Law1000 Business Law For Technical Assessment Answers

Question 

Requirements of the Offer. Technical Consumer Prod- ucts, Inc. (TCP) makes and distributes energy-efficient lighting products. Emily Bahr was TCP's district sales manager in Min- nesota, North Dakota, and South Dakota when the company announced the details of a bonus plan. A district sales manager who achieved 100 percent year-over-year sales growth and a 42 percent gross margin would earn 200 percent of his or her base salary as a bonus. TCP retained absolute discretion to modify the plan. Bahr's base salary was $42,500. Her final sales results for the year showed 113 percent year-over-year sales growth and a 42 percent gross margin. She anticipated a bonus of $85,945, but TCP could not afford to pay the bonuses as planned, and Bahr received only $34,229. In response to Bahr's claim for breach of contract, TCP argued that the bonus plan was too indefinite to be an offer. Is TCP correct? Explain. [Bahr v. Technical Consumer Products, Inc., 601 Fed.Appx. 359 (6th Cir. 2015)] 

Answer

Facts:

Emily Bahr served as a district sales manager for TCP which had a bonus plan whereby a district sales managers who was able to achieve 100% of sales growth, would receive a bonus of 200% of his or her salary. Nonetheless, TCP came up with a discrete provision, which denoted that they had a right to modify the plan. In the year, Bahr managed to get a sales growth of 113%, and a gross margin of 42%. This satisfied the provisions of the contract, thus she was entitled to a bonus of 200% of her salary. The amount of money she was earning was $ 42, 500; thus, she was anticipating a bonus of $85, 945. However, the company could not afford such money, and only paid her $ 34, 229. Bahr sued for a breach of contract.    

Issue:

The issue that was of concern for this case is whether the bonus plan that TCP had with Emil Bahr was too indefinite. The responsibility of the court was to determine if TCP was correct.    

Decision:

In the view of the court, the bonus plan was not indefinite; thus, TCP was not correct, and they were in violation of their contractual obligations.        

Legal Reason:

While deliberating on the issue before the court, the court was of the opinion that the bonus plan that TCP had proposed and thereafter initiated was definite. On this note, the modifications that TCP made to the bonus plan that it had with Emil Bahr was unacceptable, and it should not have been discrete. On this note, TCP had the responsibility of making it public and known to any changes that it had to its bonus plan. It should have communicated these changes to its employees, basically because they would be affected by the changes that were made to the bonus plan. Note that, it is a matter of justice to communicate any changes to a plan that would affect the employees of organizations: more so, if these employees are party to the plan.   

On this note TCP was found to have breached its contractual obligation to Bahr, by introducing terms without communication or informing her. Furthermore, as a consequence of this breach of contract, the plaintiff, who was Bahr, was affected significantly in a financial manner; thus, the breach of contract was significant enough for TCP to be held liable. Furthermore, it was the opinion of the court that no consideration existed for the plaintiff.    

On this note, the judge believed that TCP should have stuck with the bonus plan that it initially agreed with the plaintiff. Therefore, the court made a ruling that if TCP later on found that it was unable to meet the conditions that were stipulated into the bonus plan; then, it was their responsibility to notify its employees on any changes that are made. However, because TCP did not do this, the agreement it entered with its employees lacked consideration. Basing on these facts, the actions of TCP could not qualify as a consideration that satisfies an element of a contract. By stating that the plan was indefinite, TCP wanted to initiate an illusionary promise, thus making the plan to be invalid because it did not have a valid offer.        

References

Bahr v. Technical Consumer Products, Inc. .,601 Fed. Appx.359 (6 th Cir. 2015)