Promise and Its Parties

Engagement Agreements as Contracts

Promise and Its Parties

Contract law reads an engagement between lawyer and client as a set of promises. The Restatement (Second) of Contracts defines a contract as a promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.¹ The definition puts the promise at the center and carries a warning: not all promises are legally binding, and a broken promise may bring moral or social sanctions without any legal remedy.²

Four terms let you say who promised what to whom: promise, promisor, promisee, and beneficiary. Each has its own section below, and the later rules on the terms of an engagement assume you can apply them without hesitation.

The word contract also names more than one thing. Sometimes it means the abstract idea of an enforceable promise, and sometimes it means the document that embodies the promise, such as a signed fee letter.³ One often-quoted passage separates three senses: the series of operative acts by the parties, the physical document executed as evidence of those acts, and the legal relations that result.⁴ A promise generally need not be in writing to be enforced, so a missing fee letter does not by itself defeat a promise.⁵ This unit uses contract in the first sense and keeps its attention on the promises.

What Counts as a Promise

A promise, in the Restatement's words, is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made.⁷ Another formulation calls it a commitment to act or to refrain from acting in a specified way at a future time.⁸ Three parts do the work: an outward manifestation, a specified way of acting or refraining, and a setting in which the listener is justified in understanding that a commitment has been made. Each part screens out a different kind of remark, so you can sort a lawyer's statements to a client by running them through all three.

Manifestation means outward words or conduct, not private resolve. Contract law looks at what a person manifested instead of what the person intended, and it judges the manifestation from outside by asking how a reasonable person in the other party's position would understand the words and conduct in the circumstances.⁹ Express words and a signature are the usual forms, but a nod of the head will do if the circumstances give it that meaning.¹⁰ A lawyer who privately resolves to file a complaint but says and does nothing to signal the plan has manifested no promise. A lawyer who writes that the complaint will be filed has manifested one, whatever private doubts remain about getting to it.

The phrase “justify a promisee in understanding that a commitment has been made” sets the threshold. Not every assertion or statement of intent qualifies as a promise, and unless clear language of commitment is used, the question can be hard. Words and conduct are read in all the relevant circumstances to see whether the speaker manifested an intent to commit to a particular performance or course of action.¹¹ Clear commitment language makes the case easy, and without it the setting of the conversation carries the weight.

Apply the definition to a lawyer's everyday remarks and three kinds fall away. A prediction (“I think we will probably win”) reports an expectation about a result and commits the lawyer to nothing specified. A hope (“I hope to have this filed on time”) expresses an attitude toward a goal. An invitation (“send me your documents and we can discuss working together”) proposes further dealings. None manifests a commitment, and none is an assurance that a thing will or will not be done, which is another way the cases describe a promise.¹² The line does not depend on who controls the outcome. A promisor need not promise action on his or her own part, and an assurance that it will rain tomorrow, or that a third person shall paint a picture, may be a promise.¹³ A lawyer who flatly assures a client of a result may therefore have made a promise even though a court decides the outcome.

A manifested commitment can still fall short of a contract. The law does not remedy every broken promise, and a promise that satisfies the definition may carry only moral or social weight.¹⁴ In Cohen v. Cowles Media Co., the court was not persuaded that a news source and a reporter ordinarily believe they are making a legally binding contract. Both understand that the reporter's promise of anonymity is given as a moral commitment, and a moral obligation alone will not support a contract.¹⁵ The court added that the law does not create a contract where the parties intended none and does not treat every exchange of promises as binding.¹⁶ Gift promises show the same gap, for Helena's promise to her eight-year-old nephew was held an unenforceable gift promise because she did not make it with the motive of extracting something in return.¹⁷

Which promises the law does enforce is the subject of the sections on agreement and bargain, and the definition of promise asks only whether a commitment was manifested. Other questions arise once a promise exists. One casebook problem asks whether Loral would have been justified in renouncing price increases it had agreed to, and whether agreeing to them without meaning to pay as agreed would have been bad faith.¹⁸

The verb and its setting separate the two. The first lawyer's belief, joined to an express disclaimer, withholds commitment. The second lawyer names the conduct and the date, and a reasonable client would take the words as a commitment. A lawyer who starts drafting the complaint in silence might also manifest a commitment through conduct, a possibility the section on how promises are made takes up.

