Siegel v. Spear & Co.

New York Court of Appeals · Contracts

ContractsConsiderationBailmentsAgencygratuitous bailmentpromise to insureconsiderationmisfeasance

Facts

Plaintiff bought household furniture from defendant and gave defendant chattel mortgages requiring monthly payments and prohibiting removal without the mortgagee's written consent. When plaintiff planned to leave the city for the summer, he arranged with defendant's creditman, McGrath, to send the furniture to defendant's storehouse, where defendant would keep it free of charge. Plaintiff testified that McGrath also told him not to obtain his own insurance because McGrath would insure the furniture more cheaply and add the charge to the next bill. Plaintiff then sent the furniture to the warehouse, and about a month later it was destroyed by fire; no insurance had been obtained.

Issue

Was there sufficient consideration to support the alleged agreement by defendant's creditman to procure insurance for plaintiff's benefit when the storage itself was gratuitous? Also, could defendant defeat liability by arguing that the creditman lacked authority to make the agreement?

Rule

A mere gratuitous promise to undertake a trust in the future, without compensation, is not obligatory. But when the promisor enters upon the trust and the promise is part of the transaction under which the bailor delivers the property in reliance on that undertaking, the confidence reposed and the undertaking entered upon supply sufficient consideration, and the bailee is bound to perform according to the agreement.

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

In Cleveland, Nora Patel planned to spend six months abroad and asked Harbor Lane Furnishings, a local retailer, to keep her dining set in its back warehouse without charge. Before the movers arrived, the store's credit supervisor told Nora that the store would obtain fire insurance on the set for her and add the premium to her next payment statement; Nora then sent the dining set to the warehouse, but no insurance was ever purchased and a fire destroyed it.

If Nora sues Harbor Lane Furnishings for failure to procure insurance, which is the strongest argument that the promise to insure is enforceable?

Explanation. The majority rule is that a mere gratuitous promise in the future is not binding, but when the promise is linked to the bailment transaction and the bailee enters upon the trust by taking possession, the confidence reposed and the undertaking supply sufficient consideration. Here, the insurance promise preceded delivery and induced Nora to place the goods with the store. (Derived from Siegel v. Spear & Co. (n.d.).)