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Consideration in Option Contracts Addressed by Court of Appeals

The New York State Court of Appeals decided two cases recently regarding consideration in option contracts. The two cases, which involved many of the same parties, hinged on the granting of an option in exchange for consideration. In both cases, the court reiterated principles of contract law. The court ruled that when the cases involve sophisticated parties represented by counsel, the court will not examine the sufficiency of the consideration and will not permit extrinsic evidence to determine what “other good and valuable consideration” might be. If a party wishes to condition its contractual obligations on a particular performance by the other party, it should make that condition part of the written agreement.

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