Cengage Advantage Books: Fundamentals of Business Law Today 10th Edition by Roger LeRoy Miller

Exercise 5

Mitsui Bank hired Ross Duncan as a branch manager in one of its Southern California locations. At that time, Duncan received an employee handbook informing him that Mitsui would review his performance and salary level annually. In 2010, Mitsui decided to create a new lending program to help financially troubled businesses stay afloat. It hired Duncan as the credit development officer (CDO) and gave him a written compensation plan. Duncan's compensation was to be based on the new program's success and involved a bonus and commissions based on new loans and sales volume. The written plan also stated, "This compensation plan will be reviewed and potentially amended after one year and will be subject to such review and amendment annually thereafter."
Duncan's efforts as CDO were successful, and the business-lending program he developed grew to represent 25 percent of Mitsui's business in 2014 and 40 percent by 2015. Nevertheless, Mitsui not only refused to give Duncan a raise in 2014 but also amended his compensation plan to significantly reduce his compensation and to change his performance evaluation schedule to every six months. When he had still not received a raise by 2015, Duncan retired as CDO and filed a lawsuit, claiming breach of contract. Using the information presented in the chapter, answer the following questions.
1. What are the four requirements of a valid contract?
2. Did Duncan have a valid contract with Mitsui for employment as CDO? If so, was it a bilateral or a unilateral contract?
3. What are the requirements of an implied contract?
4. Can Duncan establish an implied contract based on the employment manual or the written compensation plan? Why or why not?