Berryman v. Kmoch - Brief PDF

Preview

Summary

Brief...

Description

Berryman [landowner] v. Kmoch [real estate broker] COURT AND DATE: Supreme Court of Kansas (1977) PROCEDURAL HISTORY: Berryman filed a declaratory judgement action to have an option contract declared null and void . Kmoch answered and counterclaimed. They both filed motions for summary judgement. Trial Court: Summary judgement for the plaintiff holding that the option was granted without consideration, was in effect an offer to sell subject to withdrawal at any time prior to acceptance. Kmoch appealed. ISSUE: Is an option without consideration binding? To establish promissory estoppel as a substitute for consideration, must the evidence show that the promisor reasonably expected the promisee to rely upon the promise, the promisee acted as expected, and a refusal to enforce the promise would sanction a fraud or would result in some other injustice? TRIGGER FACTS: Berryman created an option contract for Kmoch, a real estate broker to sell the land. Berryman then decided he wanted to be released for the agreement and sold the land to another person. Kmoch then tried to exercise the option. RULE: To establish promissory estoppel as a substitute for consideration, the evidence must show that the promisor reasonably expected the promisee to rely upon the promise, the promisee acted as expected, and a refusal to enforce the promise would sanction a fraud or would result in some other injustice.

PLAINTIFF’S MAIN ARGUMENTS:. DEFENDANT’S MAIN ARGUMENTS: Kmoch argues that he did give consideration by spending time and money in an effort to interest other investors. He hired individuals to do a farm report. He also argues that promissory estoppel should have been applied by the trial court as a substitute for consideration. He also argues that to assume Berryman gave him the option without expecting something from him in return is ridiculous and that there was consideration in a promise for a promise.

HOLDING + REASONING: No, without consideration an option is just an offer to sell that may be withdrawn at any time prior to acceptance. An option contract to purchase land must generally be supported by consideration. Without consideration, the option contract is no more than an offer to sell, which may be withdrawn at any time before it is accepted. However, a party can invoke promissory estoppel if: (1) the promisor reasonably expected the promisee to rely upon the promise, (2) the promisee acted as

expected, and (3) a refusal to enforce the promise would sanction a fraud or would result in some other injustice. Under § 42 of the Restatement (Second) of Contracts, "an offeree's power of acceptance is terminated when the offeror takes definite action inconsistent with an intention to enter into the proposed contract and the offeree acquires reliable information to that effect." In this case, the option required $10 consideration, but Kmoch did not pay it. While Kmoch acted in reliance on the option by expending time and effort to interest other investors in the property, those were not actions that Berryman would have reasonably expected Kmoch to take. Thus, Kmoch fails the first requirement necessary to substitute promissory estoppel for consideration. Since there was no consideration or an adequate substitute for consideration, such as promissory estoppel, the option contract operated only as an offer to sell by Berryman. Kmoch did not attempt to accept the offer to sell, by way of attempting to accept the option, until he was aware that Berryman had sold the property to another party. Because Berryman sold the property to another party before Kmoch accepted, Berryman adequately revoked the offer to sell to Kmoch. Accordingly, the trial court’s grant of summary judgment to Berryman was proper and is affirmed. * Acts may create consideration sufficient to make the contract binding if they benefit the optionor or are incurred on his behalf. The promise must impose a legal obligation on the promisor....