Mitsui Bank hired Ross Duncan as a branch manager in one of its Southern Califor
ID: 456213 • Letter: M
Question
Mitsui Bank hired Ross Duncan as a branch manager in one of its Southern California location. At that time, Duncan received an employee handbook informing him that Mitsui would review his performance and salary level annually. In 2008, Mitsui decided to create a new lending program to help financially troubled businesses stay afloat. Duncan was appointed to be the credit development officer (CDO) for the new program and was given a written compensation plan. According to the plan, his compensation would be based on the program’s success and would include bonuses and commissions based on the volume of loans and sales. 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 2009 and 40 percent in 2010. Nevertheless, Mitsui refused to give Duncan a raise in 2009. In fact, Mitsui amended his compensation plan to reduce his compensation significantly and to change his performance evaluation schedule to every six months. When he said still not received a raise by 2011, Duncan resigned as CDO and filed a lawsuit alleging breach of contract.
QUESTION: I need to know how to defend Mitsui in this scenario.
Explanation / Answer
This is the case of an unilateral contract. Mitsui is the offeror i.e the party making the offer and Ross is the offeree i.e the party to whom the offer is made.
In case of unilateral contracts, the offer is phrased so that the offeree can accept only by completing the contract performance. In such cases, a contract is formed only when the contract is performed. This gives Mitsui the power to revoke its offer at any tine before the offer is accepted by the promisee. The offer is deemed accepted by the promisee only on full performance.
Any additional payment to Ross in the form of bonus and any increment is subjected to employer's discretion, as per the relevant law relating to unilateral contracts. Thus, the defence for Mitsui would be that payment of bonus, commissions and any increment will be at the sole discretion of Mitsui.