Apfel v. Prudential-Bache Securities

Prudential-Bache Securities, Inc. ("Prudential") was an investment bank headquartered in New York City.

Mr. Apfel was a banker who created a new bond financing system that allowed bonds to be sold, traded, & held through computerized book entries. Later on, Apfel's system became the industry standard for the issuance of all government & corporate bonds.

In 1982, Apfel presented Prudential a proposal for issuing municipal securities (such as bonds) through the bond system. Following negotiations, Apfel agreed to convey his right to the system in exchange for payments from Prudential.

Moreover, Prudential agreed to remunerate Apfel even if the system later became public knowledge.

Following personnel changes in 1985, Prudential ceased royalties to Apfel.

Apfel sued Prudential in the New York Supreme Court (trial court).

The court only accepted the breach of contract claim by Apfel & Prudential's defense of waiver.

Does the disclosure of an idea constitute sufficient consideration to support a contract?

Does the disclosure of an idea constitute sufficient consideration to support a contract if the idea isn't novel?

Prudential argued in 1985 that Apfel's idea was in the public domain at the time of the agreement; thus, the bond system idea wasn't Apfel's to sell (collect royalties on).

To buttress its claim that the bond idea didn't belong to Apfel, Prudential stated that its attempts to patent or trademark Apfel's idea had failed.

The disclosure of an idea, even if it isn't novel, may constitute sufficient consideration to support a contract if the idea possesses value to a party.

Judge Simons: Parties are free to enter into contracts, even if the consideration exchanged is of un-equal or little value.