gratuitous promise

The gratuitous promise, or unilateral obligation, is a feature unique to Scots law. It arises from the lack of a compensation requirement for Scottish contracts.

Basically, a gratuitous promise is a one-sided contract, where one of the two parties (the promisor) gets nothing from the other party (the beneficiary). The commonest example in case law is that of the wealthy little old lady who writes a letter to the vicar promissing to contribute to the local church's new roof. That is a gratuitous promise, and if she dies before the money is paid, the vicar can make a claim on her estate.

Obviously, gratuitous promises can be very risky things. Scottish law is very specific about what constitutes such a contract and how it works.

1. A gratuitous promise is irrevocable if not rejected outright by the beneficiary.
2. The promisor must intend to be legally bound when making the promise.
   Statements of hope or expectation do not count as gratuitous promises.
3. The promisor must communicate the promise directly to the beneficiary.
   A potential beneficiary who hears about a promise by accident, or from a third party, cannot hold the promisor liable. The promisor may use any medium to communicate the promise, including advertisement in the press.
4. A gratuitous promise can be conditional
   For instance, the promise of reward for the return of lost property is a conditional gratuitous promise (since you own the lost property, its return is not compensation for the reward.)
5. A gratuitous promise must be documented in writing
   Until the Requirements of Writing (Scotland) Act of 1995, gratuitous promises had to be proven by writ or oath. However, this strong and somewhat obscure provision was eliminated as part of a sweeping set of modernisations in Scots contract law.

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Source: Scottish Business Law, Second Edition, by Moira McMillan and Sally McFarlane, 1996.

I am not a lawyer, and nothing in this write-up constitutes legal advice. The textbook I used is out of date, and the law changes all the time. If you need legal advice, contact a solicitor; the best this write-up can do is help you communicate with any legal advisor you hire.

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I am not convinced that the American concept of promissory estoppel is the equivalent of a gratuitous promise. It seems to a way of patching up a defective contract, bending the law to let justice through. Drennam v Star Paving is certainly a case where the ordinary law of contract seems to have been suspended.

This is different from Scots law, where the gratuitous promise is simply another form of contract, truly interesting only to systems where compensation is required.

The term "gratuitous promise" may be unique to Scots law, but the concept of a unilateral contract is recognized throughout the Anglo-American jurisprudence

In the United States, the doctrine of “promissory estoppel” overcomes defenses which would ordinarily prevent a gratuitous promise from being considered a binding unilateral contract. Estoppel, in general, is an equitable doctrine under which a party is not allowed to assert a claim or defense because it would be unfair. (Picture the judge stuffing a cork in the opposing party’s mouth.) In the case of promissory estoppel, the party trying to weasel out of an agreement is “estopped” from asserting any of the usual defenses to a contract: no agreement in writing, lack of consideration, that sort of thing.

The theory of promissory estoppel provides:

A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.

Restatement (Second) of Contracts § 90(1) (1981)

Note well: the promise has to be something it would be reasonable to expect people to rely on: you can't be legally bound to a promise made jokingly. Context is everything. A textbook case applying promissory estoppel is Drennan v. Star Paving Co., 51 Cal. 2d 409, 333 P.2d 757 (Cal. 1958). A subcontractor submitted an estimate with a bid on a construction project. The general contractor relied on the estimate in setting the price for the general bid. The subcontractor then discovered a mistake in calculating its estimate and tried to revoke it. The court held the estimate could not be revoked. It became binding and irrevocable -- without all the formal requisites for a binding contract-- when the general contractor relied on it, to the general contractor's "detriment" (the general contractor was bound to a bid which would cause a loss if the subcontractor's promise was not enforced).

Other examples include: advertising that a prize or reward will be offered for some action, say, $100,000 if you name your child after the advertiser’s product. If you go ahead and do it, the advertiser must pay the prize, and cannot assert that you failed to get the deal in writing.

Proof of the elements of promissory estoppel also overcomes the defense that a contract must be in writing, the defense which American lawyers refer to as “the Statute of Frauds”, even though the defense is based on common law doctrine, not a statute, on this side of the Atlantic. The term was derived from an English statute “An Act for Prevention of Frauds and Perjuries”, 29 Car. 2, ch. 3, 7 (1677).

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The above is offered solely for the reader’s edification and entertainment, not as advice.

I look up citations with Lexis Publishing’s “Law on Disc”.

In England and Wales (Although the 1989 Law of Property (Miscellaneous Provisions) Act seems to apply throughout the UK as far as I can tell based on the text) a gratuitous promise is created by the execution of a valid deed (Also known as a contract under seal, although the term has fallen into disuse, largely due to the removal of requirements for the attachement of a seal). The English law of promissory estoppel is quite different from that of the US; My musings on estoppel may be enlightening. Note also the rules regarding promises in respect to land enbodied in the doctrine of Proprietary Estoppel.

To execute a valid deed, the document must:

• Clearly describe itself as being a deed.
• If by an individual, be signed by him in the presence of one witness; or signed in his presence and at his direction by his representative, also in front of two witnesses.
• If by a corporation under the various Companines Acts, Either: Executed under the seal of the corporation, or signed by two directors, or by one director and the Company Secretary. This is as for any document executed by a corporation.
• For other kinds of corporations, readers are refered to the Law Commisson paper referenced.
• Delivered as a deed to the one in whose favour it is made.

A note should be made that as equity will not assist a volunteer, gratuitous deeds will generally not give rise to (successful) action for specific performance.

These rules may change in response to the recommendations of the Law Commision.

References:

• Law of Property (Miscellaneous Provisions) Act 1989. C.34
• Law Commission Consultation Paper 143, "The Execution of Deeds and Documents, by, or on behalf of, Bodies Corporate"