Illusory Promise, Breach of Contract

Contracts must be mutual to be enforceable. “Mutual” means there must be mutuality of obligation. Frye v. Speedway Chevrolet Cadillac, 321 S.W.3d 429, 443 (Mo. Ct. App. 2010).

Contracts that give one party a right to cancel can be considered illusory. An “illusory promise” does not create a contract. It is neither enforceable, nor operative as consideration for a return promise. Fenberg v. Goggin, 800 S.W.2d 132, 136 (Mo. Ct. App. 1990). The promise must be binding, not a mere illusion. Soars v. Easter Seals Midwest, 563 S.W.3d 111, 116 (Mo. 2018) (“A promise is illusory when one party retains the unilateral right to amend the agreement and avoid its obligations”).

Contractual contingencies, in contrast, are valid. These often occur in real estate contracts. For example, most real estate transactions are contingent upon financing and other bank requirements. So, it is permissible to draw up a contract which becomes void if a financing contingency is not met. Grease Money Intern, Inc. v. Godat, 916 S.W.2d 257, 260 (Mo. Ct. App. 1995).

This potentially subtle distinction between illusory promises and contractual contingencies is important, particularly when evaluating breach of contract claims.