loku said:
This was an additional condition of employment and it is valid to impose such in an at-will work situation. In effect, the consideration is refraining from firing the employee.
My further response:
This is my point. A non-compete contract doesn't come into play when our writer is STILL employed by his current employer. It only comes into play AFTER he has left his employer for another company. What I'm trying to get across to our writer is that while his current employer may have "held a gun to his head" to sign the agreement, the question is one of enforceability by the employer. Unless there was good "consideration", then the "non-compete" agreement is voidable and, thereby, unenforceable by the employer. It is my opinion that our writer has nothing to be worried about IF he was not paid an amount, or a sufficient amount, for his signature on the dotted line.
Requirement of consideration
A sufficient consideration is an essential element of a contract. [CC §1550; for form of pleading of insufficient consideration, see §§ 24:113, 24:122] A gratuitous oral promise ordinarily is unenforceable. [Raedeke v Gibraltar Sav. & Loan Asso. (1974) 10 Cal 3d 665, 111 Cal Rptr 693, 517 P2d 1157 (discussing modification of written agreement)]
Consideration may be executed or executory, in whole or in part. [CC §1609] It generally consists of a performance or a return promise which is bargained for and given in exchange. The performance may be an act, a forebearance, or a change in a legal relationship. [Restatement 2d, Contracts §71; Witkin, 1 Summary of California L., Contracts §207 (9th ed.)]
Consideration is excused where there is an express promise to fulfill, or an unqualified acknowledgment and admission of, a moral obligation based on a legal obligation that is not enforceable, for instance because it was discharged in bankruptcy or is barred by the statute of limitations. [Witkin, 1 Summary of California L., Contracts §§242 – 247 (9th ed.)] The promise or acknowledgment must be in writing. [CCP §360; see, for example General Credit Corp. v Pichel (1975, 2nd Dist) 44 Cal App 3d 844, 118 Cal Rptr 913]
In Passante v. McWilliam (1997) 53 Cal.App.4th 1240, 62 Cal.Rptr.2d 298, an attorney had arranged for certain financing to be provided to a client. After the financing was in place, the Board of Directors of the client voted to give the attorney 3 percent of the stock of the corporation. When the client reneged, the attorney brought suit but did not prevail, because: (1) there was no consideration for the stock because the financing was in place before the promise by the client was made, and (2) if there were consideration, the attorney could not recover because he had not advised the client that it could seek independent counsel before engaging in the transaction.
Ascertainment of consideration
An executory contract need not specify the amount of the consideration or the means of ascertaining it. It may be left to the decision of a third person, or regulated by any specified standard. [CC §1610] However, a contract is void if it provides an exclusive method to ascertain the consideration which is on its face impossible to execute. [CC §1612]
When a contract does not determine the amount of the consideration, nor the method by which it is to be ascertained, or when it leaves the amount to the discretion of an interested party, the consideration must be as much money as the object of the contract is reasonably worth. [CC §1611]
An agreement that provides that the price to be paid or other performance to be rendered is left to the will and discretion of one of the parties is not enforceable. [Automatic Vending Co. v Wisdom (1960, 3rd Dist) 182 Cal App 2d 354, 6 Cal Rptr 31] That rule applies only if the total discretion granted one party renders the contract lacking in consideration. If there are reciprocal promises, the fact that the contract allows one party to set or change a price does not render the contract illusory, because that right must be exercised in good faith and according to fair dealing. [Perdue v Crocker National Bank (1985) 38 Cal 3d 913, 216 Cal Rptr 345, 702 P2d 503, app dismd 475 US 1001, 89 L Ed 2d 290, 106 S Ct 1170]
Sufficiency of consideration
Consideration must have some value, although it may appear insignificantly small. [See, for example, Kowal v Day (1971, 2nd Dist) 20 Cal App 3d 720, 98 Cal Rptr 118] Ordinarily, courts do not inquire into the value of consideration, especially where value might be difficult to determine. However, a valueless consideration tends to indicate that it is a sham or fraudulent transaction, or that there is no bargain at all. Valueless consideration may support rescission on grounds of lack of capacity, mistake, misrepresentation, duress, or undue influence. [Restatement 2d, Contracts §79, comments c–e; see also Witkin, 1 Summary of California L., Contracts §§213 – 227 (9th ed.)]
