A hot-off-the-presses decision from New York's Appellate Division, First Department in its November 2, 2017 decision in Korff v. Corbett tackles a vexing problem:
What Happens When One Side to an Agreement Looks to Recover for Work it Previously Did?
Under New York law, the answer is rather tricky.
Here's why:
One of the basic rules regarding contracts is that each side starts out from ground zero, and assumes reciprocal obligations. "A" is required to pay "B" in exchange for the services that "B" will render.
In legalese, this is called consideration.
This doctrine inherently assumes that whatever happened in the past, is in the past; it works on a forward-looking premise.
Can Work Done in the Past Support a New Agreement in New York?
To that end, General Obligations Law (GOL) § 5-1105 provides as follows:
"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."
"What does that mean?" you ask.
Fortunately, the Korff court spelled out both the general rule, as well as the exception:
The General Rule
"It essentially codifies the notion that "[g]enerally, 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'" (Samet v Binson, 122 AD3d 710, 711 [2d Dept 2014], quoting Umscheid v Simnacher, 106 AD2d 380, 381 [2d Dept 1984])."
The (Narrow) Exception
"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to assist in understanding the consideration (see Clark v Bank of N.Y., 185 AD2d 138, 140 [1st Dept 1992], appeal withdrawn 81 NY2d 760 [1992]).
The Takeaway
At the risk of stating the obvious, the plaintiff in this case lost - and, assuming his claims were true, the loss was entirely avoidable; all he had to do was to assure that the basis for what he was being paid was clear, leaving nothing to interpretation. And that should not have been hard to do. After all, if he was able to explain it in an affidavit or at a deposition (which happened in this case), it was certainly possible to incorporate that into a contract.
