When Consideration is No Consideration

By: Jeffrey M. Haber

Past consideration is generally no consideration under New York law, and a promise based solely on prior acts or transactions is unenforceable unless it falls within a recognized exception. In Hakim v. Hakim, 2026 N.Y. Slip Op. 05598 (1st Dept. Oct. 1, 2026), the Appellate Division, First Department applied that principle to affirm dismissal of a counterclaim seeking to enforce a 1998 promissory note between brothers involved in a long-standing real estate investment relationship. The Court held that the note was premised on alleged transactions occurring decades earlier and therefore rested on past consideration. The note’s generic recital of “value received” failed to satisfy General Obligations Law § 5-1105, which requires a specific written description of the past consideration. The Court also rejected reliance on UCC § 3-408, deferring to the trial court’s credibility determination that the evidence did not establish the antecedent debt alleged by the noteholder.

Hakim v. Hakim

Hakim grew out of a decades-long family investment arrangement among three brothers, Said, Kamran, and Masud Hakim. The brothers left Iran and eventually settled in the United States around the time of the 1979 Iranian Revolution. According to the trial record, they had agreed years earlier to acquire New York real estate together as long-term investments, including a building located at 536 East 89th Street in Manhattan (the “Property”).

Kamran first acquired the Property in 1969. In 1973, a company he controlled transferred ownership of the Property to the three brothers as tenants in common. The deed for the Property was recorded that year.

Among the disputes between the brothers was a disagreement over a promissory note signed by Said in 1998. Kamran maintained that the note reflected money owed to him arising from a business-related transaction dating back to the late 1970s. Kamran said that he helped Said with efforts to purchase certain products and, in doing so, committed significant funds to secure a letter of credit. Kamran later contended that he suffered a substantial loss when the underlying obligation was not repaid.

Said acknowledged signing the note but disputed Kamran’s account of the events that led to it. At trial, the brothers offered different explanations regarding the purpose of the note and whether it reflected an actual debt. Correspondence exchanged between them in 1998 referenced the earlier transaction, but the parties disagreed about what the documents showed and whether any obligation remained outstanding.

After hearing testimony and reviewing the evidence, the trial concluded that the record did not establish a sufficient basis for recovery on the promissory note. As a result, Kamran’s counterclaim relating to the note was dismissed.

On appeal, the First Department affirmed, holding that “[t]he trial court properly dismissed Kamran’s fourth counterclaim against Said seeking recovery under the 1998 promissory note” because “it was improperly premised on past consideration.”[1]

To form an enforceable contract, the plaintiff must establish an offer, acceptance of the offer, consideration, mutual assent, and an intent to be bound.[2] “An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.”[3] Acceptance of an offer is effective if it clearly, unambiguously and unequivocally complies with the terms of the offer.[4] Consideration requires “a performance or a return promise [that is] bargained for” by the defendant’s promise to fulfill the terms of the agreement.[5] Mutual assent requires an agreement as to the essential terms and conditions of the agreement, and intent to be bound requires that such assent be sufficiently definite to assure that the parties are truly in agreement with respect to all material terms.[6]

At issue in Hakim was the consideration element of contract formation.

The First Department held that Kamran “was not required to demonstrate that there was adequate consideration for the note.”[7] Rather, “[i]t was . . . [Said]’s burden to demonstrate a lack of consideration.”[8] The Court held that Said met his burden.[9] As result, the burden “shifted back to Kamran to demonstrate an exception to the general rule, which he failed to do.”[10]

The Court found that “the note was for past consideration” and that under New York law, “the general rule is [that] past consideration is no consideration.”[11] 

There are two exceptions to the general rule. “First, the note may be enforceable where it expressly recites the nature of the past consideration in writing.”[12] “The writing must be explicit and not vague or imprecise.”[13] Second, under Uniform Commercial Code § 3-408, “no consideration is necessary for an instrument . . . given in payment of . . . an antecedent obligation of any kind.”