Promisor and Promisee

Two companion definitions name the parties to a promise. The person manifesting the intention is the promisor.²⁰ The person to whom the manifestation is addressed is the promisee.²¹ Every promise has a speaker and an addressee, and the two labels follow those positions.

The labels attach to a promise, not to a person, so one person can hold both roles in the same engagement. In a bilateral contract each party is a promisor as to its own performance and a promisee as to the performance the other has promised.²² The lawyer is therefore promisor on the services and promisee on the fee, and the client holds the reverse positions.

The labels survive even when the promise fails. In one casebook illustration, F offers to pay P $100 if P stops firing his rifle at birds in F's backyard in violation of a city ordinance. F is the party who made the promise to pay, and P, to whom it was addressed, is called the promisee. F's promise is unsupported by consideration because P was already legally obligated to refrain.²³ Naming the parties is one step and deciding enforceability is another.

A question asking who the promisor is cannot be answered until you know which promise is under examination. A lawyer suing for an unpaid fee is enforcing the client's promise to pay, so the client is the promisor in that dispute. A client suing over a missed filing deadline is enforcing the lawyer's promise, and the lawyer holds the promisor's role there.

The definition of promisee contains a requirement that is easy to miss: the manifestation must be addressed to someone. An assurance has to be made to the person who is to receive it. In the offer setting, an internal memorandum from a corporate officer to the company's accounting department about an employee's pay is not an offer, because an offer requires communication to the offeree.²⁴ The definition of promise reflects the same idea by asking whether the statement justified a promisee in understanding that a commitment had been made, which presupposes a person in that position.²⁵

Being the addressee also separates a promisee from a person who merely gains when the promise is performed. That person is a beneficiary, the label taken up next.²⁶

Third-Party Beneficiaries

Where performance will benefit a person other than the promisee, that person is a beneficiary.²⁸ The definition turns on a comparison. Ask who gains if the promisor does what was promised, and then ask whether that person is the one to whom the promise was addressed. A promisee who gains holds an ordinary position in the promise, while anyone else who gains is a beneficiary. The label describes a position in relation to a promise, as promisor and promisee do, and it says nothing yet about what the beneficiary may do if the promise is broken.

Contracts spill onto people who took no part in making them. A landscaping contract between a property owner and a landscaper gives the neighbors a better-looking street, and a county's contract with a construction company to improve a road benefits everyone who uses the road. In a complex economy, vast numbers of contracts between strangers make facilities and services available that would not otherwise exist.²⁹ Persons benefited by a contract to which they are not a party are third-party beneficiaries.³⁰

Whether such a person may enforce the contract is a separate question. Traditionally, two types of third-party beneficiary, creditor beneficiaries and donee beneficiaries, were allowed to enforce a contract to which they were not party.³¹ The Restatement (Second) drops those labels. Under it only intended beneficiaries can sue, and a beneficiary is intended when the parties intend to create a right to performance in the beneficiary and either the promisee owes money to the beneficiary or the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.³² The neighbors in the landscaping example are beneficiaries by definition. Unless something shows the owner meant them to have a right to the landscaper's performance, they are incidental beneficiaries and cannot sue.

The older rule, associated with Lawrence v. Fox, holds that an action lies on a promise made by the defendant upon valid consideration to a third person for the benefit of the plaintiff, although the plaintiff was not privy to the consideration.³³ A debt supplies the standard case.

Creditor also meets the Restatement's test for an intended beneficiary, assuming the parties meant Creditor to have a right to Buyer's performance. Debtor, the promisee, owes Creditor money, which satisfies the second branch of that test.³⁴ The neighbors in the landscaping example have no such tie to the promisee, and that difference belongs to the question of enforcement, not to the beneficiary label.

Lawyers meet beneficiaries because work done for one client often reaches people who never signed an engagement letter.

Professional-responsibility law takes notice of people like the niece. An attorney pursuing a claim may owe an obligation to someone other than the client, someone whose hopes ride on the claim. According to one illustration, the attorney would be accountable to a nonclient for negligence, and Lucas v. Hamm is a well-known supporting authority.³⁵ Whether the niece could actually recover depends on rules beyond the definition of beneficiary.

The usual error is to treat the label as a right to sue. Applying the definition requires only a comparison between the person who gains and the person to whom the promise was addressed. Whether that person can enforce the promise is a further question, answered by sorting intended beneficiaries from incidental ones.