Nicolas Brownlee
Business Law 260
Case study 11-5
This question illustrates how consideration is required in a contract.
Consideration is the value given in return for a promise or in return for a performance.
Consideration requires two elements, there must be a bargained-for-exchange between
the parties and what is bargained for must have legal value. According to West’s
Business Law the “something of legally sufficient value” must consist of a promise to do
something that one has no prior legal duty to do. The performance of an action that one is
otherwise not obligated to undertake, or the refraining from an action that one has a legal
right to undertake. Each of these promises constitutes consideration for the contract. The
second element of consideration is that it must provide the basis for the bargain struck
between the contracting parties. The promise given by the promisor must induce the
promise to offer a return promise, a performance, or a forbearing. The promisee’s
performance, promise or forbearance must induce the promisor to make the promise.
In this particular case, Timothy Cornwell used to work for Rivendell Forest
Products Limited, a former reload wholesaler in the lumber industry from 1987 to 1990.
While at Rivendell, Mr. Cornwell supervised employees using Rivendell's price quoting
system to quote prices to customers. The quote screen system allowed it to be many
times faster and generate two to three times more sales, giving it a huge advantage over
its competitors, like Georgia-Pacific Corporation, who were still using slower manual
systems. By using the Quote System, Rivendell was able to instantaneously quote to
customers’ lumber prices, including freight, thereby allowing Rivendell to become more
efficient in handling customer inquiries and eliminating the need for time-consuming
manual calculations. To keep the Quote Screen system secret, Rivendell insisted that all
of its employees, including Mr. Cornwell, to sign a confidentiality agreement in 1998.
Nicolas Brownlee
Business Law 260
Case study 11-5
When Mr. Cornwell left Rivendell to work as a marketing manager for Georgia-Pacific,
he introduced Rivendell’s Quote Screen system. Rivendell then sued Mr. Cornwell for
breach of the confidentiality agreement.
The plaintiff Rivendell clearly has a case they can dispute. Soon after Mr.
Cornwell arrived at Georgia-Pacific, he helped them develop a “quick quote” system that
borrowed heavily from trade secrets embodied in Rivendell’s Quote Screen system.
Soon after Mr. Cornwell started his new job, he attended an orientation for GeorgiaPacific’s “Noranda” program. In consideration of a Trade Secret the program and all that
is within the program Quote Screen is a trade secret. By using any of the information
within the program Mr. Cornwell breaches the contract he signed with Rivendell,
stipulating the Quote Screen system is a trade secret to the Rivendell Forest Products,
Ltd. After reading a description of Georgia-Pacific’s “quick quote” system, the two were
virtually identical as stated in the case by Rivendell’s former CEO. This is evidence of
misappropriation of trade secrets because he had access to and gained knowledge of
Rivendell’s software system, and used this knowledge to better another system used by
another company, the Georgia-Pacific co.
Though a confidentiality agreement was obviously made did Rivendell breach the
agreement? According to West’s Business Law legal sufficiency of consideration
involves the requirement that consideration be something of legally sufficient value in the
eyes of the law. Adequacy of consideration involves “how much” consideration is given.
Rivendell claims Mr. Cornwell breached his confidentiality agreement with Rivendell
and that Georgia-Pacific induced that breach. However, there was no evidence that Mr.
Cornwell received anything - higher wages, a promotion, access to technical aspects of
Nicolas Brownlee
Business Law 260
Case study 11-5
Rivendell's system, as a result of his voluntary signing of the agreement. The
confidentiality agreement is thus void for lack of consideration. According to Past
Consideration, the plaintiff cannot bargain for something which has already taken place.
In this case, Mr. Cornwell had already been employed by Rivendell for one year (19871990) before he was asked to sign the contract in 1988. Had he been asked to sign the
agreement at the start of his employment Past Consideration would be of no assistance,
and Mr. Cornwell would have broken the confidentiality agreement.
In conclusion, I believe the defendant Mr. Cornwell is in the clear. Meaning he is
not responsible for holding to the confidentiality agreement, due to Past Consideration.
In being employed by Rivendell Forest Products Ltd. for one year prior to signing any
agreement, he is therefore void from any bargaining held after; in this instance the
confidentiality agreement of the trade secrets held by the Quote Screen system. The trade
secrets given to the Georgia-Pacific corp. by Mr. Cornwell are of no bearing to this case
due to the voidance of the agreement, and Rivendell’s trade secrets were already known
and used by Georgia-Pacific before the alleged misappropriation.