Contract Law 12 I Apfel v Prudential Bache Securities (worthless computer technique)

TL;DR

Can consideration be sufficient even if it loses its value following contract formation? This case explores the importance of novelty and value in determining the validity of consideration.

Transcript

today we're going to discuss whether consideration can be sufficient even if it loses its value following contract formation we'll explore this question by looking at Apfel versus Prudential Base securities a case decided by New York state's highest court in 1993 the plaintiffs an investment banker and lawyer approached an investment bank the prede... Read More

Key Insights

• 🥳 The consideration doctrine does not focus on the equivalence of exchange or the value of what each party promised.
• ⌛ The time of contracting is crucial in determining the validity of consideration, even if its value diminishes afterwards.
• ⌛ Novelty is not a requirement for valid consideration, as long as the idea had value to the defendant at the time of the contract.

Questions & Answers

Q: Does an idea need to be novel to be considered valid consideration?

No, according to the Court of Appeals in Apfel v. Prudential Base Securities, an idea does not need to be novel to constitute valid consideration. Value at the time of contract formation is the crucial factor.

Q: What was the defendant's argument regarding the novelty of the ideas?

The defendant claimed that the ideas were already in the public domain at the time of the contract. They argued that novelty was a requirement for a valid consideration.

Q: How did the Court of Appeals refute the defendant's argument?

The Court stated that even if the idea itself was not novel, it was novel to the defendant. This indicated that the idea had value to the company, satisfying the requirement of valid consideration.

Q: Was the amount paid by Prudential for the plaintiffs' proposal disclosed in the case?

No, the opinion does not provide any information about the specific payment made by Prudential Base Securities for the plaintiffs' proposal.

Summary & Key Takeaways

• In Apfel v. Prudential Base Securities, the plaintiffs proposed a new system for issuing municipal bonds, and the defendant entered into a contract with them.

• The defendant stopped making payments, arguing that the ideas were not novel and, therefore, not valid consideration.

• The Court of Appeals determined that novelty is not required for valid consideration, as long as the idea had value to the defendant at the time of contract formation.