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Contracts • Contract Formation
K#042
Legal Definition
An illusory promise is occurs when only one party is bound to perform, and is unenforceable.
Plain English Explanation
Real, valid, binding contracts require both parties to be legally bound to some sort of performance. Sometimes its as simple as someone being bound to pay, and someone else being bound to do something. With that in mind, illusory promises are promises that don't actually cause the party to be forced to do anything. It's a meaningless promise that cannot be enforced because the person making the promise has a way out of performing. In other words, where the promise made is too indefinite, a court will likely find it to be invalid.
Hypothetical
Hypo 1: Bob tells Sam, "If you paint my house, I promise I will pay you $1,000 if I decide that I like it when you're done." Result: This is an illusory promise. There's nothing preventing Bob from later saying, "I have decided I don't like the look of your painting, so I'm not paying." That being said, obviously if Sam painted Bob's house, he would arguably be entitled to some sort of compensation, but technically and legally, a contract would not be the basis for his claim against Bob, because no contract can be formed based on an illusory promise.
Hypo 2: Bob tells Sam, "If you paint my house, I promise I will pay you $1,000 if it wins first place in the neighborhood house painting contest." Result: Bob is no longer in control of whether or not he pays. Even though it is still up to someone else's decision as to whether or not Sam's painting is good enough to receive payment, because it is no longer in Bob's control, his promise is not illusory. Here, if Bob's house wins the contest, Bob will be bound to pay $1,000 to Sam. Likewise, if Bob's house does not win, he will owe Sam nothing.
Note: The main difference between these two hypos is that in Hypo 1 Bob can decide whether or not he wants to pay, but in Hypo 2, an independent, third party will decide on an agreed upon factor that will trigger whether or not Bob must pay.
Hypo 2: Bob tells Sam, "If you paint my house, I promise I will pay you $1,000 if it wins first place in the neighborhood house painting contest." Result: Bob is no longer in control of whether or not he pays. Even though it is still up to someone else's decision as to whether or not Sam's painting is good enough to receive payment, because it is no longer in Bob's control, his promise is not illusory. Here, if Bob's house wins the contest, Bob will be bound to pay $1,000 to Sam. Likewise, if Bob's house does not win, he will owe Sam nothing.
Note: The main difference between these two hypos is that in Hypo 1 Bob can decide whether or not he wants to pay, but in Hypo 2, an independent, third party will decide on an agreed upon factor that will trigger whether or not Bob must pay.
Visual Aids
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