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CONSIDERATION - What constitutes - Adequacy - Value

Monday, March 27, 2017 @ 8:51 AM  


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Appeal by Kostic, the plaintiff, of a judgment dismissing a claim in contract on the basis that the contract was unenforceable because it was not supported by consideration and that even if it was enforceable, Kostic suffered no damages. Kostic had sued the Piikani Nation for wrongful termination of a business agreement between her and the Nation wherein the Nation agreed to retain her to provide investment advice. Kostic had argued she suffered a financial loss due to being denied the opportunity to earn commissions as an investment advisor. The trial judge found the Nation’s covenant in the business agreements was not enforceable because Kostic gave no consideration for the covenant. The trial judge found there was no consideration because Kostic’s commitment to provide investment services was the same obligation she already had to her employers. The trial judge rejected Kostic’s argument that her commitment to make herself available for the five-year contractual term to perform the requested services amounted to consideration. The trial judge also found that Kostic suffered no damages because the Nation was not obliged to pay and did not pay any of the fees or expenses under the agreements. On appeal, Kostic argued that the trial judge erred in finding no consideration to support the arrangement and that she suffered no damages.

HELD: Appeal allowed. The contract or contracts in question were supported by consideration and were therefore enforceable. Kostic’s income from her employers was directly tied to the payment of commissions on trades of the Nation’s investments. When the Nation gave notice of termination to Kostic, her income was reduced to zero. The consideration was Kostic’s five-year commitment to manage the Nation’s funds and the fact that she was not free to go elsewhere. The promises Kostic made for the Nation’s benefit were not valueless. Courts had no mandate to examine contracts to see whether bargains they contained made sense. The bargains were what they were. Kostic may also have been entitled to damages. The Nation’s premature termination of Kostic may have deprived her of the opportunity to earn the income she received from her employer for helping to manage the trust funds during the term of her agreement with the Nation. The Nation’s ability to direct someone to hire a particular investment advisor enabled Kostic to earn an income. Kostic’s damages entitlement and the quantum of damages required judicial determination.

Kostic v. Piikani Nation, [2017] A.J. No. 115, Alberta Court of Appeal, P.W.L. Martin, B.K. O'Ferrall and B.L. Veldhuis JJ.A., February 9, 2017. Digest No. 3644-004