Davis v. General Foods Corporation
1937 U.S. Dist. LEXIS 1403, 21 F. Supp. 445 (1937)
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Rule of Law:
A promise to pay for a disclosed idea is illusory and unenforceable when the promisor retains the sole discretion to determine whether any compensation will be paid. A party who discloses an idea under such an arrangement cannot recover in quasi-contract, as they are deemed to have relied on the promisor's fairness and liberality, not on a supposed contractual obligation.
Facts:
- Beatrice Davis had a new idea and recipe for fruit flavors to be used in making ice cream at home.
- Davis wrote to an officer at General Foods Corporation, offering to reveal her idea.
- In a reply letter, Lewis W. Waters, a Vice President at General Foods, stated the company would only examine the idea with the understanding that its use and any compensation were 'matters resting solely in our discretion.'
- After receiving this letter, Davis disclosed her idea and recipe to General Foods.
- General Foods subsequently began to use Davis's idea and recipe in its business.
- General Foods refused to pay Davis any compensation for the use of her idea and recipe.
Procedural Posture:
- Beatrice Davis sued General Foods Corporation in the U.S. District Court, alleging the company had breached an agreement to pay for her recipe idea.
- Davis provided a bill of particulars that included the correspondence between the parties.
- General Foods filed a motion for judgment on the pleadings, arguing that the complaint and the letters failed to state a legally sufficient cause of action.
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Issue:
Does a communication stating that the use of a disclosed idea and any compensation for it are matters 'resting solely in our discretion' create an enforceable contract or a right to recover in quasi-contract?
Opinions:
Majority - Clancy, District Judge
No. A promise where the promisor retains an unlimited right to decide the nature or extent of their performance is an illusory promise and too indefinite for legal enforcement. Such a communication does not create an enforceable contract, nor does it give rise to a quasi-contractual obligation, because the disclosing party is relying on the recipient's sense of fairness rather than a misreliance on a supposed contract. The defendant's letter explicitly reserved unlimited choice, stating that compensation, 'if any,' was a matter 'solely in our discretion.' This language is unambiguous and creates no binding obligation. Citing Williston on Contracts, the court found the promise illusory. It further held that recovery in quasi-contract (quantum meruit) is inappropriate because the plaintiff did not rely on a supposed contractual obligation but instead 'trusted the fairness and liberality of the defendant,' effectively throwing herself on the company's mercy, as described in the English case Taylor v. Brewer.
Analysis:
This decision reinforces the doctrine of illusory promises, clarifying that when a party explicitly makes payment discretionary, it negates the formation of an enforceable contract. It is significant for drawing a sharp line between a contract with merely vague terms (where quantum meruit might apply) and a communication that precludes any contractual reliance whatsoever. The ruling serves as a stark warning to creators and inventors that they cannot disclose ideas in reliance on a 'promise' of discretionary payment and later seek judicial relief. This case solidifies the principle that reliance on another's 'good faith and sense of fairness' is not a legally protected interest in the context of idea submissions under these terms.
