Batsakis v. Demotsis

Texas Court of Civil Appeals · 1949 · Contracts

Contractsconsiderationadequacygross inadequacyconsiderationadequacy of considerationgross inadequacywant of consideration

Facts

In Greece during World War II, defendant signed a written instrument stating that she had received $2,000 in United States money from plaintiff and promising to repay that amount in American dollars with 8% interest. Defendant testified that plaintiff actually gave her 500,000 drachmas and that he told her he would give her that amount if she signed a promise to pay $2,000 in American money. Defendant pleaded that the consideration was wanting or had failed to the extent of $1,975 because the 500,000 drachmas were worth only $25 in United States dollars at the time. The trial court awarded plaintiff only $750 principal, and plaintiff appealed.

Issue

Whether defendant's allegations and proof that the 500,000 drachmas were worth far less than $2,000 established want or failure of consideration so as to reduce or defeat enforcement of the written promise. Also, whether plaintiff was entitled to judgment for the full $2,000 stated in the instrument with the contractual interest.

Rule

A plea of want of consideration asserts that an instrument never became a valid obligation in the first place, and it fails where the promisor received the consideration agreed upon. Mere inadequacy of consideration will not void a contract. A plea of failure of consideration also fails where the defendant received exactly what was contracted for and the plaintiff breached no agreement.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Miami, Lena Ortiz urgently needed local cash before leaving for Argentina. Victor Sayeed agreed to give her 300,000 Argentine pesos if she signed a note promising to pay him $12,000 in U.S. dollars six months later, and he delivered the pesos exactly as promised. Lena later proves the pesos were worth only about $180 in U.S. currency on the day of the deal.

If Victor sues on the note, which is the strongest answer under the governing rule?

Explanation. The controlling rule is that mere inadequacy of consideration does not invalidate the obligation. If the promisor received the thing bargained for and that thing had some value, there is consideration even if the exchange is extremely unequal. Because Victor delivered exactly the pesos promised, neither want nor failure of consideration is shown.