Berryman v. Kmoch – Case Brief
Berryman v. Kmoch, 221 Kan. 304, 559 P.2d 790 (1977).
Facts: Berryman (P) gave Kmoch (D) a 120 day option to purchase certain real estate in exchange for “$10 and other valuable consideration”. The $10 was never paid. P asked to be released from the option agreement and later sold the land to another party. D discovered that P had sold the land when he made arrangements to exercise his option to purchase the land.
P filed a declaratory judgment action to have the option contract declared null and void. D filed a counterclaim seeking damages for P’s failure to convey the land and both parties moved for summary judgment.
D admitted that the $10.00 cash consideration recited in the option agreement had never been paid. D pointed to “other valuable consideration” and asserted that he should have been permitted to introduce evidence to establish time spent and expenses incurred in finding other investors. D also argued that promissory estoppel should have been applied by the trial court as a substitute for consideration. D appealed the court’s judgment for P.
Issues: 1) Must an option contract be supported by consideration? 2) Is promissory estoppel applicable to option contracts?
Holding and Rule: 1) An option contract must be supported by consideration. 2) Promissory estoppel is applicable to option contracts.
To invoke the doctrine of promissory estoppel as a substitute for consideration, the evidence must show (1) the circumstances indicate that the promisor reasonably expected the promisee to act in reliance on the promise, (2) the promisee acted as one would reasonably expect in relying on the promise, and (3) a refusal by the court to enforce the promise must be virtually to sanction the perpetration of fraud, or must result in other injustice.
When an option is conditioned upon a performance of certain acts, the performance of the acts may constitute consideration; but there is no such condition imposed if the acts were not intended to benefit nor incurred on behalf of the optionor.
An option contract not supported by consideration is merely an offer to sell which may be withdrawn at any time prior to acceptance. The court held that the evidence D offered did not relate to acts which a party extending an option promise could reasonably expect. It related to effort and expense incurred in an attempt to attract other investors to purchase the property.
Time and money spent by a party in trying to sell property for which he holds an option cannot be construed as consideration to the party from whom he has secured the option. An offeree’s power of acceptance is terminated when the offeror takes definite action inconsistent with an intention to enter into the proposed contract and the offeree learns of it.
Notes: Promissory estoppel can apply in cases where the promisee’s reliance would reasonably be expected – such as paying for an appraisal or obtaining a loan. In this case it did not apply because the promisee spent time and expense to try to find other investors.