## Facts

- L. U. Pitts worked for about 25 years as an independent manufacturer’s representative selling McGraw-Edison’s products on commission in a multi-state southern territory.
- Pitts had no written agreement; the parties’ relationship was not employment, and either side could end it at will without notice.
- Pitts did not contribute to any pension or retirement fund during the relationship.
- In 1955, as Pitts approached retirement age, McGraw-Edison’s sales manager discussed Pitts’s retirement and the transfer of the territory to another representative.
- McGraw-Edison confirmed an arrangement in 1955 letters stating it would pay Pitts a 1% commission on sales in the territory handled by his successor to make retirement less unpleasant.
- Pitts stopped representing McGraw-Edison, transferred customer records, and the successor took over the territory.
- McGraw-Edison paid the 1% commission for about five years, then discontinued payments in 1960, asserting the payments were intended only for a limited period.
- Pitts sued in federal court (diversity jurisdiction) for damages and declaratory relief, claiming an enforceable retirement contract (or, alternatively, promissory estoppel). The district court dismissed the action.

## Issues

1. Whether the 1955 letters and subsequent payments created an enforceable contract for continuing 1% commissions supported by consideration, or instead reflected a gratuitous payment terminable at will.
2. Whether, absent consideration, the promise was enforceable under promissory estoppel as applied under Tennessee law, including whether Pitts showed a sufficient detrimental change of position.

## Decision

- The Sixth Circuit affirmed the dismissal.
- The court held Pitts had no contractual right to continued 1% payments because the arrangement lacked consideration and was a voluntary gratuity.
- The court rejected promissory estoppel on the facts and under its understanding of Tennessee law’s limited acceptance of the doctrine in this context.
- Because the payments were gratuitous and terminable at will, McGraw-Edison could discontinue them without breach.

## Legal Principles

- A promise of continuing payments is not an enforceable contract without consideration; a voluntary payment arrangement may be treated as a gratuity terminable at will.
- In an at-will independent-contractor relationship, “retiring” or stepping aside may not constitute legal detriment where the principal already had the right to terminate the relationship at any time.
- Promissory estoppel cannot be used as a general substitute for consideration; it requires a sufficiently definite promise and a foreseeable, detrimental change of position, and its availability depends on applicable state law.

## Conclusion

The court treated the post-retirement 1% commission promise as a nonbinding, voluntary benefit rather than a consideration-supported contract, and it declined to impose continued payments through promissory estoppel under Tennessee law.


Pitts v. McGraw-Edison Co., 329 F.2d 412 (6th Cir. 1964)