Hayes v. Plantations Steel Co.
438 A.2d 1091 (1982)
Rule of Law:
A promise to pay a pension is unenforceable if the employee had already decided to retire before the promise was made, as the retirement does not constitute bargained-for consideration and the promise did not induce the employee's reliance.
Facts:
- Edward J. Hayes was an employee of Plantations Steel Company (Plantations) from 1947 until 1972, rising to the position of general manager.
- In January 1972, Hayes announced his intention to retire in July of that year, a decision he made on his own initiative after 51 years of working.
- Approximately one week before his retirement, Hugo R. Mainelli, Jr., an officer of Plantations, told Hayes that the company 'would take care' of him, with no specific sum or formal authorization mentioned.
- From January 1973 through January 1976, Plantations paid Hayes an annual sum of $5,000.
- The payments were discontinued after 1976 following several poor business years and a change in company control.
- Hayes testified that he would not have retired if he had not expected to receive a pension, but his announcement to retire preceded any promise from Plantations.
- After retiring, Hayes did not seek any other employment.
Procedural Posture:
- Edward J. Hayes sued Plantations Steel Company in Superior Court (trial court) in December 1977 for breach of contract.
- The trial justice, sitting without a jury, found for Hayes on the theories of implied-in-fact contract and promissory estoppel.
- The trial court awarded Hayes three years of back payments at $5,000 per year.
- Plantations Steel Company (appellant) appealed the judgment to the Supreme Court of Rhode Island.
- Hayes (appellee) filed a cross-appeal regarding the denial of attorney's fees.
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Issue:
Does an employer's promise to pay a pension, made after an employee has already announced their intention to retire, create an enforceable contract under the doctrines of consideration or promissory estoppel?
Opinions:
Majority - Shea, Justice
No. An employer's promise to pay a pension made after an employee has already announced their intention to retire does not create an enforceable contract. The court reasoned that there was no valid consideration for the promise. Consideration must be bargained for and induce the return promise or act. Here, Hayes had decided to retire months before Plantations made any promise, so his retirement was not given in exchange for the pension promise. His past service was also not valid consideration, as it was rendered without being induced by the promise. The promise was merely a gratuitous 'token of appreciation' for past services, not a binding offer. The court also rejected the promissory estoppel claim. A key element of promissory estoppel is that the promise must induce the promisee's action or forbearance. Since Hayes had already decided to retire, the subsequent promise did not induce his retirement. Furthermore, his refraining from seeking other employment was a natural consequence of his original decision to retire, not a detrimental change in position induced by the promise.
Analysis:
This decision reinforces the traditional contract principles of bargained-for consideration and inducement for promissory estoppel. It clarifies that a promise made after a party has already independently decided to act cannot be the basis for an enforceable contract, as the action is not a response to the promise. The case serves as a strong precedent against enforcing promises that appear to be gratuitous or are made in recognition of past services, distinguishing them from promises meant to induce future action. It underscores that for reliance to be legally sufficient under promissory estoppel, the promise must be the actual cause of the promisee's action or forbearance.
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