Baehr v. Penn-O-Tex Oil Corp.
258 Minn. 533, 104 N.W.2d 661 (1960)
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Rule of Law:
A promise does not create an enforceable contract unless it is supported by consideration, which requires a bargained-for exchange. Forbearance from suing constitutes valid consideration only if it was bargained for and given in exchange for the promise, not if it was merely a matter of personal convenience.
Facts:
- Plaintiff leased several gasoline filling stations to a tenant named Kemp.
- Kemp became heavily indebted to the Defendant and, on December 10, 1955, assigned his accounts receivable to the Defendant as security.
- Defendant installed its agent in Kemp's office to manage the business and collect payments.
- When Kemp failed to pay rent, Plaintiff, who was in Florida, called Defendant's agent.
- After an initial denial of responsibility, Defendant's agent made a subsequent phone call to Plaintiff in mid-February 1956, assuring him that the company "would see that I got my rent, and would take care of it."
- Plaintiff returned from Florida in late April or early May 1956 and, after not receiving payment, consulted an attorney.
- On June 2, 1956, Plaintiff formally notified Defendant that he was re-taking possession of the properties due to the unpaid rent.
Procedural Posture:
- Plaintiff sued Defendant in district court (trial court) for unpaid rent.
- The trial court ruled as a matter of law that Defendant was not in possession of the premises and had not taken an assignment of the leases.
- The issue of whether an enforceable contract existed was submitted to the jury, which returned a verdict for Plaintiff.
- The district court granted Defendant's motion for judgment notwithstanding the verdict (JNOV), setting aside the jury's verdict.
- Plaintiff (appellant) appealed the district court's judgment.
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Issue:
Does a creditor's promise to a landlord to pay a debtor's rent constitute an enforceable contract when the landlord's subsequent delay in suing is not shown to have been bargained for as consideration?
Opinions:
Majority - Loevinger, Justice.
No. The defendant's promise to pay the rent does not constitute an enforceable contract because it was not supported by legally sufficient consideration. For a promise to be enforceable, it must be the product of a bargain, meaning one party voluntarily assumes an obligation in exchange for an act or forbearance by the other. While forbearance from suit can serve as consideration, it must be something the parties bargained for. In this case, there is no evidence that the defendant sought the plaintiff's forbearance or that the plaintiff's delay in suing was related to the defendant's promise. The plaintiff's delay appears to have been a matter of personal convenience, as he was in Florida and did not contact a lawyer until he returned months later. Without a bargained-for exchange, the promise was merely a gratuitous assurance and did not create a contract.
Analysis:
This decision reaffirms the classic contract law principle that a promise is unenforceable without consideration, emphasizing that consideration must be the result of a deliberate, bargained-for exchange. It clarifies that forbearance is not valid consideration if it is merely coincidental to the promise rather than induced by it. The ruling heightens the evidentiary burden for plaintiffs in such cases, requiring more than just a promise followed by a period of inaction to prove a contract. Future litigants will need to demonstrate that forbearance was explicitly or implicitly part of a mutual agreement, rather than a unilateral decision.
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