Tuesday, November 22, 2005
On this date, November 22, 1927, Judge Cardozo made a major dent in the doctrine of consideration and ensured himself an even bigger place in contracts casebooks when he issued the opinion in Allegheny College v. National Chautauqua County Bank, 246 N.Y. 369 (1927).
In the case, Mrs. Mary Yates Johnston made a $5,000 pledge to the college’s fund drive, to be paid from her estate. She subsequently revoked the gift. After she died, the college sued to collect. Held: The college won. Ordinarily, uncompleted gifts can be revoked by the giver, and Mrs. Johnston had plainly revoked. The promise could be enforced only if Cardozo could find a contract. He did:
The promisor wished to have a memorial to perpetuate her name. She imposed a condition that the "gift" should "be known as the Mary Yates Johnston Memorial Fund." The moment that the college accepted $1,000 as a payment on account, there was an assumption of a duty to do whatever acts were customary or reasonably necessary to maintain the memorial fairly and justly in the spirit of its creation. The college could not accept the money, and hold itself free thereafter from personal responsibility to give effect to the condition. More is involved in the receipt of such a fund than a mere acceptance of money to be held to a corporate use. The purpose of the founder would be unfairly thwarted or at least inadequately served if the college failed to communicate to the world, or in any event to applicants for the scholarship, the title of the memorial. By implication it undertook, when it accepted a portion of the "gift," that in its circulars of information and in other customary ways, when making announcement of this scholarship, it would couple with the announcement the name of the donor.
Cardozo seems to be (deliberately or not) confusing a conditional gift (“I’ll give you a car if you promise never to drive over the speed limit”) with a contract. But while the reasoning is suspect, the rule that you don’t need consideration to support a charitable pledge has gone into the books.
Allegheny College (top left), by the way, is still educating students in Meadville, Pa., a town known for being equally distant from Pittsburgh, Cleveland, and Buffalo. Allegheny is a small (2,100 students) liberal arts college, loosely affiliated with the Methodist Church. Its annual tuition these days is $31,000, and its current endowment is $113 million.