Plowman v. Indian Refining Co

Brief Fact Summary.

Plaintiffs, Plowman and seventeen others similarly situated or their estates, worked for Defendant Indian Refining Co., for many years. Defendant offered to pay Plaintiffs one-half of the wages currently being earned. Plaintiffs remained on the payroll, receiving the offered money, but did not render any services other than coming to the office for their remittance.

Synopsis of Rule of Law.

Past consideration or past performance is not consideration.

Facts.

Defendant told Plaintiffs that they would receive half of their current wages every payday for the rest of their life. The consideration for this agreement was a desire to provide for the welfare of these older employees who had worked for Defendant for many years. Plaintiffs remained on Defendant’s payroll and insurance payments continued to be deducted from the checks. However, Plaintiffs were not required to perform any services other than coming to pick up their checks at the office every payday. The payments were made for almost a year before Defendant informed Plaintiffs that they were terminating the arrangement.
Defendant disputes Plaintiffs’ contention that the payments were to be made for life. Instead, Defendant claims that the payments were made to protect the employees from cut backs or layoffs occurring at the plant and that there was no specified duration for receiving the remittance. According to Defendant, the arrangement was gratuitous and was not approved by the board of directors.

Issue.

Was there sufficient consideration to make the agreement an enforceable contract?

Held.

No. Past consideration is not sufficient consideration to make an agreement enforceable.
Plaintiffs argued that their long and faithful service as employees of Defendant for so many years served as consideration for the agreement. Consideration is given in exchange for or in reliance upon a promise. The service that was already provided prior to the promise could not be said to be in exchange for or in reliance upon Defendant’s promise. Therefore, the Court found that Plaintiffs’ years of employment did not supply consideration to make Defendant’s promise enforceable.
The Court also quickly dismisses Plaintiffs’ argument that there is moral consideration. The Court states that moral consideration is not valid consideration unless the moral duty was previously a legal duty. The Court similarly notes that appreciation of Plaintiffs’ service is not valid consideration to make the promise enforceable.
In addition the Court considers Plaintiffs’ actions of going to the office to pick up the checks. The Court determines that this is a condition and not consideration because the action benefits Plaintiffs and not Defendant. Further, picking up the checks was a detriment to Defendant, but not to Plaintiff.
The Court also notes that the agreement was not made by an officer Defendant company with authority to make such an agreement. The Court further determines that there was no later ratification of the agreement. However, the decision seems to focus on lack of consideration rather than lack of authority.

Discussion.

Under these facts, Plaintiffs could not show valid consideration to make the promise enforceable. Plaintiffs’ best argument was likely that their past performance of services to their employer, Defendant, operated as consideration for the promise. However, past consideration is not valid consideration.