Past and future: attempts to prospectively alienate property.

• Author: Tymoczko, Alexei

Compare the following examples:

Aunt's note to nephew promising three thousand dollars with mark "Value Received." (2)

Father's gift of real property and promise to pay two mortgages to disabled daughter in return for a dollar, with physical delivery of deed. (3)

Father's gift of a painting to son with life reservation. (4)

In each example, there is a uniform donative intent: intent to make a future transfer of property to another (hereafter, a future gift). (5) In each example, the prospective donee made a claim against the estate of the donor to enforce the gift. (6) In each example, the prospective gift failed to satisfy the Statutes of Wills, but the issue of wills was never dispositive. (7) Instead, the courts examined the central question of whether the legal form was sufficient for the enforcement of a transfer of goods. (8) The courts have held that even when the donative intent is identical, the transfer of goods is defeated when the form of the transfer is insufficient. (9) The required form extends beyond basic legal terminology: in the first two cases the donors had some understanding of contracts. (10) "Value Received" and the tender of a dollar are both attempts to demonstrate consideration, without the precision of the legal art. (11) The required level of legal form, however, is not a physical demarcation, but merely an advanced understanding of the law. In essence, when the substance of the contract is ignored and the form is examined, the seal is reinstituted. (12)

This note compares the fundamental policies and principles underlying the requirements of gift delivery and contract consideration with the fundamental policies and principles underlying the seal. (13) Historically, the seal could be used to create a legal obligation allowing the enforcement of a future gift. (14) Today, the courts present inconsistent results allowing future gifts only when accompanied by extremely sophisticated legal form, and disallow future gifts when legal form is inadequate, such as with the failure of delivery or consideration. (15) Ironically, the modern elements of gift and contract that prevent a future gift from legal enforcement mirror the purpose of the seal. (16) This paper examines the history of the seal and the problem of inconsistent holdings based on legal form, and suggests a technological solution to the problem of inconsistency.

The mere requirement of legal sophistication as an element of a future gift is not necessarily problematic. (17) Inconsistent court holdings, however, present a legal barrier that reduces the ability of a property holder to transfer or alienate property. (18) A seal is a legal form that any lay person can easily grasp and achieve, without the expenditure of excessive funds or legal knowledge. (19) The absence of consistent guidance on the part of the judiciary combined with a requirement of legal sophistication create a generally insurmountable barrier to property transfer as a future gift. (20)

This modern problem arises from the discontinuation of a historical concept, but a novel modern solution exists. (21) Forms of modern technology can address the policies underlying the three legal concepts of seal, delivery, and consideration. (22) Specifically, three types of technology embody several of the goals of the abovementioned legal form: authentication, transmission, and storage technologies. (23) This note will examine technologies related to authentication, such as watermarks and digital signatures, to transmission, such as various high-speed data methods, and to storage technologies, including the current use of banks and registries, and suggest how future gifts could be effectuated combining a legal theory (either old or new) with technology. (24)

This note is divided into three main sections. The first section examines the historical use of the formal seal and the related legal powers associated with authentication and legal obligation. The second section examines modern American law and various approaches to effectuating future gifts. Finally, the third section suggests the use of modern technology to solve both the historical vulnerabilities of the seal and the modern inconsistencies in effectuating a future gift. (25)

1. HISTORY

   Historically, the seal was a legal method of documentation, authentication, and, therefore, enforceability of documents. (26) The formal seal has been implemented as a legal method since recorded time. (27) Two main legal implementations of the seal are examined here: Ancient and Roman, and English common law. Over time, the seal has reflected several important functions: ritual, authentication, and legally binding significance. (28)

   Under ancient laws, functionaries, both religious and governmental in nature, used the formal seal to effect and authenticate gifts. (29) In pharaonic Egypt, the seal gave public status to non-will documents that would allow a post-mortem transfer of property. (30) Many of the early uses of the seal were religious in nature, partially reflecting the solemn nature of the seal ritual itself. (31) Under Roman law, public officials or private professionals who acted as early notaries could legally recognize documents and create a corresponding legal obligation. (32) Public officials became keepers of legal documents, with the associated power of authentication. (33) Private professionals drafted and kept legal documents, which could be authenticated and recognized through judicial intervention. (34)

   The purposes of authentication and public exposure of documents through seals continued into the Middle Ages. (35) Documents, particularly deeds, placed under seal would be kept in a royal depository. (36) The seal could therefore be used to defeat fraud by use of comparison between a public document and the recorded royal seal. (37)

   Early English common law continued the requirements of the formal seal for authentication of documents, but over time and particularly under American law, the requirements began to fade. (38) English common law initially added greater legal significance to the seal with respect to written documents while adding further requirements to the formalities of the seal. (39) Property transfer and promises both required formalities, including a description of the parties and the promise, a formal seal, and the delivery of the written document. (40) Although English common law initially strengthened the doctrine of the seal, many of the benefits of the formal seal disappeared as literacy increased. (41) In particular, the use of the seal became redundant because of the signature. (42) The signed document began to replace the functions of authentication and ritual that had been associated with the seal. (43) As the purpose of the seal to authenticate the parties declined because of the increase of literacy and signatures, the ability of the seal to bind parties also disappeared. (44)

   Although the signature replaced the seal regarding the functions of authentication and ritual, it failed to create a corresponding ability to effect legal obligation. (45) In particular, the overall use of the seal as a form of public documentation and authentication, in combination with the ability to bind parties, disappeared. (46) The disappearance of the legal seal brought with it a change in the law restricting the ability of an individual to create a binding personal legal obligation. (47) The inability to freely create such a legal obligation also resulted in the inability to freely transfer property at a future time; therefore, the future promise became increasingly difficult to make.

2. CURRENT LAW

   The formal seal is now an archaic legal form in most modern jurisdictions. (48) Notwithstanding [section] 95 of the Restatement (Second) of Contracts, which states that a promise may be binding without consideration if sealed, the seal is now largely meaningless in modern law. (49) Currently, two-thirds of United States jurisdictions have changed the role of the seal by statute, thereby removing an effective way of creating a future gift. (50) Nevertheless, donors continue attempts to make future transfers of property. Some attempts, such as creating a legal or equitable life estate followed by a remainder, have been successful but require relatively sophisticated legal knowledge. (51) Most attempts, such as an attempted gift or contract, fail under the requirements of property and contract law. (52) This section covers modern attempts to effectuate a future gift by comparing the requirements of successful methods to the shortcomings of unsuccessful methods. This section will pay particular attention to the general invalidation of gifts when delivery is absent, with focus on the policy function of delivery as a requirement for a valid gift.

   In cases involving future gifts, especially following the death of the donor, Statutes of Wills have the potential of disposing with any problem. (53) Courts could decide that a future gift should at least meet the statutory requirements of the Statute of Wills, especially if the gift could be finalized after the death of the donor. (54) Nevertheless, in virtually all such cases the Statute of Wills is not even discussed. (55) In those cases in which such statutes are discussed the requirements of a legal will are rarely dispositive. (56) Instead, in those cases where a future gift is bound on the outer limit by death and therefore arguably has a testamentary nature, court decisions are still made based on underlying contract or property law. (57)

   The absence of Statutes of Wills in cases of future gifts is surprising considering the potential conflict between language in a future gift and language in a will. (58) Generally courts have only addressed this issue when conflicts arise between present gifts and wills through the theory of "ademption." (59) In the event that there is insufficient or absent property in an estate to fill a specific bequest, the theory...