Texas Causes of Action & Affirmative Defenses

Texas Causes of Action & Affirmative Defenses

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Saturday, May 19, 2012

Lack of consideration vs. failure of consideration: important differences

A want or lack of consideration is different from a failure of consideration. A lack of consideration occurs when a contract, at its inception, does not impose obligations on both parties. See Burges v. Mosley, 304 S.W.3d 623, 628 (Tex. App.-Tyler 2010, no pet.). Without a mutuality of obligation, a contract is unenforceable. Id. In contrast, a failure of consideration occurs when, because of some supervening cause arising after the contract is formed, the promised performance fails. Id.
In this case, there is no dispute that the lease, as written, imposed obligations on both parties; Cheung-Loon was required to provide Primo's with use of the parking lot at 3321 McKinney Avenue and appellees were required to, among other things, pay rent for Primo's use of the lot. Appellees provided no evidence that the contract was unenforceable due to a lack of consideration at its inception.  Accordingly, the trial court erred in failing to grant Cheung-Loon a no-evidence summary judgment on the affirmative defense of want of consideration.
A failure of consideration occurring after a contract's inception constitutes a defense to an action on the written agreement. See McGraw v. Brown Realty Co., 195 S.W.3d 271, 276 (Tex. App.-Dallas 2006, no pet.). The affirmative defense defeats summary judgment if the nonmovant presents evidence that it did not receive the consideration set forth in the agreement. Id
A failure of consideration may be either partial or total. A total failure of consideration is ground for cancellation or recission of the contract. See Food Mach. Corp. v. Moon, 165 S.W.2d 773, 775 (Tex. Civ. App.-Amarillo 1942, no writ). 
A partial failure of consideration will not invalidate the contract and prevent recovery thereon, but is a defense pro tanto. See Huff v. Speer, 554 S.W.2d 259, 263 (Tex. Civ. App.-Houston [1st Dist.] 1977, writ ref'd n.r.e.).
The dispute here centers on whether Primo's was able to use the parking lot to the extent it bargained for. Appellees provided evidence that, one year into the lease term, Cheung-Loon's other tenants began using most, if not all, of the parking spaces in the lot Primo's leased for its own use. Even if Primo's was not entitled to exclusive use of the lot, which we do not decide, the lease clearly entitled it to use the lot for its customers' parking. Because appellees provided some evidence showing it was either totally or partially prevented from using the lot, we conclude appellees raised a fact issue on failure of consideration. Accordingly, the trial court correctly denied Cheung-Loon's motion for a no-evidence summary judgment on this affirmative defense. Furthermore, because appellees raised a fact issue on this affirmative defense, the trial court correctly denied Cheung- Loon's motion for summary judgment on its claim for breach of contract.
SOURCE: DALLAS COURT OF APPEALS - 05-10-01171-CV – 5/15/12

"Consideration is defined as `either a benefit to the promisor or a loss or detriment to the promisee.'" Northern Natural Gas Co. v. Conoco, Inc., 986 S.W.2d 603, 607 (Tex. 1998) (quoting Receiver for Citizen's Nat'l Assurance Co. v. Hatley, 852 S.W.2d 68, 71 (Tex. App.-Austin 1993, no writ)). A promissory note given "for value" is supported by adequate consideration and is therefore enforceable. Suttles v. Thomas Bearden Co., 152 S.W.3d 607, 615 (Tex. App.-Houston [1st Dist.] 2004, no pet.). 
A promissory note is issued for "value" if it is issued as payment of, or as security for, an antecedent claim against any person, whether or not the claim is due. Id.; see also Ward v. Vaughn, 298 S.W.2d 862, 866-67 (Tex. Civ. App.-Galveston 1957, no writ) (explaining that forbearance of antecedent debt was sufficient consideration for note). 
Failure of consideration occurs when, "after an agreement has been reached, the promised performance fails." Bassett v. American Nat'l Bank, 145 S.W.3d 692, 696 (Tex. App.-Fort Worth 2004, no pet.) (holding that failure to pay amount promised by note constituted failure of consideration).