Caseflicks

Supreme Court of Kansas • 1977

Berryman v. Kmoch

559 P.2d 790 | 221 Kan. 304 | 1977 Kan. LEXIS 217

Full access

Unlock the video and quiz

The written brief is free to read below. Subscribe to watch the video explainer and take the quiz.

Create an account Log in

Takeaway

In short, this case holds that an unpaid option is ordinarily only a revocable offer, and an option holder’s voluntary efforts will not preserve it absent bargained-for consideration or reliance that makes nonenforcement unjust.

Background

Wade Berryman signed a written instrument granting Norbert H. Kmoch a 120-day option to buy 960 acres in Stanton County, Kansas. The document stated that the option was granted for “$10.00 and other valuable consideration,” but Kmoch never paid the $10. Kmoch, a real-estate broker who prepared the document, later spent time and money investigating the property and seeking investors who might join in its purchase.

In late July 1973, Berryman telephoned Kmoch and asked to be released from the option. Berryman subsequently sold the land to someone else. In August, a Federal Land Bank representative told Kmoch that Berryman had disposed of the property. Kmoch nonetheless recorded the option and, in October, sent Berryman a letter purporting to exercise it.

Berryman brought a declaratory-judgment action seeking to invalidate the option. Kmoch counterclaimed for damages based on Berryman’s failure to convey. On cross-motions for summary judgment, the trial court ruled for Berryman, holding that the unsupported option was merely a revocable offer and that it had been withdrawn before Kmoch accepted. Kmoch appealed.

Issues

Issue #1

Whether the written option was binding and irrevocable despite Kmoch’s failure to pay the recited $10 or otherwise furnish consideration.

Holding

No. Without consideration, the purported option was only a continuing offer to sell, which Berryman could revoke before acceptance.

Reasoning

An option to purchase land, like any other contract, must be supported by consideration to bind the optionor for the stated option period. Although this instrument recited $10 and other valuable consideration, the parties agreed that the $10 was never paid. Kansas law permits proof of a total or partial failure of consideration in an action between the original parties, so evidence of nonpayment did not violate the parol-evidence rule.

Kmoch’s asserted expenditures of time and money did not supply consideration. His efforts to inspect the land and interest possible investors neither conferred a bargained-for benefit on Berryman nor imposed a legal obligation on Kmoch. The document did not list the property with Kmoch as a broker or require him to find a buyer; it simply gave him the privilege of buying the land if he chose.

Berryman’s possible expectation that Kmoch would investigate the property or arrange financing was a motive for granting the offer, not contractual consideration. Kmoch never promised to purchase the land, pay money during the option period, or perform any other legally enforceable duty. An illusory promise cannot make an option binding.

Issue #2

Whether promissory estoppel made the unsupported option enforceable.

Holding

No. Kmoch’s activities were not reasonable, expected reliance of the kind necessary to prevent fraud or injustice.

Reasoning

Promissory estoppel requires a promise that the promisor reasonably should expect to induce definite and substantial action or forbearance, actual reasonable reliance by the promisee, and circumstances in which enforcement is necessary to avoid fraud or other injustice.

The evidence Kmoch proposed concerned his own efforts to interest other investors in the land. Those efforts were not requested by Berryman, were not required by the option, and were not undertaken for Berryman’s benefit. Because the agreement gave Kmoch no duty to act, Berryman had no reason to expect that Kmoch would materially change position in reliance on an unpaid option.

Kmoch was an experienced real-estate broker who drafted the option and knew that no consideration had been paid. On these facts, refusing enforcement did not sanction fraud or create the kind of injustice that promissory estoppel is designed to prevent.

Issue #3

Whether Berryman effectively revoked the offer before Kmoch accepted it.

Holding

Yes. Kmoch received reliable notice that Berryman no longer intended to sell to him and had sold the land before Kmoch attempted acceptance.

Reasoning

An offeree’s power to accept ends when the offeror takes definite action inconsistent with the proposed transaction and the offeree obtains reliable information of that action. In particular, an offer to sell land is revoked when the offeror sells or contracts to sell to another and the offeree learns of it before accepting.

Kmoch admitted that Berryman told him in July that he no longer wanted to remain obligated under the option. Kmoch also admitted that, in August, a Federal Land Bank representative informed him that Berryman had disposed of the land. Those facts terminated Kmoch’s power of acceptance before his October letter purporting to exercise the option.