Only because God draws a salary of $1 a year.
I just wanted to add that not just salaries of 1 exist. I've witnessed a lot of sales of real estate for 1 . (That would be one guilder or 1 euro, in Holland)
Typically, the local government sells a piece of property that requires a lot of upkeep (say a nature-reservearea or a derelict church) to some foundation or real-estate developer that has promised to upgrade it to the prespecified wishes.
If I understand correctly, the price of 1 euro is neccesary to make it a real legal sale. Also, it makes great PR.
IANAL(y), but consideration can be pretty vague and subjective; you don’t necessarily have to have the token dollar changing hands to ensure contract formation. In the case of the corporate execs, I’m sure the other compensation they receive would be more than sufficient; the dollar would just provide something concrete and visible so that in case of a dispute, no one (hopefully) will try to claim that the contract fails for lack of consideration.
In the case of Bloomberg, it might be more important; is he actually receiving anything else even marginally tangible from the city in exchange for his services? Arguments could be made that he’s contracting for the less tangible benefits such a position confers, but it’s -much- easier and more certain to have that nominal consideration of $1.
I think Steve Jobs did the $1 thing (this was before the jet, and at least some of the stock options) was so he could be considered an employee and get health insurance.
Brian
Ok, if they really want to save money, why $1 instead of 1 cent or better yet, a mil (1 thousandth of a dollar for which no coin exists). How about .999999… mil. How low can you go if you want to be thrifty?
Yeah, I always assumed it was so that the person could continue to be considered a real employee. Our old pastor (John Wimber) got so many speaking gigs and sold so many books that he took $1 in salary for many years, as he had essentially become independently wealthy (he didn’t go buy a bigger house or Faberge eggs).
Many real estate sales in the United States are recorded as for “$1 and other consideration” because the buyer does not want to prejudice any future tax assessment of the property. The buyer hopes that the tax assessor will assess the property at less than what he paid for it; the buyer can still challenge the assessment if it’s more than what he paid for it.
It is called ‘contractual consideration’
- it is down to civil/commercial law
Instead of $1 they could get a peppercorn
Unless there is a material exchange, then in UK commercial law, there is no contract.
I rather suspect that the same exists in the USA
And I forgot about ‘contractual intent’, and my brain is not functioning, so I’ll gloss over that one.
When Richard Riordan was mayor of Los Angeles, he said he work for $1 a year. However, City employees were paid every other week and got 26 paychecks.
And he had to get paid through the same payroll system. So he was put into a special classification where he made $.04 every two weeks for a total of $1.04 per year.
If I sign an NDA during volunteer work, does that mean there is no consideration and therefore the contract is invalid?
Very possibly - but it could backfire.
These rules are intended to protect people from intimidation.
Which, to go on a slight tangent, always seemed mighty silly to me. At least here in Ohio you have to report the sale amount to the County Auditor anyway, so that they can assess the conveyance fee. And if you’re just trying to hide it from the public, natch–the auditor’s records are just as public as the recorder’s.
I’ve always suspected that the nominal consideration on deeds persisted more out of tradition than anything else.
One reason for the Dollar is that while other considerations may exist, the dollar is easily provable to exist as a consideration. It satisfies the conditions for a contract without any ambiguity. Signing the contract with a clause specifically stating that compensation would be one dollar is much more demonstrably a true contract.
The subtlties of whether someone qualifies as a “government employee” or “corporate officer” may well be also more simply demonstrated by the actual exchange of a dollar. I am not sure about any actual case law supporting that.
Tris
This probably doesn’t help the OP, but I remember from one of Richard Feynman’s books, that when he was working for the Federal Government, he signed a paper turning over patent rights in exchange for ‘a dollar’. But he never got his dollar from the government, it was just the language in the paperwork. I wonder if the executives in the OP’s situation ever actually get their dollar.
IANAL but an NDA is not a contract. It’s a legally binding promise (I don’t know the legal term for such a thing but I imagine there is one). If you sign an NDA you are bound even though you are receiving nothing in return. It doesn’t matter whether you are working in a paid position or a volunteer position.
You beat me to the punch with patent rights. I’ll tell my story anyway. I worked as an engineering intern one summer and I was given $1 in return for signing away my patent rights during my internship. They actually gave us the dollar. This was during a group orientation and they had someone going around collecting signed contracts and passing out dollar bills.
The consideration theory has some charm to it, but these salaries are common in continental European jurisdictions which do not require consideration for contracts (the mere consent of the parties suffices) as well. I guess it’s just symbolism without any legal relevance.
I’m surprised they didn’t pass out dollar checks, so they’d have a record of it.
Cite?
In your example, the stock options alone are sufficient consideration. It doesn’t matter whether the employee ultimately exercises them or, indeed, whether they even have value on the (future) date that they may be exercised. It’s enough that they have potential value when the contract is made.
If I agree to buy a lottery ticket from you for $5, and you agree to see me that lottery ticket for that price, we have made a valid contract, with all necessary consideration. And that’s true even if the lottery ticket (after the drawing) turns out to be worthless or (if it wins) I fail to redeem it for some reason. The same analysis applies to options as consideration.
Your restatement cite doesn’t help you. True, the language that you quote relates to the issue of adequacy of consideration. Sometimes (although this is rare, and usually other circumstances have to be present), a court will hold that a contract is invalid because the consideration paid is disproportionately small when compared to the benefit received. If I convince a little old lady to sell me her $800,000 house for a dollar, a court might void that contract on the basis of inadequate consideration. (The fact that I’m an attorney and she’s a LOL might help her case.)
But usually, courts aren’t in the business of second-guessing the adequacy of consideration. That’s what the first sentence you quote says. The second sentence simply says that, even in those rare instances where a court might consider doing so, it’s even less likely to second guess consideration if the consideration is difficult to value.
In other words, consideration that is difficult-to-value makes it more likely (not less likely) that it will stand as legally sufficient. This is the opposite of what you seem to think it says. And, accordingly, options can stand as valid consideration.
All that said, setting forth additional consideration of $1 doesn’t hurt anything, and might help if the options are illusory in some other way.
Usual disclaimer: Although IAAL, I am not the lawyer of anyone reading this, and such people are not my clients. This is a comment on a general principle of law and not meant to be reliable legal advice to be used in any real world situation. See a lawyer licensed in your state for that.