Facts: Brodsky signed an option contract to buy land from Culbertson. Brodsky was to deliver a check for $5,000, representing “earnest money,” to a bank. The bank would hold the check in escrow, uncashed, for 60 days. Brodsky could inspect the property and perform engineering studies. If he decided against buying, he could terminate the agreement and demand his earnest money. Ultimately, Brodsky decided that he did want to buy the land, but Culbertson refused to sell, claiming that Brodsky gave no consideration. The trial court ordered Culbertson to convey the land, and he appealed.

Issue: Did Brodsky give valid consideration that makes Culbertson’s promise enforceable? 

Holding: Brodsky gave no consideration. His promise was illusory because he reserved an absolute right to nullify the deal at any time, for any reason. Brodsky did not even lose the use of the money, since the check could not be cashed unless he exercised his option. The court reversed, giving judgment for Culbertson.

Questions:

1. What is an option contract?

2. What is an “escrow?”

3. How did the escrow work in this case?

4. Brodsky gave a $5,000 check to the bank. Why wasn’t that consideration?

5. Brodsky performed tests on the land. Why weren’t the tests consideration, since they were a detriment to him?

6. Brodsky is the one who didn’t give consideration but he still wants to buy the property, so why is Culbertson trying to get out of the deal?

7. Is that ethical?