Requirements of the Offer. No. Technical Consumer Products, Inc. (TCP), is not correct. The bonus plan...

 

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Requirements of the Offer. No. Technical Consumer Products, Inc. (TCP), is not correct. The bonus plan was not too indefi- nite to be an offer. One of the requirements for an effective offer is that its terms must be reasonably definite so that a court can determine whether a breach has occurred and award an appropriate remedy. Generally, these terms include an identification of the parties and the object or subject of the contract, the consideration to be paid, and the time of performance. In this problem, TCP provided its employees, including Bahr, with the details of a bonus plan. A district sales manager such as Bahr who achieved 100 percent year-over-year sales growth and a 42 percent gross margin would earn 200 percent of her base salary. TCP added that it retained absolute discretion to modify the plan. Bahr exceeded the goal and expected a bonus commensurate with her performance. TCP paid her less than half what its plan promised, however. In the ensuing litigation, TCP claimed that the bonus plan was too indefinite to constitute an offer, but this was not in fact the case. Clear criteria applied to determine an employee's eligibility for a certain amount within a specific deadline. A court asked to apply the plan would have little or no doubt as to the amount an employee would be entitled to. The term that reserved discretion to TCP to modify the plan did not sufficiently undercut the clarity of the offer to prevent the formation of a contract. In the actual case on which this problem is based, the court con- cluded that the reservation of discretion to revoke a plan makes an offer too indefinite and issued a judgment in TCP's favor. A state inter- mediate appellate court reversed this judgment, holding that TCP's plan was a sufficiently definite offer. Requirements of the Offer. No. Technical Consumer Products, Inc. (TCP), is not correct. The bonus plan was not too indefi- nite to be an offer. One of the requirements for an effective offer is that its terms must be reasonably definite so that a court can determine whether a breach has occurred and award an appropriate remedy. Generally, these terms include an identification of the parties and the object or subject of the contract, the consideration to be paid, and the time of performance. In this problem, TCP provided its employees, including Bahr, with the details of a bonus plan. A district sales manager such as Bahr who achieved 100 percent year-over-year sales growth and a 42 percent gross margin would earn 200 percent of her base salary. TCP added that it retained absolute discretion to modify the plan. Bahr exceeded the goal and expected a bonus commensurate with her performance. TCP paid her less than half what its plan promised, however. In the ensuing litigation, TCP claimed that the bonus plan was too indefinite to constitute an offer, but this was not in fact the case. Clear criteria applied to determine an employee's eligibility for a certain amount within a specific deadline. A court asked to apply the plan would have little or no doubt as to the amount an employee would be entitled to. The term that reserved discretion to TCP to modify the plan did not sufficiently undercut the clarity of the offer to prevent the formation of a contract. In the actual case on which this problem is based, the court con- cluded that the reservation of discretion to revoke a plan makes an offer too indefinite and issued a judgment in TCP's favor. A state inter- mediate appellate court reversed this judgment, holding that TCP's plan was a sufficiently definite offer.

Answer rating: 100% (QA)

Solution In this problem TCP provided its employees including Bahr with the details of a bonus plan ... View the full answer