Brief Fact Summary. The government agreed to consider using a particular fire protection company if it needed firefighting services. The terms of the alleged agreement granted both the government and the firefighting company the right to choose whether they wished to work with one another if the other came calling.
Synopsis of Rule of Law. "It is axiomatic that a valid contract cannot be based upon the illusory promise of one party, much less illusory promises of both parties."
Issue. Is there a valid contract?
Held. No. The court made an initial observation that "[t]o be valid and enforceable, a contract must have both consideration to ensure mutuality of obligation … and sufficient definiteness so as to 'provide a basis for determining the existence of a breach and for giving an appropriate remedy.' " The presence or lack of consideration concerns whether or not a promise or performance is bargained for. There is no consideration if "by its terms the promisor or purported promisor reserves a choice of alternative performances…." The court distinguishes [Ace-Federal Reporters, Inc. v. Barram] and observes that the "contract [in Barram] obligated the government to fulfill all of its requirements for transcription services from enumerated vendors or obtain a waiver. The Tender Agreements here are nothing but illusory promises. By the phrase illusory promise is meant words in promissory form that promise nothing; they do not purport to put any limitation on the freedom of the alleged promisor, but leave his future action subject to his own future will, just as it would have been had he said no words at all." The government if they wished could call on the Appellant to obtain firefighting service. On the same note, if the government requested the Appellant's services, the Appellant did not have to perform if it did not want to. "It is axiomatic that a valid contract cannot be based upon the illusory promise of one party, much less illusory promises of both parties."
Discussion. This case demonstrates that in order for there to be a valid contract, the parties must be obligated to do something. If they can back out of the "agreement" for any reason there really is no "agreement".