Business Law and the Regulation of Business 11th Edition by Richard Mann, Barry Roberts

تمرين 12

FACTS DiLorenzo, a forty-year employee of Valve Primer, was also an officer, director, and shareholder of one hundred shares of stock. DiLorenzo claims that in 1987 Valve Primer offered him a ten-year stock option that would allow DiLorenzo to purchase an additional three hundred shares at the fixed price of $250 per share. DiLorenzo claims that in reliance on that employment agreement, he stayed in his job for over nine additional years and did not follow up on any of several recruitment offers from other companies. Valve Primer claims the 1987 employment agreement between it and DiLorenzo did not contain a stock purchase agreement. The only purported proof of the agreement is an unsigned copy of board meeting minutes of which DiLorenzo had the only copy.
In January 1996, DiLorenzo entered into a semiretirement agreement with Valve Primer, and he attempted to tender his remaining one hundred shares pursuant to a stock redemption agreement. Shortly thereafter, Valve Primer fired DiLorenzo. DiLorenzo argued before the trial court that, even if the purported agreement was not found to be valid, it should be enforced on promissory estoppel grounds. Valve Primer's moved for summary judgment, which the trial court granted for lack of consideration. The trial court denied the promissory estoppel claim because of insufficient reliance. DiLorenzo appealed.
DECISION The trial court's grant of Valve Primer's motion for summary judgment is affirmed.
OPINION Reid, J. We begin by addressing whether there was consideration for the stock options. ''A stock option is the right to buy a share or shares of stock at a specified price or within a specified period.'' [Citation.] In order to evaluate the nature and scope of the stock options issued to DiLorenzo, we must assume, for purposes of this portion of our discussion, that DiLorenzo's corporate minutes are valid.
''A contract, to be valid, must contain offer, acceptance, and consideration; to be enforceable, the agreement must also be sufficiently definite so that its terms are reasonably certain and able to be determined.'' [Citation.] ''A contract is sufficiently definite and certain to be enforceable if the court is able from its terms and provisions to ascertain what the parties intended, under proper rules of construction and applicable principles of equity.'' [Citation.] ''A contract may be enforced even though some contract terms may be missing or left to be agreed upon, but if essential terms are so uncertain that there is no basis for deciding whether the agreement has been kept or broken, there is no contract.'' [Citation.] A bonus promised to induce an employee to continue his employment is supported by adequate consideration if the employee is not already bound by contract to continue. [Citation.] Because we are assuming the validity of the document issuing the stock options, we now turn to whether the underlying option is supported by valid consideration so as to make it a proper contract.
''Consideration is defined as the bargained-for exchange of promises or performances and may consist of a promise, an act or a forbearance.'' [Citation.]
The general principles applicable to option contracts have been long established. An option contract has two elements, an offer to do something, or to forbear, which does not become a contract until accepted; and an agreement to leave the offer open for a specified time, [citation], or for a reasonable time. [citation]. An option contract must be supported by sufficient consideration; and if not, it is merely an offer which may be withdrawn at any time prior to a tender of compliance. [Citation.] If a consideration of ''one dollar'' or some other consideration is stated but which has, in fact, not been paid, the document is merely an offer which may be withdrawn at any time prior to a tender of compliance. The document will amount only to a continuing offer which may be withdrawn by the offeror at any time before acceptance. [Citation.] The consideration to support an option consists of ''some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other' [citation]; or otherwise stated, ''Any act or promise which is of benefit to one party or disadvantage to the other ***.'' [Citation.]
''The preexisting duty rule provides that where a party does what it is already legally obligated to do, there is no consideration because there has been no detriment.'' [Citation.]
Focusing on the lack of a detriment to the employee, the trial court found no valid consideration. Based upon our view of the discussion in [citation], the trial court was correct in concluding that the option contract is merely an offer which may be withdrawn at any time prior to a tender of compliance. DiLorenzo could have exercised the option the moment it was purportedly made, then immediately quit, thereby giving nothing to the employer. Though the exercise of the option would require the transfer of money for the stock, the option itself carries with it no detriment to DiLorenzo. Therefore, there was no consideration for the option.
***
We next address DiLorenzo's claim that he is entitled to the value of the shares of stock based upon the theory of promissory estoppel. DiLorenzo argues that the trial court misapplied the law in finding that there was insufficient reliance to support a claim for promissory estoppel. He claims that, once the trial court decided there was insufficient consideration to support the option contract, promissory estoppel should have been applied by the court to enforce the agreement as a matter of equity. DiLorenzo argues that he detrimentally relied upon Valve Primer's promise in that he worked at Valve Primer for an additional period in excess of nine years in reliance on the stock option agreement. ***
Valve Primer responds that the trial court was correct in finding insufficient reliance to support the promissory estoppel claim. Valve Primer argues that the DiLorenzo could not satisfy the detrimental reliance prong of the promissory estoppel elements. Though DiLorenzo claimed he did not act upon offers of employment he claims were made by other companies during the course of his employment with Valve Primer, he presented to the trial court nothing but his own testimony in support of his claim. Valve Primer argues that, since DiLorenzo essentially is claiming his stock option vested immediately, he cannot contend that he detrimentally relied upon the purported agreement in the corporate minutes by turning down those other opportunities. *** For purposes of promissory estoppel, if DiLorenzo's allegations are taken as true, and the purported option vested immediately, it required nothing of him in order to be exercised other than the payment of $250 per share.
''Promissory estoppel arises when (1) an unambiguous promise was made, (2) the defendant relied on the promise, (3) the defendant's reliance on the promise was reasonable, and (4) the defendant suffered a detriment.'' [Citation.] Whether detrimental reliance has occurred is determined according to the specific facts of each case. [Citation.]
While we would accept that, under certain circumstances, it may be possible for a relinquishment of a job offer to constitute consideration sufficient to support a contract, this is not such a case. There is nothing in the language of the corporate minutes or any other source to be found in this record to suggest that Valve Primer conditioned the alleged stock option on DiLorenzo's promise to remain in his employment. While the corporate minutes say the alleged grant of the stock option was intended to ''retain and reward,'' it contains no mechanism making the retention mandatory. Since the corporate minutes lack a mandatory obligation on which DiLorenzo could have reasonably detrimentally relied, and he could have elected to buy the shares of stock immediately, DiLorenzo's decision to remain on the job for the additional period of over nine years must be viewed as a voluntary act. Under those circumstances, promissory estoppel would not apply. It was, therefore, not an abuse of discretion to grant Valve Primer's motion for summary judgment on that issue.
INTERPRETATION Past consideration is not legal consideration to support a promise; promissory estoppel requires detrimental reliance.
ETHICAL QUESTION Did the parties act ethically? Explain.
CRITICAL THINKING QUESTION What would have satisfied the consideration requirement in this case?