## Facts

- Hamilton Bancshares, Inc. entered two written stock purchase option agreements with shareholders to buy specified shares of bank stock within an 80-day period.
- Each agreement recited consideration of “One Dollar and other good and valuable consideration,” but the $1 was never paid.
- Each agreement also stated that Hamilton’s president paid the optionors $5,000 “earnest money,” to be applied to the purchase price if exercised and refunded if not exercised.
- Defendants sent letters during the option period purporting to withdraw the options before Hamilton attempted to exercise.
- Hamilton rejected the purported withdrawals and notified defendants within the 80-day period that it was exercising the options.
- Hamilton sued for specific performance; defendants sought judgment asserting the options were revocable for lack of consideration.
- After discovery, the trial court granted summary judgment for defendants, concluding the refundable earnest money conferred no benefit on defendants and thus was not consideration.
- Hamilton appealed.

## Issues

1. Whether refundable “earnest money” payments, credited to the purchase price if exercised and refunded if not, constitute legally sufficient consideration to support an irrevocable option contract.
2. If consideration existed, whether the optionors could nonetheless withdraw the options before the offeree’s timely exercise within the stated option period.

## Decision

- The appellate court reversed the summary judgment and remanded.
- The court held that the $5,000 earnest-money payments constituted “other good and valuable consideration” supporting the options.
- Because the options were supported by consideration, they were irrevocable during the agreed 80-day period.
- Defendants’ attempted withdrawals within the option period were ineffective, and Hamilton’s exercise was not defeated by those withdrawals.

## Legal Principles

- An option contract requires consideration to make the offer irrevocable for the stated period; absent consideration, an offer may generally be revoked before acceptance.
- Consideration is legally sufficient if it involves a benefit to the promisor or a detriment to the promisee; courts generally do not examine adequacy where legal sufficiency exists.
- A deposit or earnest-money payment may constitute consideration for an option even if it must be credited to the price upon exercise or refunded upon non-exercise, because the payment can confer a temporary benefit to the optionor and a temporary deprivation to the optionee.
- Express contract language acknowledging “other good and valuable consideration” may be satisfied by a contemporaneous, actually paid earnest-money sum identified in the instrument.

## Conclusion

The court held that the parties’ earnest-money arrangement supplied consideration for the stock purchase options, making them binding and nonwithdrawable during the 80-day option period, and it reversed summary judgment for the optionors and remanded for further proceedings.


Hamilton Bancshares, Inc. v. Leroy, 476 N.E.2d 788 (Ill. App. Ct. 4th Dist. 1985)