Search - consideration

Under common law, a contract is not valid unless consideration is given, even where the amount of consideration is nominal (for example, many commercial agreements refer to consideration of $1 paid between the parties, "the receipt and sufficiency of which is hereby acknowledged"). As such, where consideration of any amount is paid, it is uncertain if a vendor will ever be able to utilize subsection 56.4(5) to prevent the application of paragraph 68(c) unless the contract relating to the RC is executed under seal (i.e., a contract without consideration). ...

Application of the requirement – that the proceeds be received by the grantor of the non-compete covenant or an eligible corporation thereof – to a trust or partnership (pp.12-13) [Under s. 56.4(7)(b)] generally, consideration must be received by either the "taxpayer" or an "eligible corporation" of the taxpayer. ... …With respect to a trust, it would seem that a Restrictive Covenant granted by a beneficiary or trustee of a trust would not meet the receipt of consideration requirements as neither the trustee or beneficiary would receive either a goodwill amount or consideration for the disposal of property. ... The reference to " the amount" rather than " an amount" suggests that it may be necessary to allocate to each partner that portion of the goodwill amount that directly represents consideration for the Non-Competition Covenant granted by that party…. ...

., standby charges) payable by a borrower as consideration for the lender agreeing to lend money or make money available (arguably, under the definition of “restrictive covenant” such an agreement “affects … the … provision of property … by the taxpayer” (i.e., of funds by the lender) or “affects … the acquisition of property … by the taxpayer” (i.e., the lender’s acquisition of the debt obligation) consent payments, i.e., payments made to creditors in consideration for consenting to an amendment to the debt terms, e.g., to permit a particular transaction or loosen a financial covenant (such “agreement could be viewed as affecting the (ongoing) provision of property by the taxpayer, being the loaned funds, especially if the consent relates to an amendment of a covenant that could otherwise have been breached and allowed the taxpayer to demand repayment under an acceleration clause (or, more generally, to the extent the amendments affect the ongoing terms under which the loan will continue to be provided).”) in the context of a distress restructuring, an additional payment made to a debt holder who agrees to exchange for the securities of the restructured debtor by a specified date, e.g., where the debtor proposal is that holders exchange each $100 of debt for shares with a fair market value of $40, an “early consenting” debenture holder might receive shares having a fair market value of $50 (“The additional $10 of value may properly be viewed as consideration for the debenture holder having agreed to consent to the restructuring plan by the specified date, rather than as consideration for the exchange itself, having regard to paragraph 68(c).”) ...