Practice Exam Question, 11/12/03


Question 1:


I would advise Jill that she is not obligated to return the car to Uncle George because delivering the title to the car to her constituted a completed gift.


Question 2:


I would advise her that she may be able to recover the uninsured loss depending on when Uncle George stopped paying the premiums.  It’s not clear from the facts that Uncle George ever paid the insurance premiums, either because he forgot or he broke his promise.


Jill may be able to recover on a promissory estoppel theory.  Uncle George’s promise to pay her insurance premiums induced her reasonable reliance on those premiums being paid.  If she knew they weren’t being paid, she might have chosen to keep the car in the Bates garage all the time or sell it instead of risking theft or damage by driving it around.  Uncle George should have reasonably expected that his promise to pay for insurance would induce Jill to not pay for insurance herself while continuing to drive the car.  Jill actually did not buy insurance herself, and kept driving the car, and it is likely that she would have acted differently in the absence of Uncle George’s promise.  Uncle George’s promise may be enforced even though it was not bargained for, nor was it met with consideration.


However, this remedy is limited.  Jill will only be given relief if it is necessary to prevent injustice.  If Jill had reason to know that Uncle George was going to get angry and stop paying for her insurance before she actually received the letter, she should have changed her behavior in order to reduce the risk of an uninsured loss.


On the other hand, Uncle George’s promise in its entirety seems like a gift promise.  A majority of courts would enforce a gift promise on the basis of promissory estoppel, but courts are generally less likely to enforce such promises between family members.


Maybe Jill was the cheapest cost avoider: if Uncle George simply forgot to pay the premiums, Jill should have checked to make sure they were up to date.  A court may find that justice does not require that Jill be compensated because she should have checked that she was insured rather than taking Uncle George’s word for it.  On the other hand, Uncle George should have told Jill before he stopped making the insurance payments so that she could adjust her behavior accordingly.


Question 3:


Finally, I would advise Jill that she will not be able to enforce Uncle George’s promises to garage, maintain, fuel, and insure the car in the future because there was no consideration for Uncle George’s promise.  The $10 and the lock of hair were not bargained for, that is why they are not real consideration.  Uncle George clearly didn’t want the $10 or the lock of hair, and thought they were a joke.  The value of the $10 is clearly out of proportion to the value of the car as stated in the letter.  Even though adequacy of consideration doesn’t matter, the $10 being so far out of proportion to the $100,000 value of the car is good evidence that the $10 was not real consideration.


On the other hand, the lock of hair does not have a particular monetary value that any court could definitively attach.  Furthermore, Uncle George did finally accept both items knowing the possible legal significance of doing so.


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