The fog generated by traditional contract language is thick enough that I find myself periodically revisiting issues that I’ve tackled previously. In that vein, I’d now like to consider an odd opinion that reader @21law told me about. It involves those two chestnuts, the traditional recital of consideration and “successors and assigns” provisions.
The opinion in question is Urban Sites of Chicago, LLC v. Crown Castle USA, 2012 IL App (1st) 111880, 979 N.E.2d 480, issued by the Appellate Court of Illinois in October 2012. (Go here for the copy issued by the court; go here for a WestlawNext PDF.)
Here are the facts:
In 1999, plaintiff Urban Sites leased to Sprint a piece of property in Chicago. The original site plan said that the property was 25 feet by 50 feet, with a easement on another 25 feet. In 2000, Urban Sites and Sprint agreed to reduce the leased property to 25 feet by 34 feet, with an 18-foot easement. In 2001, Sprint subleased a portion of the property to a predecessor of T-Mobile; that sublease was later assigned to T-Mobile. Sprint ultimately assigned its interest in the Sprint lease to GSA and Crown Castle.
On March 1, 2005, Urban Sites entered into a contract with Sprint (the “2005 Agreement”) in connection with Sprint’s pending assignment of its interest in the property to GSA. The 2005 Agreement included as an attachment a copy of the Sprint lease along with two copies of the original site plan depicting Sprint’s leased area as being 25 feet by 50 feet. In the 2005 Agreement, Urban Sites confirmed that the Sprint lease was in effect as attached, without any default. One Jerald Much signed the 2005 Agreement on behalf of Urban Sites and initialed each page, including the attached copies of the site plan.
In 2009, Urban Sites notified T-Mobile that it had wrongfully occupied a part of the property that Crown Castle hadn’t leased from Urban Sites. That set the litigation in motion. In 2011, the circuit court hearing the dispute granted Crown Castle, GSA, and T-Mobile’s motions for summary judgment “based on the clear language” of the 2005 Agreement.
In its opinion, the Appellate Court held that “Because Urban Sites’ representation that the original site plan was in place at the time the 2005 agreement was executed was clear and unambiguous, Urban Sites is estopped from claiming something else now.” Because the point of the 2005 Agreement was to confirm the terms of the lease, it makes sense that Urban Sites should have to live with what was a mistake on its part.
In an attempt to get around that, Urban Sites argued that there was an invalid modification of the terms of the Sprint lease. The Appellate Court found that argument unpersuasive. No surprise there: Urban Sites made a mistake; there was no modification.
But for some reason, the Appellate Court thought it worthwhile to assume, for the sake of argument, that the lower court had in fact decided that the lease had been validly modified. It concluded, in unnecessary dicta, that even if that had been the case, the Appellate Court would still have affirmed the lower court’s holding.
In particular, the Appellate Court argued as follows:
In this case, Urban Sites argues that there was inadequate consideration to support a valid modification of the Sprint lease. However, the evidence contained in the record establishes that there was adequate consideration as a matter of law. The 2005 agreement plainly states that the parties entered into the 2005 agreement “[f]or good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged.” Urban Sites’ representative, Much, executed the agreement and affirmed this representation by initialing each page of the documents. Further, under the “miscellaneous” section of the 2005 agreement, Urban Sites also represented that “[t]his [a]greement shall be binding upon [Urban Sites] and its successors.” Based on the unambiguous representations on the face of the 2005 agreement, the evidence establishes that there was consideration as a matter of law.
In two respects, the Appellate Court’s reasoning is problematic:
First, the Appellate Court is of the view that a traditional recital of consideration is sufficient to establish that a contract is supported by consideration. That flies in the face of longstanding contract-law orthodoxy. I’ve said as much in MSCD and in blog posts (most recently, here). But don’t take my word for it—here’s what 3 Williston on Contracts § 7:23 (4th ed.) has to say on the subject (footnotes omitted):
But the recital of the receipt of a fictitious consideration is also common in written agreements, when in fact there was no consideration and no intention to give any. When, for instance, a consideration of one dollar or other nominal sum is recited as having been paid in return for a stated promise, the parties ordinarily have not actually bargained for any such exchange, and if the truth cannot be shown, a promise will be enforced which in fact has no sufficient consideration. It would destroy the requirement of consideration to hold that an admission of consideration in an unsealed writing prevented the promisor from showing that no consideration existed. If merely saying in writing that a specified fictitious consideration had been received were enough to make a promise binding, a new kind of formal obligation would be created. Rather than adopt this rule broadly, the solution of the law has been generally to entitle the recital to some weight, but to permit the introduction of contrary evidence except in a few narrowly defined areas.
In this context it wouldn’t even make sense to say that the traditional recital of consideration creates a rebuttable presumption that there was consideration. (That’s what Williston is alluding to when it refers to “some weight.”) Since this dispute involves mistake, not modification, consideration doesn’t come into it, so the rebuttable presumption would be irrelevant.
But the kicker is that the court thought that the “successors and assigns” language helped to establish that the contract was supported by consideration. In this post and this post I describe, and find wanting, six ostensible functions of “successors and assigns” provisions. Well, I guess that thanks to the Appellate Court’s opinion, I now have a seventh feeble rationale for “successors and assigns” language. Because “successors and assigns” provisions are bafflingly cryptic yet somehow utterly standard, they’re the most protean of provisions: people see in them whatever they want to see. It’s past time to get rid of them.
In this case, the Appellate Court’s detour into the traditional recital of consideration and “successors and assigns” language didn’t affect the outcome. But it’s nevertheless disconcerting.
4 thoughts on “The Illinois Appellate Court’s Problematic Take on the Traditional Recital of Consideration and “Successors and Assigns” Provisions”
Reciting a fictitious consideration accomplishes nothing where there is in fact no consideration. But it it a drafting sin to identify the consideration when it actually exists? I’m thinking of a provision like: “The consideration supporting this agreement is the exchange of promises set forth in this agreement.” If a party resisted enforcement on the ground of lack of consideration, such a provision would narrow the inquiry to whether the enforcing party’s stated duties were substantial or merely nominal. Doesn’t that modest objective justify 15 words?
I can’t make up my mind to which category of contract language the provision belongs: policy? intention? joint assertion of fact?
A. Wright: If there’s an exchange of promises that constitutes consideration, that will be evident on the face of the contract.
Regarding the category of contract language, this reminds me of previous discussion of what category of contract language a governing-law provision constitutes. It’s language of policy, but I don’t have handy the relevant analysis. I’ll retrieve it at some point.
By the way, your question reminds me of this post on “as consideration.”
If the consideration is *outside* the contract somehow, I think it could be useful to point to it. I can’t think of many examples where it would be – perhaps where a document containing obligations for Party A is ancillary to another contract containing obligations for both Party A and Party B? If so, pointing to the consideration would have evidential value.
The dicta are surely wrong. Firstly, the concept of “adequate consideration as a matter of law” doesn’t fit with the established idea of consideration, because consideration is a factual issue and not a legal one. Secondly, it is incoherent to say that wording in a document can bind the parties as to whether there is consideration or not – you need to establish whether there is consideration or not before you can determine whether the document is binding.
It’s lucky for everyone it’s obiter, really. And lucky that it’s in Illinois. (Unless you happen to be in Illinois.)