Engagement Ring: Consideration or Gift?
A big part of any newly corporate individual’s life can often be marriage. Now that you have money you can afford to purchase the ring for your sweetheart and begin the wonderful process of wedding planning. In the case of a male, wedding nodding and saying “yes dear, that sounds great.”J/K. Well one question is “what does the engagement ring mean?” besides its symbolism for commitment and love. What I mean is, is an engagement a gift from a donor to a donee, or is it consideration from an offerer to and offeree. This may appear not important (possibly heartless), but if the unthinkable happened, and the engagement is called off, this is vital in determining who gets the ring back!!
This issue has been debated in many states. There are approx. three solutions to the ring problem it is either 1) an Unconditional Gift, 2) a Conditional Gift, or 3) Consideration in an express contract. Each situation is dealt with differently.
Conditional Gift: Majority of states have sided with this theory. That is, the ring is a gift that isn’t final if the marriage doesn’t occur. Much like getting to play your Nintendo if your grades are good, but once they are bad, no more Super Mario Bros.
Unconditional Gift: Montana rejected the Conditional theory and went right to the proposers throat! In Heiman v. Parrish the Supreme Court ruled that acceptance of the engagement ring was more than enough to complete the gifting process (intent to give, delivery of gift, and acceptance of gift).
Express Contract: This is the idea that the engagement is merely a waiting period until a contract is carried out. In order for a contract there must be consideration on both sides: wedding ring is one consideration, Marriage the other consideration. If one side does not fulfill their promise (Not marrying you), the contract is void and most likely both parties are returned to their original position preventing any unjust enrichment. Stay tuned in NYC to see if this works out for our NY readers. One ex-fiance is suing his ex to get back a $30,000 ring that was given to the granddaughter of a slain Gambinio Crime-Family Boss. Maybe it should be a sunk cost to him.
In the meantime, My CPA instructor Peter O’Lento with Becker Review suggests avoid giving rings around holiday times because the ring may be construed as an unconditional gift, instead of consideration in a contract! Now I hope no one finds this useful because I hope no ones engagement ends this way! Nonetheless, I thought this was an interesting topic for young professionals to consider.