Question

Citynet, LLC, established an employee incentive plan 'to enable the Company to attract and retain experienced individuals.' The plan provided that a participant who left Citynet's employment was entitled to 'cash out' his or her entire vested balance. (When an employee's rights to a particular benefit become vested, they belong to that employee and cannot be taken away. The vested balance refers to the part of an account that goes with the employee if he or she leaves the company.)When Citynet employee Ray Toney terminated his employment, he asked to redeem his vested balance, which amounted to $87,000.48. Citynet refused, citing a provision of the plan that limited redemptions to no more than 20 percent annually. Toney filed a suit in a West Virginia state court against Citynet, alleging breach of contract. Citynet argued that the plan was not a contract but a discretionary bonus over which Citynet had sole discretion.
Was the plan a contract? If so, what was the consideration?

Answer 1

Answer:

There is a contract but a unilateral one.

Explanation:

There is a contract but a unilateral one.  

Employee incentive plan “to enable the Company to attract and retain experienced individuals" is an offer ,to which the extended stay of Toney is the acceptance. And, naturally, Citynet is obligated to fulfill the "promise" promised. The plan is very much a contract with the above said offer and its acceptance that makes the promise binding and legally enforceable..  

Consideration here is Toney's staying on the job.

On stay,the plan  provided “cash out” of his or her entire vested balance ie.when an employee’s rights to a particular benefit become vested, they belong to that employee and cannot be taken away. The vested balance refers to the part of an account that goes with the employee if he or she leaves the company.

Nowhere, the amount to vest on voluntary termination , is left to the sole discretion of Citynet .

As such in the above case, Toney is right in suing Citynet for breach of contract as all the essential elements of a contract ,namely, valid offer and its acceptance and a legally acceptable consideration --are present to make the incentive plan and the promises contained therein, binding and enforceable on Citynet .