The following sounds like a typical law school contracts exam question: Two sisters enter a contract to split all gambling winnings between them. They have a falling out, and don't speak to each other for years. One day, one sister wins the lottery and the other sister demands her half. The lottery-winning sister claims the contract isn't enforceable, the other sister claims it is. Who is right?
That is precisely what happened in Connecticut between 83-year-old Theresa Sokaitis and her 87-year old sister, Rose Bakaysa. They both used to gamble together frequently, play the same lottery numbers for years, and regularly play the card and slot machines at the Foxwoods Resort Casino in Connecticut. They always shared their earnings.
Theresa won more than $160,000 playing poker at Foxwoods in 1995 and split it with Rose. They then agreed to share all future winnings. The sisters entered into a signed agreement, they even notarized it. The agreement stated that they would share in any future winnings from lottery, cards, casinos and bingo.
Recently, Rose won the $500,000 Powerball jackpot, and rather than splitting the amount with Theresa, she split the earnings with her brother, Joseph F. Troy Sr., with whom she purchased the lottery ticket with. Theresa didn't even know about the win, she saw the numbers in the paper, which were the same numbers they used to play. She then demanded her share.
Theresa filed a lawsuit against her sister claiming a breach of contract. First, the lower court dismissed the suit under a Connecticut law that makes gambling contracts illegal. After an appeal, the higher court recently ruled that the sisters' agreement involved legal activities, shouldn't have been dismissed, and the case can go to trial.
Is This a Contract?
One of the very first things you learn in law school is that a contract requires three things: an offer, acceptance and consideration. Here, the first two elements are obviously present. The consideration, although less obvious, is also present. Consideration means something of value given by both parties to a contract that gets them to enter into the agreement. As the highest court in Connecticut ruled, the consideration in this case is the sisters' mutual promises to one another to share in the winnings they received. However, the consideration is not the actual money that is won, which is an important distinction.
Is This Agreement Legal?
While a contract may be present, there can be many instances when it isn't enforceable, for instance when the subject matter is an illegal activity. For example, if two parties have an agreement to sell drugs, one party can't later sue the other for breach because the subject matter of the contract is illegal. Here, the state supreme court ruled that the subject matter, lottery winnings, are legal, and so the contract is valid in that respect.
In Connecticut, there is a law that forbids private "wagering contracts." A wagering contract is an agreement that, upon the happening of an event (like winning the lottery), one party will give something to the other. These types of contracts are governed by the Gaming Act. Rose's attorney claims that this law makes the agreement void.
While the Connecticut statute mandates that contracts splitting wagers "shall be void," the court decided that this can't be the final law in Connecticut, which has authorized gambling.
Is the Agreement Enforceable?
Assuming that there is a valid contract, the next issue is has it been revoked? The sisters have not spoken to each other in years. However, they never formally revoked the agreement. One sister claims the contract is still valid, that she still had an expectation of it being fulfilled. The other sister claims that by not speaking to each other for years, it is obvious that there was no longer an agreement. This issue also will be presented in court.
The case is expected to go to trial within the next six months, the outcome is uncertain. However, this case will surely appear in contracts law textbooks.
What Can I Learn from This?
The lessons from this story are: Be careful when making contracts, it's easy to enter into an agreement such as this for something that seems unlikely to occur or to even forget about it. However, courts may see it another way and enforce such agreements.
Have an attorney review your contracts so that you can be made aware of future issues that may arise.
Also, it may be wise to insert an expiration clause stating that the contract expires on a certain date so that it is not floating around indefinitely.
Questions for Your Attorney
- Is it possible to create a binding contract verbally to share lottery winnings, for example with those "what if I win" chats you might have at a family gathering?
- If you think you've made a contract to share lottery winnings, what's the surest way to revoke the contract?
- How difficult is it to bring a lawsuit to enforce a verbal contract? What if there were no witnesses?