Feinberg v. Pfeiffer Co.

St. Louis Court of Appeals, Missouri · Contracts

ContractsConsiderationPromissory estoppelpension promisegratuitous promisepast considerationretirementreliance

Facts

Plaintiff worked for defendant for many years and, in 1947, defendant's board adopted a resolution increasing her salary and giving her the privilege of retiring at any time on $200 per month for life. Plaintiff was told of the resolution the same day, was told she could take the pension immediately, and she continued working until June 30, 1949, when she retired. She testified that she retired in reliance on the pension and would not have left employment without it. Defendant paid the pension until April 1956, then reduced the payment after concluding the arrangement was only a gratuity.

Issue

Was defendant's board resolution promising plaintiff $200 per month for life upon retirement legally enforceable, even though the promise was not supported by bargained-for consideration in the ordinary sense? Specifically, did plaintiff's retirement in reliance on the promise make the promise binding under promissory estoppel?

Rule

Past services alone do not constitute valid consideration for a later promise. Continued employment does not supply consideration where the promise does not condition benefits on continued service and the employee makes no promise to remain. But a promise is binding under Section 90 of the Restatement when the promisor should reasonably expect it to induce definite and substantial action or forbearance, it does induce such action or forbearance, and enforcement is necessary to avoid injustice.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Cleveland, Orion Glass Works told its at-will payroll manager, Linda Carver, that she could retire whenever she chose and would then receive $3,000 per month for life. Linda was not asked to stay any particular period, but two years later she retired because she and her spouse planned their finances around the promised payments; after 18 months of payments, Orion stopped, calling the arrangement a gift.

Is the promise most likely enforceable?

Explanation. The majority held that past service is not consideration and continued at-will employment, without a promise to stay and without conditioning the benefit on future service, is not bargained-for consideration. But a promise is binding under Restatement § 90 when the promisor should reasonably expect definite and substantial action or forbearance, such action occurs, and enforcement is necessary to avoid injustice. Linda’s retirement is the key induced change of position. (Derived from Feinberg v. Pfeiffer Co. (n.d.).)