• Key point. Financial commitments made by a church to a staff member are legally enforceable only if the church receives something of value (‘consideration’) in return for its commitments.
* A Tennessee court ruled that a church’s decision to make biweekly payments to a former pastor’s widow was unenforceable since the church received nothing of value (‘consideration’) in return for its commitment, and therefore the church’s decision to discontinue making the payments did not amount to a breach of contract. In 1981 Pastor Dave began his tenure as senior pastor at a Baptist church (the “church”). He served in this capacity until his death in 1995. In return for his services, the church paid Pastor Dave a salary as well as various fringe benefits such as cell phone services, beeper services, lawn services, and vehicle maintenance. At Pastor Dave’s request, the church orally agreed to provide most of these benefits directly to his wife (Darla). Before his death, Pastor Dave spoke to several deacons of the church and asked the church to provide for his wife if the church was able to do so. The church responded by entering into an agreement with Darla in which it agreed to provide her with $785 on the first and third Sunday every month until 2010 and would provide lawn services for her residence. Pursuant to the agreement, Darla would receive these benefits until one of two terminating events occurred: (1) her death; or (2) she remarried. However, if she remarried within five years of the inception of the contract, she would continue to receive these benefits for five years. If she remarried after five years, she would no longer receive any benefits.
In 1996 the church discontinued making payments to Darla, and she sued the church and the entire board of deacons seeking damages for breach of contract. A trial court dismissed all of Darla’s claims on the ground that the church’s obligations under the ‘contract’ were unenforceable because it had not received any ‘consideration’ from Darla in return for its obligations. It is a basic principle of contract law that a party’s obligations under a contract are not enforceable unless the party received something of value (called ‘consideration’) in return for those obligations. The trial court concluded that the church had received nothing of value from Darla in return for its substantial commitments under the contract, and therefore those commitments were unenforceable. This meant that the church was legally justified in terminating its payments to Darla.
On appeal, Darla insisted that the church’s obligations under the contract were enforceable because she had in fact provided the church with consideration. She cited (1) her presence at the church as ‘first lady’ of the church; (2) her loss of benefits previously received from the church; and (3) her decision not to remarry. The appeals court rejected all three of these grounds.
‘First lady’ of the church
In rejecting Darla’s first theory of consideration, the court noted that there was no evidence that the church benefited from her presence. She ‘did not take on any additional responsibilities with the church nor promise to continue her activities with the church. If she chose to no longer attend the church as a member, she would still be eligible for the benefits conferred to her pursuant to the terms of the agreement. Accordingly, her mere presence at the church does not constitute consideration.’
Loss of prior benefits
Darla also pointed out that church leaders orally agreed, at her husband’s request and during his lifetime, to provide her with various fringe benefits such as cell phone services, beeper services, lawn services, and vehicle maintenance. She claimed that she ‘gave up’ these benefits when she entered into the written agreement with the church, and that this relinquishment of benefits constituted consideration in support of the church’s obligations under the written agreement. The court disagreed, noting that for this loss to constitute consideration, Darla must have had a vested right to the benefits at the time the written agreement with the church was executed. It pointed out that the previous benefits were provided to her as a result of her husband’s employment contract with the church, and so for Darla to have had a vested right to the benefits conferred to her, she must have been an intended beneficiary of her husband’s employment contract.
To establish that she was an intended beneficiary of the employment contract between the church and her husband, Darla had to establish that the employment contract was valid, and demonstrate a ‘clear intent to have the contract operate for her benefit.’ The court conceded that the employment contract was valid, but concluded that there was no clear intent that the employment contract between her husband and the church would operate for her benefit. Further, when Pastor Dave died, all vested rights within that contract expired, meaning that Darla gave up nothing when she later signed her own agreement with the church. Therefore, ‘since Darla had no rights to the benefits conferred to her, her subsequent relinquishment of those benefits cannot constitute consideration.’
Refusal to marry
Darla pointed out that the provision in her agreement with the church forbidding her to marry in order to remain entitled to benefits constituted sufficient consideration supporting the church’s obligations under the agreement. The court disagreed. It noted that restraints upon marriage are void as a matter of public policy, and cannot serve as consideration.
Darla’s final argument, raised for the first time on appeal, was that the church’s obligations under the agreement with her were legally enforceable even without consideration on the basis of ‘promissory estoppel.’ Under the doctrine of promissory estoppel, a party’s promises will be deemed enforceable even without consideration if they induce another party to rely to his or her detriment on those promises. Darla asserted that she relied to her detriment based on the church’s promises as set forth in the agreement, and therefore the agreement was legally enforceable even if no consideration existed to support the church’s obligations. In particular, she claimed that she ‘conducted her life in reliance on the benefit she received from the church.’ However, the court concluded:
In order for the theory of promissory estoppel to apply, Darla must show that the promises made in the agreement induced an action or forbearance by her to her detriment in reliance on those promises after the church made those promises. She has failed to demonstrate such detrimental reliance. The only act of forbearance or action taken since the execution of the agreement in reliance on the promises made by the church in the agreement was that Darla declined a proposal of marriage in order to adhere to the conditions of the agreement. As we have stated earlier, this restraint of marriage is void as a matter of public policy. Since this restraint cannot be adequate consideration for the agreement, it is counterintuitive to allow this restraint to serve as a basis for upholding the agreement on a theory of promissory estoppel. Accordingly, the theory of promissory estoppel is inapplicable in this case.
Application. This case illustrates an important legal principle. Commitments made by churches to current or former employees, or their spouses, may not be legally enforceable if the church receives nothing of value (consideration) in return for its commitments. There are some exceptions to this rule, such as the doctrine of promissory estoppel, but these will not be available in all cases. Cochran v. Robinwood Lane Baptist Church, 2005 WL 3527627 (Tenn. App. 2005).
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