Smith v. Wheeler

Supreme Court of Georgia · 1974 · Contracts

ContractsOption contractsConsiderationoption contractconsiderationrecited considerationfailure of considerationimplied promise to pay

Facts

On March 17, 1973, Wheeler and Smith signed a one-year option agreement giving Smith the right to buy certain Rockdale County property. The agreement recited consideration of one dollar as having been paid, but it was undisputed that the dollar was not paid when the agreement was executed. On May 22, 1973, Wheeler notified Smith that he considered the option a legal nullity because the dollar had not been paid and that Smith had no rights in the property. On March 11, 1974, Smith mailed notice that he was prepared to exercise the option, enclosed the one dollar, and stated he was ready to pay $30,000 cash at a scheduled closing, but Wheeler refused delivery and later sued to have the option declared void.

Issue

Whether a signed option agreement that recites one dollar consideration is a nullity and unenforceable when the one dollar was not actually paid before the optionor attempted to revoke, such that judgment on the pleadings for the optionor was proper.

Rule

Under Georgia law, the recital of one dollar consideration in a signed agreement gives rise to an implied promise to pay that consideration, enforceable by the other party. Therefore, even if the recited dollar was not actually paid, the option contract is not void on that ground alone.

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

In Macon, Georgia, Dana Holloway signed a written nine-month option giving Leo Mercer the right to purchase her vacant lot. The document stated that it was made "in consideration of one dollar, receipt acknowledged," but Leo did not actually hand over the dollar when both parties signed. Three weeks later, Dana sent Leo a letter stating that the option was void because the dollar had never been paid.

If Leo sues to enforce the option, which is the strongest argument against Dana's position?

Explanation. The controlling rule is that, under the majority opinion, a signed agreement reciting one dollar consideration is not void merely because the dollar was not actually paid at execution. The recital gives rise to an implied promise to pay that the other party may enforce. Thus Dana cannot invalidate the option solely on the ground that the recited dollar was unpaid. (Derived from Smith v. Wheeler (n.d.).)