Cengage Advantage Books: Business Law 9th Edition by Arnold Goldman ,William Sigismond

Exercise 6

Apfel, a company that sold computer systems, sold a computerized system for trading securities on the market to Prudential-Bache Securities, an investment bank. Before the purchase was made, Prudential-Bache thoroughly reviewed Apfel's system, which had been made known only to them, and deemed that the system fit its business needs. This review was followed by a sales contract in which Prudential-Bache agreed to make periodic payments for employing this system. Prudential- Bache encouraged its customers to use the system and for at least two years was the only company to offer these services. During this time, they handled millions of transactions, which of course produced income for the company. After a few years, Prudential-Bache had a change in personnel. The contract with Apfel was reviewed, and the new management decided to cancel and not make further payments. The new management claimed that the contract with Apfel had no value to them and that therefore there was no consideration to bind the parties. Their "no value" claim stated that the computerized system was not as secret as had been conveyed to them and that other investment companies were also using the system. Was Prudential-Bache in a position to claim that no consideration was present because of its claim that it had no value to the company? (Apfel v. Prudential- Bache Securities, Inc., 600 N.Y.S.2d 433)