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Current Developments in the Commercial Divisions of the
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Posted: March 9, 2018

Alleged Oral Contract Not Void for Lack of Consideration

On February 8, 2018, Justice Kornreich of the New York County Commercial Division issued a decision in Coelho v. Grafe Auction Co., 2018 NY Slip Op. 30235(U), holding that an alleged oral contract was not void for lack of consideration, explaining:

That said, and although plaintiff does not move for summary judgment, the court’s review of the record impels it to sua sponte grant plaintiff summary judgment on defendants’ defense of lack of consideration. As noted earlier, defendants’ contention that plaintiff did not provide any consideration borders on the frivolous. While the parties dispute the value of plaintiffs contributions, in the commercial context, so long as there is some consideration, that is enough to form a binding agreement. Regardless, it strains credulity for defendants to contend that GAC received nothing of value from plaintiff after having paid him more than $300,000 for his work. While the parties may dispute whether the Letter Agreement governs, defendants may not argue at trial that it is unenforceable for lack of consideration.

(Internal citations omitted) (emphasis added).

New York contract usually is straightforward. One non-obvious rule of New York contract law is that a contract must be supported by consideration. That is, each party must receive something of value in exchange for what it gives up under the contract. As this decision shows, particularly in commercial transactions, a court usually will not second guess a party on the question of whether the consideration is sufficient. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client face a situation where you are unsure how to enforce rights you believe you have under a contract.

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