Chapter 2 CONSIDERATION

• Jurisdiction: New York

Chapter Two

Consideration

I. Consideration

An agreement requires consideration.¹⁰⁹² There must be consideration in order to make a contract valid.¹⁰⁹³ A promise without consideration is not a contract but simply an unenforceable promise.¹⁰⁹⁴ Professor Corbin describes consideration as a quid pro quo; at a minimum bargained-for exchange. Promissory estoppel and past consideration are categories of a bargained exchange.¹⁰⁹⁵ A promise usually is consideration for a return promise.¹⁰⁹⁶ As in all unilateral contracts, the acceptance of the offer and the performance of the consideration by the offeree consisted of the identical act.¹⁰⁹⁷ Because the letter agreement at issue was a unilateral contract, it did not need to be supported by a mutual promise from plaintiff to be enforceable.¹⁰⁹⁸

The general rule is that a promise made by one party with none by the other is void; unless both are bound so that either can sue the other for a breach, neither is bound.¹⁰⁹⁹ A promise not supported by a consideration is a nudum pactum.¹¹⁰⁰ That a valid consideration is an essential element of an agreement cannot be doubted; it is a material and indispensable element of every contract—the existence of a contract implies consideration.¹¹⁰¹ An offer not given for consideration may be revoked at any time.¹¹⁰²

Fundamentally, consideration consists of either a benefit to the promisor or a detriment to the promisee,¹¹⁰³ which has been bargained for by the parties to the contract.¹¹⁰⁴ The dual notion of consideration as either a benefit to the promisor or a detriment to the promisee persists and is an integral part of the enforceability of contracts.¹¹⁰⁵

Corbin states that "courts, in general, insist that either a detriment incurred by the promisee or a benefit received by the promisor at the request of the promisor exist before consideration will be found":

Both benefit and detriment in this context have a technical meaning. Neither the benefit to the promisor nor the detriment to the promisee need to be actual; rather, it is a sufficient legal detriment to the promisee if he promises or performs any act, regardless of how slight or inconvenient, which he is not obligated to promise to perform so long as he does so at the request of the promisor and in exchange for the promisee. ¹¹⁰⁶

Courts have long held that it is competent for parties to make whatever contracts they please, so long as there is no fraud or deception or infringement of law; and the fact that the bargain is a hard one will not deprive it of validity.¹¹⁰⁷ It is not for the court to decide whether the defendant made a good or bad bargain.¹¹⁰⁸

II. Promise and Consideration Must Each Be the Motive For the Other

The promise and the consideration must purport to be the motive each for the other, in whole or at least in part; it is not enough that the promise induces the detriment, or that the detriment induces the promise if the other half is wanting.¹¹⁰⁹ The fortuitous presence in a transaction of some possibility of detriment, latent but unthought of, is not enough; the promisor and promisee must have dealt with it as the inducement to the promise.¹¹¹⁰

Rose v. Elias¹¹¹¹ held that although the plaintiff's claim alleged that she forbore job opportunities at the defendant's oral request, the defendant's written promise to provide an apartment for her was unambiguously complete; to wit, that the parties did not view her forbearance from accepting job opportunities as consideration for the promise.

Where an agreement clearly and unambiguously sets forth the consideration, no new consideration may later be reviewed by the court where it is clear that the parties did not view the additional consideration for the promise.¹¹¹² A covenant to do what one is already under a legal obligation to do is not sufficient consideration for another contract.¹¹¹³

Williston discusses the distinction between consideration and motive:¹¹¹⁴

Though a desire to obtain the consideration for a promise may be, and ordinarily is the motive inducing the promisor to enter into a contract, this is not essential, and, indeed, motive alone cannot serve as consideration. For example, if A is induced by friendship to agree to move from one country to another and to build a house upon a site to be conveyed to him by B, though A's motive for entering into the transaction is friendship, if there is an actual bargain to this effect there will be a contract. And this result would be the same regardless of A's motive, and even if it were enmity. By the same token, if there is no legal consideration, no mere motive such as love and affection, close friendship or desire to do justice, a desire to avoid trouble, or to provide for a child, or to express regret for having caused some difficulty will support a promise.

