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Posted: January 21, 2018

Contract Claim Should Not Have Been Dismissed for Lack of Consideration

On January 17, 2018. the Second Department issued a decision in Nassau County v. New York State Urban Dev. Corp., 2018 NY Slip Op. 00300, holding that it was error to dismiss a contract claim for lack of consideration, explaining:

The only question before us is whether the County-UDC Agreement is supported by valid consideration. The Supreme Court, in relevant part, accepted the contention of UDC and DASNY that the County-UDC Agreement was unenforceable for lack of consideration. Specifically, they contended that UDC’s actions in connection with the design and construction of the Aquatic Center were undertaken solely as a result of UDC’s statutory duty to implement the legislative appropriation of $24 million to complete the Aquatic Center project. In other words, UDC claimed that it received no benefit from its participation in the project, and that none of its actions were the result of a bargained-for exchange with the County. We disagree.

At the outset, while the project documents are silent as to any compensation, financial or otherwise, received by UDC for its management of the project, UDC and DASNY failed to produce evidentiary materials in admissible form to support the contention that UDC received no such compensation. In any event, even assuming that UDC did not receive anything of value for its role in the project, this does not establish, as a matter of law, that the County-UDC Agreement is invalid for lack of consideration. ” Consideration consists of either a benefit to the promisor or a detriment to the promisee. It is enough that something is promised, done, forborne, or suffered by the party to whom the promise is made as consideration for the promise made to him or her.. The detriment suffered or the thing promised need not benefit the promisee or a third party, or be of substantial value to anyone.

Here, there is evidence in the record that the $24 million appropriation proved insufficient to complete the Aquatic Center, and but for the County’s promise to fund future cost overruns, which was specifically incorporated into the County-UDC Agreement, the project could not have gone forward as planned. In fact, the cost-overrun provision of the County-UDC Agreement bears all the hallmarks of a negotiated agreement. It makes clear that the County bears no responsibility for any portion of a cost overrun attributable to any fees payable to either UDC or DASNY, and it requires UDC to refund any overpayment of a cost overrun to the County upon completion of the project. Contrary to the contention of UDC and DASNY, the County’s promise to fund future cost overruns constitutes a specific, bargained-for legal detriment.

(Internal quotations and citations omitted) (emphasis added).

Contract law–usually straightforward–has traps for the unwary, like the requirement that there be consideration for a contract to exist. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client face a situation where you are unsure whether a contract exists.

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