Consideration consists either in some right, interest, or benefit accruing to one party or some forbearance, detriment, or responsibility given, suffered, or undertaken by the other. Valid consideration furthermore must be bargained for. It must induce the return act or promise. To be valid, therefore, the purported consideration must not have been delivered before a promise is executed, that is, given without reference to the promise. Consideration is therefore a test of the enforceability of executory promises, and has no legal effect when rendered in the past and apart from an alleged exchange in the present.
The employee worked for the employer for 25 years. Starting one year after he retired and continuing for three years, the employee received an annual sum from the employer. The employee testified that approximately one week before his actual retirement he spoke with an officer of the employer who stated that the employee would be “taken care of.” There was no mention of a sum of money and no formal authorization for payments by the shareholders. The employee filed a case for yearly pension on the basis that he had an implied-in-fact contract with the employer to pay him a yearly pension. The lower court held that the employer owed the employee an annual sum for four years because the employee had a right to expect the continued payments.
Was the employee entitled to a yearly pension?
The court held that the employee did not supply the required consideration to make the employer's promise binding. The court held that the employee announced his intent to retire well in advance of any promise by the employer to pay him, and therefore the intention to retire was arrived at without regard to any promise by the employer. The court held that the employee's long years of dedicated service was legally insufficient consideration because his service was rendered without being induced by the employer's promise.