Opinion ID: 805147
Heading Depth: 3
Heading Rank: 1

Heading: Mutuality of Obligation

Text: Appellants contend that UPC’s agreement with Westlake lacked consideration and cannot be enforced. Specifically, Appellants assert that there was no mutual obligation between the parties because Westlake retained the unilateral discretion to subject delivery to its approval of UPC’s credit, which it never did. According to Appellants, therefore, Westlake’s promise under the agreement was illusory; and, because Westlake was not truly bound to perform, its agreement is not an enforceable contract under Texas law. “Consideration is a present exchange bargained for in return for a promise.”10 “It consists of either a benefit to the promisor or a detriment to the promisee.”11 “A promise is illusory if it does not bind the promisor, such as when the promisor retains the option to discontinue performance.”12 Such illusory promises, therefore, lack mutuality of obligation and do not constitute a contract.13 9 Rideau v. Parkem Indus. Servs., Inc., 917 F.2d 892, 897 (5th Cir. 1990) (citing Glass v. Petro-Tex Chem. Corp., 757 F.2d 1554, 1559 (5th Cir.1985)). 10 Roark v. Stallworth Oil and Gas, Inc., 813 S.W.2d 492, 496 (Tex. 1991) (citing Connell v. Provident Life & Accident Ins. Co., 224 S.W.2d 194, 196 (1949)). 11 Id. (citation omitted). 12 In re 24R, Inc. 324 S.W.3d 564, 567 (Tex. 2010). 13 Id. 8 Case: 10-20634 Document: 00511931930 Page: 9 Date Filed: 07/24/2012 No. 10-20634 In this case, the jury found that Westlake and UPC intended to form a binding contract. Although we note that Appellants refer — out of context — to various statements made by witnesses during the trial that some such deals are “subject to credit approval,” we can find no testimony or other record evidence indicating that Westlake had the unilateral right to rescind the contract without being subject to a breach of contract claim. By contrast, Westlake adduced evidence at trial that a deal such as this becomes binding once the “veil is lifted” and no party rejects the counterparty during a short period of time that follows. Westlake also presented testimony that industry custom permits specific additional terms, such as payment and credit, to be worked out after formation of the buy and sell contract. Van Der Wall gave Brice permission to enter a bid for ethylene on behalf of UPC. Brice matched UPC’s bid with Westlake’s offer. It is undisputed that neither party timely objected after the veil was lifted. Thus, a binding contract was formed. Furthermore, any contention that the deal was subject to a condition precedent of UPC providing credit acceptable to Westlake lacks merit because, as further discussed below, the record makes clear that the condition of obtaining acceptable credit was at most a condition precedent to performance, not to the formation of the contract.14 Having determined that there is a “legally sufficient evidentiary basis” for the jury to have concluded that the parties formed a binding contract, we will not disturb the jury’s verdict on the basis of Appellants’ assertion that the contract lacked consideration.