Opinion ID: 1911460
Heading Depth: 1
Heading Rank: 4

Heading: Lack of or gross inadequacy of consideration for the option.

Text: Cunningham's argument that there was no consideration for the option is based upon the fact that the rental paid by Esso to him under the first lease was offset by the rental paid by him to Esso under the sub-lease. Hence it is said that no rent at all was paid, the covenant to pay rent was illusory, and the covenant could not afford consideration for the option. The point is pushed to the length of saying that the whole transaction (i. e., the two leases) was a paper transaction without meaning between the parties. This conclusion is manifestly unsound. The leases did not merge in the fee, nor did they cancel each other. Not only were the provisions and the length of terms different, but their purposes were different. The main lease from Cunningham to Esso, as above stated, enabled Cunningham to finance the building of the station. Moreover, even if the rent covenants are regarded as merely a guarantee by Esso to the mortgagee (and this is certainly very doubtful), such a guarantee was for Cunningham's benefit as well as Esso's. We can see no reason why it does not constitute consideration for the other covenants of the lease. The theory of this argument is not developed in the briefs, but it appears to be based upon the assumption that the lease contract is divisible  that is, that the agreement for the option is necessarily dependent solely upon the covenant to pay rent. Nothing in the lease supports such an assumption. The argument on inadequacy of consideration comes to this: That a purchase price of $20,000 for property worth $18,000 on or shortly after the granting of the option is grossly inadequate when the option is to run for a long period of years. We fail to see why this is so. The test is whether the consideration is adequate when the option is granted. In this case the option price represented a $2,000 profit on the investment. Moreover, when inadequacy of consideration is alleged, it must be gross inadequacy. Glenn v. Tidewater Associated Oil Co., Del.Ch., 101 A.2d 339, 344. No fraud or overreaching is shown, and the price was clearly not grossly inadequate. The argument really reduces to a reiteration of the contention already dealt with, viz., that a great increase in the value of the land bargained for is sufficient in itself to defeat the enforcement of the option. This we have held to be unsound. We are of opinion that none of the contentions pressed upon us justifies the conclusion that the Vice Chancellor exceeded the limits of judicial discretion in awarding the remedy of specific performance. The judgment of the Court of Chancery is affirmed.