Dougherty v. Salt

New York Court of Appeals
227 N.Y. 200, 125 N.E. 94 (1919)

ELI5:

Rule of Law:

A promise to make a future gift is not legally enforceable, even if it is memorialized in a promissory note that recites consideration, when the evidence demonstrates that no actual consideration was bargained for or given.

Facts:

The plaintiff, an eight-year-old boy named Charley, was visited by his aunt, the defendant's testatrix.
During the visit, the aunt expressed her fondness for her nephew and her desire to 'take care of him.'
At the aunt's request, the boy's guardian filled out a printed promissory note form for $3,000, which contained the words 'value received.'
The aunt signed the note, which was payable at her death or before.
She then handed the note to her nephew, stating, 'You have always done for me, and I have signed this note for you. Now, do not lose it. Some day it will be valuable.'

Procedural Posture:

The plaintiff sued the defendant (the aunt's estate) in a state trial court to enforce the promissory note.
A jury at the trial court returned a verdict in favor of the plaintiff.
The trial judge then set aside the jury's verdict and dismissed the plaintiff's complaint.
The plaintiff, as appellant, appealed to the Appellate Division (an intermediate appellate court).
The Appellate Division reversed the trial court's judgment and reinstated the jury's verdict.
The defendant, as appellant, appealed that decision to the Court of Appeals of New York, the state's highest court.

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Issue:

Is a promissory note that recites 'value received' enforceable when the underlying evidence, provided by the plaintiff's own witness, proves the promise was gratuitous and intended as a future gift?

Opinions:

Majority - Cardozo, J.

No. A promissory note is not enforceable when the evidence shows it was a voluntary and unenforceable promise of an executory gift. The inference of consideration created by the phrase 'value received' can be overcome by evidence to the contrary. In this case, the plaintiff’s own witness, the boy's guardian, provided testimony that irrefutably showed the note was not given as payment for a debt or as part of a bargain, but rather as a 'bounty' or gift stemming from the aunt's affection. The court reasoned that 'Nothing is consideration that is not regarded as such by both parties.' Since the circumstances clearly indicate the promise was a gift and not an exchange, the note lacks the essential element of consideration and is therefore unenforceable.

Analysis:

This case serves as a foundational illustration of the bargain theory of consideration in contract law. It establishes that a mere recital of consideration (like 'value received') is not conclusive and can be rebutted by evidence showing the true, gratuitous nature of a promise. The decision reinforces the principle that promises motivated by affection or a sense of moral obligation, rather than a bargained-for exchange, do not constitute enforceable contracts. It solidifies the distinction between a conditional gift promise, which is unenforceable, and a contract supported by valid consideration.

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