As to the first exception, the Court found that “the note provide[d] no details about consideration, stating merely that the promise [was] for value received, which [was] insufficient.”[14] 

As to the second exception, the Court rejected Kamran’s argument that it applied because Said agreed to “sign the note to repay Kamran for Kamran’s 1970’s deposit of $600,000 for a letter of credit.[15] “Although Said admitted that his signature appeared on the note,” said the Court, “he said it pertained to a proposed real estate transaction that never came to fruition.”[16] Since the “trial court did not credit Kamran’s testimony regarding the purpose of the note,” “even if Kamran’s allegations would provide a basis to enforce the note under UCC 3-408,” said the Court, it would not disturb “the [trial] court’s credibility determination,” which “[was] entitled to deference.”[17] 

Takeaway

The principal takeaway from Hakim is that a signed promissory note is not automatically enforceable merely because it memorializes a claimed obligation. While a promissory note ordinarily carries a presumption of consideration, that presumption can be overcome where the maker demonstrates a lack of consideration, including that the note was based on past consideration. Once that showing is made, the burden shifts back to the noteholder to establish that an exception to the general rule applies.

Hakim illustrates New York’s rule that “past consideration is no consideration.” As discussed, Kamran attempted to enforce a 1998 promissory note by tying it to financial assistance he allegedly provided Said more than twenty years earlier in connection with a letter of credit. The Court concluded that the note was premised on events that had already occurred and therefore lacked bargained-for consideration supporting a new contractual obligation. The decision underscores that a promise made years after the underlying conduct cannot be enforced simply because the parties later reduced it to writing.

A second key lesson is the importance of specificity when relying on General Obligations Law § 5-1105, which permits enforcement of some promises supported by past consideration. To invoke that exception, the writing itself must expressly and clearly describe the prior consideration. General language such as “for value received”, as in Hakim, is not enough. The writing must identify the past consideration with sufficient detail so that the basis for the promise is evident from the document itself. In Hakim, the note’s generic recital of “for value received” failed to satisfy that requirement.

Hakim also highlights the limits of UCC § 3-408’s antecedent-obligation exception. A promissory note may be enforceable even without new consideration if it was given to satisfy a preexisting debt or obligation. However, the threshold question is whether such an antecedent obligation actually existed. In Hakim, the brothers offered conflicting accounts of the note’s purpose. Because the trial court credited Said’s testimony and rejected Kamran’s explanation, the antecedent-obligation exception could not save the note.

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Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes only and is not intended to be, and should not be, taken as legal advice.

Unless otherwise stated, Freiberger Haber LLP’s articles are based on recently decided published opinions or litigation releases and not on matters handled by the firm.

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[1] Slip Op. at *1.

[2] 22 N.Y. Jur. 2d, Contracts Section 9.

[3] Restatement (Second) of Contracts § 24.

[4] King v. King, 208 A.D.2d 1143, 1143-1144 (3d Dept. 1994), citing 21 N.Y. Jur. 2d, Contracts § 53 at 470 (1982), and 2 Williston on Contracts § 6:10 at 68 (4th ed. 1990).

[5] See Restatement (Second) of Contracts §71. See also Kolchins v. Evolution Markets, Inc., 128 A.D.3d 47, 59-60 (1st Dept. 2015).

[6] Joseph Martin, Jr., Delicatessen v. Schumacher, 52 N.Y.2d 105, 109 (1981); Matter of Express Indus. & Term. Corp. v. New York State Dept. of Transp., 93 N.Y.2d 584, 589 (1999).

[7] Slip Op. at *1, quoting Carlin v. Jemal, 68 A.D.3d 655, 656 (1st Dept. 2009) (internal quotation marks omitted); and citing, Neo Universe Inc. v. Ito, 147 A.D.3d 682, 682-683 (1st Dept. 2017).

[8] Id., quoting Neo Universe, 147 A.D.3d at 682; and citing Navon v. Zackson, 191 A.D.3d 578, 578 (1st Dept. 2021); Carlin, 68 A.D.3d at 656).

[9] Id.

[10] Id.

[11] Mann v. Green, 159 A.D.3d 545, 545 (1st Dept. 2018) (internal quotation marks omitted).

[12] Slip Op. at *1.

[13] Id., quoting Korff v. Corbett, 155 A.D.3d 405, 408 (1st Dept. 2017) (internal quotation marks omitted), lv. denied, 31 N.Y.3d 912 (2018); see General Obligations Law § 5-1105 (providing: “A promise in writing and signed by the promisor or by his agent shall not be denied effect as a valid contractual obligation on the ground that consideration for the promise is past or executed, if the consideration is expressed in the writing and is proved to have been given or performed and would be a valid consideration but for the time when it was given or performed.”).

[14] Id., quoting Mann, 159 A.D.3d at 546 (internal quotation marks omitted); and citing Korff, 155 A.D.3d at 408.

[15] Id. at *2.

[16] Id.

[17] Id., citing Hemmings v. Sutton, 151 A.D.3d 457, 458 (1st Dept. 2017).