A Question of Ethics—Unilateral Contracts. International Business Machines Corp. (IBM) hired Niels Jensen as a software sales representative. According to the brochure on IBM’s “Sales Incentive Plan” (SIP), “the more you sell, the more earnings for you.” But “the SIP program does not constitute a promise by IBM. IBM reserves the right to modify the program at any time.” Jensen was given a “quota letter” that said he would be paid $75,000 as a base salary and, if he attained his quota, an additional $75,000 as incentive pay. Jensen closed a deal worth more than $24 million to IBM. When IBM paid him less than $500,000 as a commission, Jensen filed a suit. He argued that the SIP was a unilateral offer that became a binding contract when he closed the sale. [Jensen v. International Business Machines Corp., 454 F.3d 382 (4th Cir. 2006)] (See pages 243–244.)

1. Would it be fair to the employer for the court to hold that the SIP brochure and the quota letter created a unilateral contract if IBM did not intend to create such a contract?

Would it be fair to the employee to hold that no contract was created? Explain.

2. The “Sales Incentives” section of IBM’s brochure included a clause providing that “management will decide if an adjustment to the payment is appropriate” when an employee closes a large transaction. Does this affect your answers to the above questions? From an ethical perspective, would it be fair to hold that a contract exists despite this statement? Explain.