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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.
