) constitutes a consideration to create a valid contract. * Drinking alcohol, smoking and gambling Oct 1889 - 1891

Rule The Exchequer Chamber in 1875 Definition of “Consideration”: “A valuable consideration, in the sense of the law, may consist either in some right, interest, profit, or benefit, accruing to the one party, or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other.” “Consideration means not so much that one party is profiting as the other abandons some legal right in the present, or limits his legal freedom of action in the future, as an inducement for the promise of the first.” Oct 1889 - 1891

Application of the Rule William E. Story Jr. smokes and occasionally drank alcohol and he had a legal right to do so. William E. Story Jr. had forgone his legal rights. This is sufficient consideration. In addition, it does not matter whether the performance of the conditions imposed proved a benefit to the promisor, Uncle William E. Story. Sr. or not. Hence, the contract is valid. Oct 1889 - 1891

Verdict Order appealed from reversed; and the judgment of the trial court was affirmed. Sidway to pay $5,000 + interest. Oct 1889 - 1891

Opinion/Discussion Legal right in modern times? - William E. Story Jr. was 15 at the time of contract - In modern U.S., legal drinking age is 21, legal smoking age is 18/19 (depending on states), legal gambling age is 18 and above (depending on states/activity). - Hence, no longer constitutes a consideration? Capacity of William E. Story Jr. to enter a contract? - In modern U.S., a minor (typically under 18) is considered incapable of entering a contract. - No contractual capacity = Invalid contract. Oct 1889 - 1891

Thank you.