Opinion ID: 2976398
Heading Depth: 2
Heading Rank: 1

Heading: Past Consideration

Text: Valero Energy argues, and the district court found, that the letter agreement was based on past performance. Specifically, the district court concluded that “[t]he plain language of the letter agreement expressly shows that the consideration for the purported contract was [Source’s’] past performance” of having “identified” and “developed” a market for Valero Energy’s products. Source Assoc., Inc. v. Valero Energy Corp., No. 05-2526, 2007 WL 1235997, at  (N.D. Ohio April 26, 2007). The court found that “through the use of the past tense, the letter agreement clearly establishes that the ‘formulation and development of this market’ occurred prior to the formation of the purported contract.” Id. Because past performance is not valid consideration, the court concluded that such “detriment” on the part of Source could not support a contract. To be sure, “past consideration” — a promise that has already been performed — cannot support a contract. Carlisle, 704 N.E.2d at 43. “This is because past consideration cannot be a bargained-for benefit or detriment, since it has already occurred or accrued.” Id. A contract, however, must be read as a whole and the “intent of each part gathered from a consideration of the -4- No. 07-3785 Source Assoc. Inc. v. Valero Energy Corp. whole.” Saunders v. Mortensen, 801 N.E.2d 452, 455 (Ohio 2004). Further, when reading the contract as a whole, consideration “may be inferred from the terms and obvious import of the contract.” Nilavar, 711 N.E.2d at 735 (quoting 17 Ohio Jur. 3d Contracts § 46 (1980)). Viewing the letter agreement in its totality, we conclude that consideration exists. Admittedly, the letter agreement begins by stating that Source has “identified” and “developed” a market for Valero Energy’s products. However, the agreement goes on to say: “The purpose of this letter is to confirm the agreement between Valero Energy and Source in which Valero Energy grants Source an exclusive right to market and sell Valero Energy’s products to Crystal.” (JA 16, emphasis added.) Although the development of the market may have occurred in the past, reading the letter agreement as a whole, as Ohio law instructs, shows that it obligates Source to undertake an additional detriment—that of marketing and setting Valero Energy’s products to Crystal in the future, in return for the exclusive right to do so. Given this exchange, which does not involve past consideration, this Court must next decide whether it nevertheless is supported by legally sufficient consideration, or whether the agreement merely recites illusory promises.