Commercial Division Blog
Contract That Has Consideration When Entered Into Does Not Fail for Lack of Consideration if Circumstances Change
On August 20, 2014, Justice Ramos of the New York County Commercial Division issued a decision in Trilegiant Corp. v. Orbitz, LLC, 2014 NY Slip Op. 24230, declining to dismiss a breach of contract claim for lack of consideration.
In Trilegiant Corp., the plaintiff in a dispute over a services contract moved for summary judgment on three of the defendant's affirmative defenses. This post focuses on the court's decision on the defense of lack of consideration:
[The defendant] has raised the affirmative defense of lack of consideration. [It] contends that there had to be consideration for each quarterly termination payment and that [the plaintiff's] continued use of DataPass is necessary to its claim against [the defendant]. [The defendant] argues that the consideration for the termination payments was supposed to be [the plaintiff's] forfeit of potential earnings, earnings that [the plaintiff] cannot forfeit if it is not in the business of DataPass.
The law does not support [the defendant's] argument. It is well settled that an agreement should be interpreted as of the date of its making and not as of the date of its breach. Additionally, if there is consideration for the entire agreement that is sufficient; the consideration supports every other obligation in the agreement. A single promise may be bargained for and given as the agreed equivalent of one promise or of two promises or of many promises. The consideration is not rendered invalid by the fact that it is exchanged for more than one promise.
Considerations of public policy also support this conclusion, because a promisor should not be permitted to renege on a promise either because that specific promise lacks textually designated consideration or because the promisor wants to avoid performance of multiple obligations when the promisee has already performed and has no further obligations concurrent with the promisor's performance.
While [the defendant] contends that [the plaintiff] has been unable to forfeit earnings from new DataPass customers since it ceased the practice in January 2010, that fact has no bearing on whether there was consideration for the termination payment provision in the MSA. The termination payments were part of the original MSA, and [the plaintiff] is correct when it asserts that the existence of consideration for the MSA itself, whether consisting of either a benefit to the promisor or a detriment to the promisee, is not a disputed material fact in this case.
Additionally, courts do not look to the adequacy of consideration provided that there was consideration, absent fraud or unconscionability. There are no allegations that the MSA was fraudulently agreed upon or that it is unconscionable.
(Internal quotations and citations omitted) (emphasis added).