Johnson v. Otterbein University

Supreme Court of Ohio · Contracts

ContractsConsiderationCharitable subscriptionsGiftsconsiderationgratuitous promiseexecutory giftcharitable subscription

Facts

Johnson signed a writing promising to pay the university one hundred dollars at a fixed time, directing that the money be applied to the institution's indebtedness and stating that it should be refunded in case of misapplication. The parties treated the writing as a donation to the institution. The university argued that its acceptance created consideration because it agreed to apply the fund as directed and because liabilities were incurred on the faith of the promise. The record, however, did not show when the alleged borrowed funds were incurred, and the pleadings did not allege those liabilities.

Issue

Was Johnson's written promise to donate money to the university enforceable despite the absence of traditional consideration, either because the university's acceptance and directed use of the funds created mutual promises or because the university's charter made such a promise binding without consideration?

Rule

An executory contract to give is without consideration, and a promise to pay money as a gift may be revoked at any time before payment. Acceptance of a writing that directs how the donated fund is to be applied does not, without more, create legal consideration or mutual promises, and statutory charter provisions governing the application of donations do not make gratuitous promises binding unless the statute expressly includes such promises.

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

In Columbus, Nora Patel signed a letter stating, "I promise to pay Lakeview Conservatory $2,000 on December 1," and adding that the money must be used to reduce the school's existing utility debt. The conservatory accepted the letter but gave Nora nothing in return, and Nora withdrew the pledge before December 1.

If the conservatory sues for the $2,000, which is the strongest argument for Nora?

Explanation. The majority rule is that an executory promise to make a gift is unenforceable for lack of consideration and may be revoked before payment. A direction that the funds be applied to a particular purpose, such as paying existing debt, does not create legal consideration or mutual promises merely because the institution accepts the writing.