Brief Fact Summary. The Plaintiff, Langer (Plaintiff), retired from the Defendant, Superior Steel Corp. (Defendant) and received a letter stating he would receive a pension of $100 per month for life. After 4 years of payment the company ceased payment.
Synopsis of Rule of Law. For a gratuitous promise to be enforceable, there must be valid consideration resulting from a bargained for exchange.
Pennsylvania courts define consideration as a benefit to the party promising or a loss or detriment to the party to whom the promise is made citations omitted as long as the promisee in return for the promise does anything legal which he is not bound to do or refrains from doing anything which he has a right to do, whether there is any actual loss or detriment to him or actual benefit to the promisor or not.View Full Point of Law
Issue. Was the letter a gratuitous promise or an enforceable contract?
Held. The letter is an enforceable contract because it was a result of a bargained for exchange. Consideration was present by the Plaintiff refraining from working for a competitor in exchange for the payment of $100 per month. Likewise, the company received a benefit by barring its former skilled employee to work for its competition. This differs from Kirksey v.Kirksey because there was benefit derived by the promisor.
The contract is also enforceable on a theory of promissory estoppel. Here, the promisor should reasonably expect the promise to “induce action or forbearance of a definite and substantial character.”
Discussion. The court looks at both parties to the transaction and finds that both parties gained a benefit in entering the contract. Therefore, the existence of a bargained for exchange makes this agreement enforceable rather that gratuitous.