[C]onsideration is a present exchange bargained for in return for a promise. . . . [T]he law in most common law jurisdictions, including the majority of the United States, does not require that the cause or motive of the promisor actually induce the making of this promise or that the promisee in rendering his performance or in uttering his return promise actually be induced or motivated by that promise; rather, it is enough that one party manifest an intention to induce the other's response and to be induced by it and that the other responds in accordance with the inducement.

In Jacobs v. Jacobs,¹¹¹⁵ the plaintiff and Jacobs were married. The plaintiff commenced divorce proceedings against Jacobs. The plaintiff and Jacobs entered into a stipulation of settlement on the record wherein Jacobs agreed to make various payments. The defendant, Jacobs's paramour, was present in open court and participated in the colloquy with the parties and the court. The defendant agreed to guarantee certain payments; although the defendant's execution of a written guarantee was discussed, it was never accomplished. The judgment of divorce declared the defendant to be jointly liable with Jacobs on the respective obligations. The defendant and Jacobs were subsequently married.

Following Jacobs's death, the plaintiff stopped receiving the various payments, whereupon she commenced an action against defendant based on her guarantees. The Appellate Division noted that CPLR 2104, by its clear and unequivocal language, does not apply to nonparties and could "pose serious problems."¹¹¹⁶ Considering ordinary contract principles, the court observed that although the defendant had not received new consideration from the plaintiff, the guarantees were, nevertheless, enforceable under ordinary contract principles. Consideration existed for the defendant's guarantee of the obligations assumed by Jacobs in the divorce settlement because the plaintiff's acceptance of the settlement was conditioned upon the defendant's guarantees.

III. Prenuptial Agreements andPostnuptial AgreementsAre Governed Under Ordinary Contract Law

As contracts governed by the principles of ordinary contract law,¹¹¹⁷ postnuptial agreements and prenuptial agreements require consideration¹¹¹⁸—mutual promises, undertakings, and covenants contained in a prenuptial agreement such as the waiver of each party's rights to the other party's separate property constitutes consideration.¹¹¹⁹ In the distribution of marital property, N.Y. Domestic Relations Law § 236B(5)(d)(13) (DRL) requires the trial court to take into account "any transfer or encumbrance made in contemplation of a matrimonial action without fair consideration." A transfer in consideration of marriage constitutes fair consideration.¹¹²⁰

An agreement must be in writing if it is made in consideration of marriage except for mutual promises to marry.¹¹²¹ Significantly, pursuant to statute, marital agreements, prenuptial and postnuptial agreements must be in writing ab initio;¹¹²² an oral agreement, pre- or postnuptial, is unenforceable. Mutual releases are integral components of marital agreements; each promise expressed in a mutual release constitutes a valuable consideration for the other.¹¹²³ A breach of promise to marry is not actionable.¹¹²⁴

Courts search prenuptial agreements for valid consideration¹¹²⁵ and parties litigate the presence or absence of consideration in prenuptial agreements.¹¹²⁶ In Ranieri v. Ranieri,¹¹²⁷ the plaintiff and the defendant were purportedly married by a "minister" of the Universal Life Church (ULC). One day before the "marriage," they entered into an agreement that the defendant would pay the plaintiff $90,000 within 90 days of the marriage, the consideration for which was their "plan to marry and to execute a prenuptial agreement whereby [the plaintiff] will relinquish valuable marital rights that she may have." The parties cohabited for 84 days before the plaintiff sought a judgment, inter alia, declaring the marriage "a nullity and void ab initio" because "the ULC minister had no statutory authority to perform a marriage." She also wanted the $90,000. The defendant, to avoid the $90,000 payment, alleged that a ULC minister does not fall within the statutory definition of clergyman or minister, and since the "marriage" was invalid, there was no valid consideration to support the Antenuptual Agreement thereby rendering it void and unenforceable. Relying on DRL § 11 and the Religious Corporations Law § 2, and other case law, the Appellate Division explained why the ULC was not a church under New York law, and declared the marriage void. It further declared the agreement void because "as a general proposition, since antenuptial agreements conditioned upon marriage are unenforceable where the marriage is subsequently declared void on the theory that the consideration therefor had failed."

Although the husband in Werther v. Werther¹¹²⁸ had complied with the consideration set forth in the prenup, to wit, his execution of a deed transferring his residence, owned by him separately before the marriage, to the wife individually, which was the "bargained for consideration" of the...