Occasion: Katie Scothorn was promised by her grandfather, John Ricketts, that he would take care of her financially if she quit her job. The promissory note given was for $2,000 with 6% annual interest and payable on demand. Her grandfather died a year later after she quit her job and the estate refused to pay her the money. The plaintiff, Katie Scothorn, sued the estate, the defendant, for payment of the note. 

 

Legal Issue: Was the note enforceable even though Katie Scothorn did not provide consideration?

 

What is consideration in contract law?

 

In traditional contract law, consideration means that both parties give something of value. One party makes a promise, and the other party gives something in return—money, services, a promise to do (or not do) something.

 

In this case, Mrs. Scothorn didn’t bargain or promise anything in exchange for the note. So, under strict contract law, the note looked unenforceable.

 

Holding: Nebraska Supreme Court ruled in favor of Scothorn.

 

Reasoning: Although Scothorn did not provide consideration, the Supreme Court appealed to the doctrine of equitable estoppel. 

 

Equitable estoppel prevents a promisor from denying a promise if the recipient of that promise has reasonably relied on it without consideration. 

 

For equitable estoppel to apply, courts generally look for:

• Representation or conduct: One party made a statement, promise, or acted in a way that led the other to believe something was true.
• Reliance: The other party reasonably relied on that representation.
• Detriment: The relying party suffered harm or changed their position because of that reliance.
• Fairness: It would be unjust to allow the first party to contradict their earlier position.

 

Scothorn had quit her job and relied on the promise given by her grandfather, therefore according to equitable estoppel she must receive the promissory note. Thus, she received the full $2,000 note promised by her grandfather. 

 

Case file:

 

https://law.justia.com/cases/nebraska/supreme-court/1898/57-neb-51-77-n-w-365-1898.html