Feinberg v. Pfeiffer Co.

Brief Fact Summary. P brings a breach of contract action against D because D refuses to honor a pension plan agreement.

Synopsis of Rule of Law. Mutuality of obligation requires that consideration for a promise be bargained for and given in exchange for that promise.

Facts. Feinberg (P) began working for Pfeiffer Co. (D), a manufacturer of pharmaceuticals in 1910, when P was 17 years old.  There was no contract between P and D regarding P’s length of employment.  P was free to quit and D was free to fire P at any time.  In recognition of P's long and faithful service, D increased P’s salary from $350/month to $400/month.  P was also afforded the privilege of retiring from active duty at any time that she may elect and receive retirement payments from D in the amount of $200/month for the remainder of P’s life.  P was immediately notified of her salary increase and pension plan.  P testified that she had no prior knowledge of the pension plan and that she would have continued to work for D regardless.  P did continue to work for D until June 30, 1949 when she retired.  Her pension plan was a major factor in her decision to retire.  D started paying P $200/month.  Several years after her retirement, D notified P that her payments would be reduced to $100 per month.   P refused to accept the reduced amount.  D terminated all payments.  P sued for breach of contract.  Judgment for P.  D appealed.

Issue. After being notified of her right to a pension plan, does P’s continuation to work for D constitute a valid consideration?

Held. No.  But judgment affirmed for other reasons.  See the second part of the opinion at p. 91, Farnsworth Cases and Materials, 6th Edition.
•    P’s continuation to work after being notified of the pension plan lacks the mutuality of obligation, which is essential to the validity of a contract.  There was no language predicating P’s right to a pension plan upon her continued employment.  P made no promise or agreement to continue her employment with D in exchange for D’s promise to pay P her pension plan.

Discussion. For a consideration to be valid, it must be bargained for and given in exchange for a promise.