Brief Fact Summary. The purchaser of property waived the requirement of a satisfactory architects report as a condition to the sale of property. Seller later refuses to sell and argues the waiver of the report made the promise illusory.
Synopsis of Rule of Law. Making a promise dependent upon a condition does not make it illusory.
Issue. Was the engineer’s report a necessary precondition for the contract to occur?
Held. No. Reversed.
A party cannot create an unenforceable contract by waiving the condition which renders his promise illusory. A promise given for a promise is sufficient consideration and does not necessarily render the contract illusory or affect its validity.
A condition precedent to the promisor’s duty that the promisor be “satisfied” may require performance personally satisfactory [Subjective + Good Faith] to the promisor or it may require performance acceptable to a reasonable person [Objective]. It is a question of fact. Neither case renders it illusory.
The promise given is that the promisor will exercise his judgment in good faith. Because it requires good faith, the ability to cancel the contract is not unfettered. Such provisions are valid where the option can be exercised upon the occurrence of specified conditions.
Discussion. The court is maintaining the stance that mutuality of obligation is necessary to the enforceability of a contract. If one party is free to perform or withdraw from the agreement at his own unrestricted desire, then the contract will be illusory. Here, the waiver of the report was not deemed to be an unrestricted way out for the buyer.