During World War II in Greece, Eugenia Demotsis needed funds to support her family and could not access money, property, or credit she had in the United States. George Batsakis agreed to provide her 500,000 Greek drachmas in exchange for her written promise to repay him $2,000 in U.S. currency, plus 8 percent interest, after the war or earlier if collection could be arranged through her American representative. The drachmas were worth roughly $25 in U.S. dollars at the time.
Batsakis sued to collect the promised $2,000. Demotsis admitted receiving the drachmas but asserted want and failure of consideration, tendering $25 plus interest. After a bench trial, the district court awarded Batsakis only $750 principal plus 8 percent interest. Batsakis appealed, arguing that the court should have enforced the note for its full $2,000 amount.
Issue #1
Whether the extreme disparity between the value of the drachmas delivered and the $2,000 repayment promise established want of consideration.
Holding
No. The drachmas had some value, and their inadequacy relative to the promise did not mean the agreement lacked consideration.
Reasoning
The parties' arrangement was a bargain: Batsakis would give Demotsis 500,000 drachmas, and Demotsis would execute the instrument promising to pay $2,000 in American currency. Demotsis's own testimony confirmed that Batsakis conditioned delivery of the drachmas on her signing that promise.
A plea of want of consideration asserts that an instrument never became a valid obligation at its formation. That theory failed because Demotsis received the drachmas that were promised, and it was undisputed that the drachmas were not valueless.
The court characterized the transaction as a sale of drachmas for Demotsis's written payment obligation. Even if the exchanged values were drastically unequal, mere inadequacy of consideration does not void an otherwise valid contract.
Issue #2
Whether Demotsis could establish failure of consideration because the drachmas were worth only about $25 in U.S. currency.
Holding
No. There was no failure of consideration because Demotsis received exactly the performance for which she had bargained.
Reasoning
Failure of consideration concerns a breakdown after a valid obligation is formed, such as when the promised performance is not delivered. Here, however, Batsakis delivered the 500,000 drachmas that the parties understood he would provide in exchange for Demotsis's signed promise.
The low dollar value of the drachmas did not show that Batsakis failed to perform. It showed, at most, that the agreed exchange was unfavorable to Demotsis, which is not a failure of consideration.
Issue #3
Whether Batsakis was entitled to recover the full $2,000 stated in the instrument and contractual interest.
Holding
Yes. The judgment had to be reformed to award Batsakis $2,000, with 8 percent annual interest from April 2, 1942.
Reasoning
Because neither want nor failure of consideration was established, the trial court had no basis to reduce the stated principal from $2,000 to $750. The written instrument was enforceable according to its terms.
The court construed the instrument's interest provision to require interest at 8 percent per year. It reformed the judgment to award the $2,000 principal and 8 percent interest from April 2, 1942, with the specified post-judgment interest treatment.