Facts
- John C. Ricketts gave his granddaughter, Katie Scothorn, a promissory note for $2,000 at 6% interest, payable on demand.
- At delivery, Ricketts stated he had arranged matters so she would not have to work and expressed that she should stop working.
- Scothorn soon quit her bookkeeping job after receiving the note and remained out of work for about a year.
- The note did not condition payment on her quitting; her resignation was a response to Ricketts’s expressed intent.
- Ricketts paid one year’s interest but did not pay the principal before his death.
- The executor of Ricketts’s estate refused payment, asserting the note was a gratuitous promise unsupported by consideration.
- Scothorn sued to enforce the note, alleging her reliance made the promise enforceable.
Issues
- Whether the promissory note was supported by sufficient consideration to be enforceable as a contract.
- If not, whether the estate was estopped from asserting lack of consideration because the promise foreseeably induced Scothorn to change her position to her detriment.
Decision
- The Nebraska Supreme Court affirmed judgment for Scothorn enforcing the note.
- The court treated the note as lacking traditional bargained-for consideration.
- The court held the estate was equitably estopped from asserting lack of consideration because Ricketts intentionally induced Scothorn’s detrimental change of position in reliance on the promise.
Legal Principles
- A gratuitous promise may be enforced in equity when the promisor, by words or conduct, intentionally induces the promisee to act or forbear in reasonable reliance, and the promisee changes position to their detriment.
- When such induced reliance occurs, the promisor (and the promisor’s estate) may be barred by equitable estoppel from asserting the technical defense of no consideration.
- Reliance-based enforcement may apply beyond charitable-subscription settings to individual promisees where the promisor’s inducement foreseeably leads to detrimental action or forbearance.
Conclusion
The court enforced the grandfather’s note not as a bargained-for exchange, but because his statements were intended to cause, and did cause, his granddaughter to quit work in reliance on payment; equity therefore barred the estate from avoiding liability by claiming lack of consideration.