Opinion ID: 1060352
Heading Depth: 2
Heading Rank: 1

Heading: Initial Value

Text: The first prong of the Brewer test requires that the offeree furnishes initial value. Participants in King and QCI's program bought a minimum of three pay telephones at $4995 per pay telephone. Participants never took possession of the phones, nor did participants pay taxes on the phones or choose locations for their phones. Furthermore, it is clear from promotional materials that QCI intended the program to quickly raise money for capital expenditures and expansion, without sacrificing equity in the company. King argues that, in the case of the sale of personal property, there must be an overpayment of fair value by the investor in order for there to be a finding of initial value. King bases his argument on Hawaii Market , in which participants in a private wholesale club scheme payed grossly inflated prices for consumer items in order to join the club and receive future commissions on sales. Rather than being a requirement for initial value, however, the presence of overpayment was simply how the Hawaii Market court distinguished the transaction from a simple purchase of merchandise. In this case, King's program requires little distinguishing from a sale of merchandise: purchasers never took possession of the pay telephones, and, furthermore, QCI was not in the business of selling pay telephones: QCI was in the business of providing discount long-distance telephone service. Thus, this Court finds that Prong 1, the furnishing of initial value, is satisfied.