Also known as:promissory restraint · promissory restraint on alienation
Written by attorneys · grounded in primary & secondary sources — see below
A restraint on alienation that arises when the holder of an interest in property promises not to alienate it. Such a promise creates contractual liability upon breach but does not automatically void the attempted transfer or cause forfeiture of the interest.
Sources & Authorities
How it applies
Common Examples
2
Unreasonable Right of First Refusal
Pilar Pena received a storefront under her father's will subject to a right of first refusal held by Patriot Insurance at a price fixed to 2012 rent levels with a ninety-day exercise window. Years later rents had risen sharply and a third-party buyer offered market value. When Patriot Insurance sought to match at the outdated formula price, the provision operated as a promissory restraint because its price and timing terms were unreasonable at the time of the donative transfer.
Leasehold Covenant Breach
Pierce Patterson leased commercial space from Pinnacle Holdings under a lease containing a covenant not to assign without consent. When Patterson assigned the lease to a competitor without obtaining consent, the assignment breached the covenant and exposed Patterson to contract damages. The covenant functioned as a promissory restraint rather than disabling or forfeiting the leasehold interest outright.
How does a promissory restraint differ from a disabling restraint?+
A promissory restraint arises from a covenant not to alienate and creates only contractual liability upon breach. A disabling restraint renders any attempted transfer void by its terms. Courts treat the two categories differently when determining validity under the rule against restraints on alienation.
Supporting sources
When is a right of first refusal treated as a promissory restraint?+
A right of first refusal becomes a promissory restraint when its price or exercise period terms are unreasonable at the time of the donative transfer. In that event the provision is evaluated under the rules governing promissory restraints rather than being insulated from restraint analysis.
Supporting sources
Are promissory restraints on life estates or terms of years enforceable?+
A promissory restraint on a legal possessory estate for life is valid. A similar restraint on an estate for years is valid only if it satisfies additional conditions set out in the Restatement of Property.
Supporting sources
What remedy follows breach of a promissory restraint?+
Breach of the covenant gives rise to an action for damages or specific performance. The attempted transfer itself remains effective unless an independent ground for invalidity exists.
866 N.E.2d 882 (Mass. 2007)Property
…company now owned and operated by the defendant. [^maj-5]: Section 413(1) of the Restatement of Property (1944) states: "A promissory restraint or forfeiture restraint on the alienation of a legal estate in land which is in the form of a provision that the owner of the estate shall not sell the same without first offering to a…
Trusts and Estates Trusts and Future InterestsTrusts · Alienability of trust interestsUBEFoundational