Dougherty v. Salt
Citation: 227 N.Y. 200 (1919)
Facts
An eight-year-old boy’s aunt gave him a promissory note for $3,000, signed “value received.” She made no request of him in exchange. After she died, he sued her estate to enforce the note. The estate argued the note was a gift promise unsupported by consideration.
Issue
Is a promissory note for a gift, reciting “value received” when no value was in fact exchanged, enforceable?
Holding
No. The note was a voluntary and unenforceable promise to make a gift. The recitation of “value received” did not create consideration where none existed — parties cannot create consideration by labeling a gift as an exchange.
Rule
Gift promises are unenforceable: A promise to make a gift, even when memorialized in a promissory note reciting “value received,” is not supported by consideration if no value was actually bargained for and received. Courts look to the substance of the transaction, not the form; mere recitation of consideration cannot substitute for actual consideration.
Significance
- Judge Cardozo’s opinion establishing that nominal or formal consideration is insufficient when no actual exchange occurred
- Illustrates that “consideration” requires a genuine bargained-for exchange — not a mere recital
- Distinguished from the “peppercorn” consideration rule: courts will not generally inquire into the adequacy of consideration when the exchange is genuine, but will look at whether an exchange actually occurred
- Paired with Hamer v. Sidway (where nephew’s forbearance from drinking/gambling was genuine consideration for uncle’s promise) to show the distinction