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Legal Memorandum: Inadequacy of Consideration

Issue: When must a court find an agreement was not supported by adequate consideration?

Area of Law: Business Organizations & Contracts, Employee Law
Keywords: Employment Agreement; Consideration
Jurisdiction: Federal
Cited Cases: 400 F.3d 370; 907 P.2d 51
Cited Statutes: None
Date: 11/01/2007

In Walker v. Ryan’s Family Steak Houses, Inc., 400 F.3d 370 (6th Cir.), consideration was inadequate because, inter alia, the employer was not equally bound to arbitrate as were the employees.  Walker, 400 F.3d at 380.  “In truth, it is only the Ryan’s applicant or employee who has agreed to bring any employment-related dispute exclusively in the . . . arbitration forum.”  Id.  A contract is substantively unconscionable if “the contractual terms are unreasonably favorable to the drafter,” Alexander v. Anthony Int’l, L.P. 341 F.3d 256, 265 (3d Cir. 2003), and are “so one-sided as to oppress or unfairly surprise an innocent party [or demonstrate] an overall imbalance in the obligations and rights imposed by the bargain,” Maxwell v. Fid. Fin. Servs., Inc., 907 P.2d 51, 58 (Ariz. 1995).  .

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