The following inducements are good consideration for a promise [CC §1605]:
(1). A benefit conferred, or agreed to be conferred, to which the promisee is not lawfully entitled; or
(2). A prejudice suffered, or agreed to be suffered, which the promisor is not lawfully required to suffer at the time of consent.
The promise to fulfill an existing contract with another is no consideration for a promise by a third party. [Borgonovo v Henderson (1960, 1st Dist) 182 Cal App 2d 220, 6 Cal Rptr 236]
Good consideration also includes [CC §1606]:
(1). An existing legal obligation resting on the promisor;
(2). A moral obligation originating from some benefit conferred on the promisor; or
(3). Prejudice suffered by the promisee.
Consideration for a contract must be lawful under CC §1667. [CC §1607; for text of CC §1667, see § 24:47] The entire contract is void if any part of a single consideration for one or more objects, or of several considerations for a single object, is unlawful. [CC §1608]
A written instrument is presumptive evidence of consideration. [CC §1614] The party seeking to invalidate or void a contract has the burden of showing insufficient consideration. [CC §1615] This is a burden of producing evidence to question the presumption that there is consideration, not a burden of proof to show that there is no consideration. [Rancho Santa Fe Pharmacy, Inc. v Seyfert (1990, 4th Dist) 219 Cal App 3d 875, 268 Cal Rptr 505]
Illegality
An illegal contract is specifically one that:
(1). Is contrary to an express provision of law [CC §1667];
(2). Is contrary to the policy of express law, though not expressly prohibited [CC §1667];
(3). Is otherwise contrary to good morals [CC §1667]; or
(4). Restrains the marriage of any person except a minor [CC §1669].
Either an illegal contractual object, or illegal consideration for a contract, may invalidate the contract. Consideration for a contract must be lawful. [CC §1607] The entire contract is void if any part of a single consideration for one or more objects, or of several considerations for a single object, is unlawful. [CC §1608] The object of a contract must be lawful when the contract is made. [CC §1595]
Failure of consideration
Failure of consideration is the failure to execute a promise, the performance of which has been exchanged for performance by the other party. [Bliss v California Cooperative Producers (1947) 30 Cal 2d 240, 181 P2d 369; FPI Development, Inc. v Nakashima (1991, 3rd Dist) 231 Cal App 3d 367, 282 Cal Rptr 508]
There can be a failure of consideration supporting a contract when:
(1). Terms of the contract are left up to the arbitrary discretion of one of the parties, or the actual exercise of that discretion is unreasonable [Perdue v Crocker National Bank (1985) 38 Cal 3d 913, 216 Cal Rptr 345, 702 P2d 503, app dismd 475 US 1001, 89 L Ed 2d 290, 106 S Ct 1170];
(2). The consideration was one to which a party was already lawfully entitled [see CC §1605];
(3). The consideration was one which a party was already lawfully bound to give [see CC §1605];
(4). The consideration offered was not lawful, in part or entirely [see CC §§1607, 1608, 1667];
(5). The contract did not specify the amount of consideration nor any means of ascertaining its amount by a specified standard [see CC §1610];
(6). The contract provided an exclusive method by which its consideration was to be determined, and that method was on its face impossible to execute or became impossible to execute [see CC §§1612, 1613]; or
(7). One party gave consideration for the other party’s performance of the contract, but after the contract was made, the facts and circumstances changed by supervening events so that the purpose of the contract was frustrated [see FPI Development, Inc. v Nakashima (1991, 3rd Dist) 231 Cal App 3d 367, 282 Cal Rptr 508 (misnomer to call frustration of purpose a failure of consideration)].
The party seeking to invalidate or void a contract has the burden of producing evidence to question the sufficiency of the consideration. [CC §1615]
IAAL
