Commercial Division Blog
Contract That Did Not Recite Past Consideration Upon Which it Was Based Unenforceable
On November 2, 2017, the First Department issued a decision in Korff v. Corbett, 2017 NY Slip Op. 07677, dismissing a breach of contract claim because the contract upon which it was based did not recite the past consideration upon which it was based, explaining:
General Obligations Law (GOL) § 5-1105 provides:
A promise in writing and signed by the promisor or by his agent shall not be denied effect as a valid contractual obligation on the ground that consideration for the promise is past or executed, if the consideration is expressed in the writing and is proved to have been given or performed and would be a valid consideration but for the time when it was given or performed.
It essentially codifies the notion that generally, past consideration is no consideration and cannot support an agreement because the detriment did not induce the promise. That is, since the detriment had already been incurred, it cannot be said to have been bargained for in exchange for the promise. However, General Obligations Law § 5-1105 makes an exception where the past consideration is explicitly recited in a writing. To qualify for the exception, the description of the consideration must not be vague or imprecise, nor may extrinsic evidence be employed to assist in understanding the consideration. . . .
Turning to the merits, we observe that the Agreement does not say why defendants are agreeing to pay plaintiff the sums recited therein. Although paragraph 1 says, "All my firm's legal bills and interest thereon ... will be cleared up out of the first available financing sources," only plaintiff is the beneficiary of the promises made by defendants in paragraphs 2 and 3. Thus, while paragraph 1 arguably establishes the presence of consideration given by plaintiff's firm, the other two paragraphs say nothing of consideration given by plaintiff himself. One must rely on plaintiff's deposition testimony ("The consideration for the July 1990 letter involved business services that I had rendered to" Corbett) or affidavit ("the claims here relate to my entitlement to compensation for work I ... performed on behalf of Defendants prior to 1989") to discern the consideration for the payments promised by defendants there. As stated, in seeking the exception afforded by General Obligations Law § 5-1105, resort to such extrinsic evidence is impermissible.
(Internal quotations and citations omitted) (emphasis added).