Hamer v Sidway (1891): An Important Contract Law Example

In this contract law example, we will be discussing the case of Hamer v Sidway (1891), which reached the Court of Appeals of New York 124 N.Y. 538, 27 N.E. 256. A significant case that is still taught across law schools today, Hamer v Sidway answers the question ‘Does abstaining from your legal rights form consideration for a contract?’.

Contracts are all about consideration, where one party gives something to another party in exchange for a promise. In other words, both parties involved have to benefit in some way in order to have consideration. As we’ll share in this article, it’s not so clear cut whether this is the case in Hamer v Sidway.

Facts of the Case

Louisa Hamer (plaintiff) was assigned multiple payments of $5,000 along with interest by William E. Story II (Story). Story made these assignments upon reliance that he would receive money from his uncle, William E. Story, Sr., with whom he had been promised $5,000 if he refrained from drinking alcohol, using tobacco, swearing, and gambling until he reached 21 years of age.

Story agreed, and diligently upheld his promise by abstaining from these activities until he reached his 21st birthday. Upon fulfilling his commitment, he informed his uncle of his adherence to the agreement. In response, the uncle confirmed that he was entitled to the $5,000, but that the money would be deposited at a bank until the uncle believed that Story was capable of handling the money himself. Story agreed to this.

Unfortunately, Story’s uncle died before he could fulfill the payment. When Story tried to collect the money, the executor of the uncle’s estate, Franklin Sidway (defendant), refused to pay. Subsequently, Hamer sued Sidway in New York state court to enforce the promise that was made to Story.

Rule of Law

One of the reasons why this case is so important is that it highlights a consideration that differs from the norm of A gaining something from B and vice versa. This is expressed through the rule of law which states that voluntarily refraining from exercising one’s legal rights, based on promises of future benefit made by other parties, can be considered valid consideration.

Argument From Plaintiff

The following are the arguments from the plaintiff (Louisa Hamer):

1. William E. Story II (Story) did offer something in return for his uncle’s promise.
2. The loss incurred by the nephew in this case was his abstention from engaging in activities detrimental to his health.

Argument From Defendant

The following are the arguments from the defendant (Franklin Sidway):

1. The contract was invalid since it was made without consideration.
2. The promisor must benefit in order for a contract to have consideration.
3. Refraining from the use of liquor, tobacco, and other harmful activities benefited the promisee (nephew) instead of the promisor (uncle).

Issue

The issue on the table: is abstaining from exercising one’s legal rights, like not drinking or smoking, enough to be considered adequate consideration?

The Procedural History of the Case

As we know from the facts, Hamer sued Franklin Sidway to enforce the promise made to Story. While the trial court affirmed the promise’s validity, the appellate court reversed this decision. Consequently, Hamer appealed to the New York Court of Appeals regarding this ruling.

Holding

The New York Court of Appeals ruled in favor of Story (the nephew), stating that his abstinence from lawful activities at the uncle’s request constituted valid consideration and formed a binding contract. The court’s holding was that a valid consideration can exist in a contract when someone refrains from doing something that they have a legal right to do.

Court’s Reasoning:

In the case of Hamer v Sidway, the court’s reasoning was based on the principle of valid consideration in a contract. Emphasizing that consideration involves a bargained-for exchange where each party gives or promises something of value to the other, the court reasoned that Story had refrained from partaking in the activities requested by his uncle in exchange for the promise of a sum of money upon reaching a certain age. The nephew’s act of refraining from these lawful activities at the uncle’s behest was thus seen as providing a benefit to the uncle and creating a detriment to the nephew.

In this case, the nephew’s abstinence from his lawful rights constituted sufficient consideration, leading the court to uphold the nephew’s right to receive the promised amount from his uncle’s estate.

As expressed in the similar case of Talbott v. Stemmens:

The abandonment of [the use of tobacco] use may have saved him money or contributed to his health, nevertheless, the surrender of that right caused the promise, and having the right to contract with reference to the subject-matter, the abandonment of the use was a sufficient consideration to uphold the promise.

Hamer v Sidway

Lessons From Hamer v Sidway

While Hamer v Sidway is similar to contract law example Ricketts v. Scothorn (1898) in that it deals with a promise made between family members, it is a fundamentally different case. Where Ricketts v. Scothorn deals with the concept of Promissory Estoppel and whether reliance on a promise makes a contract enforceable, Hamer v Sidway addresses whether making a promise to abstain from one’s legal rights constitutes sufficient consideration.

As we’ve established through this case, the law recognizes abstinence from a legal right as valid consideration. However, linking back to the activities abstained in this case, it’s important to note that, at present, the law prohibits 15 year olds from engaging in activities such as drinking, purchasing tobacco products, and gambling. A similar arrangement between an uncle and a teenager today would therefore not be deemed as valid consideration.

Nonetheless, the principle established in this case that forbearance from a legal right can constitute valid consideration in a contract continues to be cited and applied in various other contract law examples, discussions and cases today.

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Disclaimer: The content presented in this article about Hamer v Sidway is intended for informational purposes only and represents study notes, not legal advice. While efforts have been made to ensure accuracy, the information provided may not be entirely comprehensive or up-to-date. Readers are therefore encouraged to seek professional legal counsel or verification for any specific legal issues or concerns they may have. The author also does not guarantee the accuracy, completeness, or reliability of the information contained herein, and thus shall not be held responsible for any consequences resulting from its use.