Legal Memorandum: Valuable Consideration in Option Agreements

Issue: Under the laws of the state of Minnesota, may a court determine that ‘valuable consideration’ was given to support a promise where it was a corollary agreement to part of a larger transaction?

"Valuable consideration" may include any value given by a party or detriment accepted by it, such as forbearance of a possible legal right.  Johnson v. Kruse, 205 Minn. 237, 285 N.W. 715, 717 (1939), overruled on other grounds, Bennett v. Johnson, 230 Minn. 404, 42 N.W.2d 44 (1950).  See Corbin, supra, §§ 5.19 at 95,  5.22, 5.24 (1995); Bank of Montreal v. Beecher, 133 Minn. 81, 157 N.W. 1070, 1071 (1916);  Oliver Mining Co. v. Clark, 69 Minn. 75, 71 N.W. 908, 908 (1897) (defendant entitled to specific performance even if he refused to accept deed because of an encumbrance, where he did not intend to abandon his right and it was understood that he would insist on a conveyance as soon as  encumbrance was removed).

Consideration may take the form of forbearance from suit, as well as other value.  "An option to buy or sell very frequently is given as part of larger contract with other purposes; and a consideration sufficient to make the option binding and irrevocable may be found in the consideration that the optionee gives in that larger contract."  Corbin, supra, § 11.10 at 546; see also Restatement (Second) of Contracts § 80(1); 83 (1981) (one undivided consideration exchanged for several promises is valid).  It is not even necessary for instruments executed as part of a single transaction to refer to each other in order to be construed together, or for the consideration to […]