Smith v. Wheeler
233 Ga. 166, 210 S.E.2d 702 (1974)
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Rule of Law:
A signed option contract that recites consideration, even if the nominal consideration was not actually paid at the time of signing, is not rendered unenforceable. The recital of consideration gives rise to an implied and enforceable promise to pay.
Facts:
- On March 17, 1973, Ira Wheeler and Charles Smith signed a one-year option agreement for Wheeler to sell property to Smith.
- The agreement recited consideration of one dollar, the receipt of which was acknowledged, but the dollar was not actually paid at that time.
- On May 22, 1973, Wheeler's attorney sent a letter to Smith stating that Wheeler considered the option a 'legal nullity' due to the non-payment and intended to sell the property to another party.
- On March 11, 1974, within the one-year option period, Smith sent Wheeler a registered letter to exercise the option, enclosing the one-dollar consideration and scheduling a closing.
- Wheeler refused to receive delivery of Smith's letter.
Procedural Posture:
- Ira Wheeler filed a complaint against Charles Smith in the Superior Court of Rockdale County, a trial court, seeking to have the option agreement declared a nullity.
- Smith filed an answer and a motion to strike.
- Wheeler filed a motion for judgment on the pleadings.
- The trial court denied Smith's motion and granted Wheeler's motion for judgment on the pleadings, ruling the option contract was a nullity.
- Smith, as appellant, appealed the trial court's judgment to the Supreme Court of Georgia.
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Issue:
Does the failure to pay a recited one-dollar consideration at the time of execution render a signed option contract unenforceable, allowing the optionor to unilaterally revoke the offer before the option period expires?
Opinions:
Majority - Jordan, Justice
No. The failure to pay the recited consideration does not render the option contract a nullity. The court adopts the minority view that a recital of consideration in a signed contract gives rise to an implied promise to pay, which can be enforced by the other party. Therefore, the optionor cannot withdraw the offer before the option period expires on the basis that the nominal consideration was not physically paid at the time of signing. The court rejects the argument that the option was a unilateral offer that could be withdrawn prior to the tender of consideration, finding instead that the mutual promises in the signed document formed a binding contract.
Concurring - Ingram, Justice
No. The option contract is enforceable because both parties signed it, which signifies their mutual assent to its terms. The optionee's signature created a binding obligation to pay the recited one-dollar consideration, making the option irrevocable for the specified period. This situation is analogous to deeds for real estate, where the recital of consideration creates an enforceable debt even if the money is not actually paid. Had the optionee not signed the agreement, the optionor might have been able to lawfully withdraw the offer before acceptance or payment.
Analysis:
This decision aligns Georgia with the minority rule on recited consideration, enhancing the stability and predictability of option contracts. It establishes that the recital of consideration in a signed agreement is not a mere formality but creates a legally enforceable promise to pay. This protects the optionee's right to rely on the option period without fear that the optionor can revoke the offer based on the technicality of an unpaid nominal fee. The ruling shifts the focus from the physical exchange of money to the legal significance of mutual, written promises.
