Bd. of Control v. Burgess

206 N.W.2d 256 (Mich. 1973)

 

RULE:

A written acknowledgment of receipt of consideration merely creates a rebuttable presumption that consideration has, in fact, passed. Neither the parol evidence rule nor the doctrine of estoppel bars the presentation of evidence to contradict any such acknowledgment.

FACTS:

Plaintiff university brought an action against defendant property owner for specific performance of a contract that gave the university the option to purchase the property owner's house. The contract purported to grant the university a 60-day option to purchase the property owner's house. The university never paid the stated one dollar consideration or any other consideration. Subsequently, the university delivered written notice to the property owner of its intention to exercise the option, but the property owner rejected the university's tender of the purchase price. The Washtenaw County Circuit Court (Michigan) entered judgment for the university. The property owner appealed.

ISSUE:

Does acknowledgment of receipt of consideration bar any subsequent defense of failure of consideration?

ANSWER:

No.

CONCLUSION:

Because the property owner received no actual consideration for the purported option, the court held that the document was not an enforceable option and that the property owner was not barred from so asserting. Options for the purchase of land, if based on valid consideration, are contracts which may be specifically enforced. Conversely, that which purports to be an option for the purchase of land, but which is not based on valid consideration, is not a contract and will not be enforced -- it is a simple offer to sell the same land. An option is a contract collateral to an offer to sell whereby the offer is made irrevocable for a specified period. Ordinarily, an offer is revocable at the will of the offeror. Accordingly, a failure of consideration affects only the collateral contract to keep the offer open, not the underlying offer. Therefore, the court concluded that the transaction was a simple offer to sell the property. The court could not resolve the question of whether the property owner effectively revoked her offer to sell before the university accepted the offer because there was conflicting testimony as to when the property owner informed the university that she would not abide by the option agreement. The court concluded that the trial court did not err in finding that there was no fraud, material mistake, or coercion. The court REVERSED the judgment and REMANDED for additional findings of fact.

Click here to view the full text case and earn your Daily Research Points.