## Facts

- Stonestreet leased a lot to Southern Oil for a filling station for a ten-year term with an option for Southern Oil to buy the property for $5,000 during the lease.
- The lease required Stonestreet to furnish water only to the extent possible from his existing supply and stated that if the well failed, Southern Oil would have to secure water on its own.
- When more water was needed, Stonestreet and Southern Oil entered a written agreement with a driller under which each would pay one-half of the well’s cost, and both paid their respective halves.
- The written well-drilling agreement did not include any term requiring Southern Oil to repay Stonestreet’s share if Southern Oil later exercised the purchase option.
- Stonestreet claimed Southern Oil’s representative orally promised, during the well-drilling arrangements, that if Southern Oil exercised the option to purchase, it would reimburse Stonestreet for his one-half share of the well cost.
- Southern Oil later exercised the purchase option but did not reimburse Stonestreet, and Stonestreet sued to recover his share of the well expense.

## Issues

1. Whether Southern Oil’s alleged oral promise to reimburse Stonestreet for one-half of the well cost upon exercise of the purchase option was supported by consideration and therefore enforceable.

## Decision

- The Supreme Court of North Carolina reversed the judgment for Stonestreet and held that Southern Oil’s motion for judgment as of nonsuit should have been granted.
- The court concluded that, even crediting Stonestreet’s account of the oral promise, the promise was unsupported by consideration and was unenforceable.

## Legal Principles

- An enforceable contract requires consideration: a benefit to the promisor or a detriment to the promisee.
- A promise is not supported by consideration where the promisee gives nothing new in exchange and merely performs (or remains bound to perform) an existing obligation.
- A gratuitous “naked promise,” without new consideration, creates no enforceable duty even if the promise is made and later broken.
- Exercising an existing contractual option does not supply consideration for a separate reimbursement promise not included in the original written bargain.

## Conclusion

The court held that the alleged reimbursement assurance was a gratuitous promise because Stonestreet provided no new consideration beyond obligations already fixed by the written well-cost agreement and the preexisting lease-option arrangement, requiring judgment as of nonsuit for Southern Oil.


Stonestreet v. Southern Oil Co., 226 N.C. 261, 37 S.E.2d 676 (N.C. 1946)