Quick Summary
Mary Ellen Cook (plaintiff) worked as a real estate agent for Coldwell Banker/Frank Laiben Realty Co. (defendant), who offered a year-end bonus program based on commission earnings. After surpassing the necessary threshold and later leaving for another firm, Cook was denied her earned bonus.
The dispute centered on whether Cook was entitled to her bonus following her departure prior to the revised payment date. The appellate court confirmed that she had substantially performed under the terms of the unilateral contract, rendering it enforceable.
Facts of the Case
Mary Ellen Cook (plaintiff) served as a real estate agent for Coldwell Banker/Frank Laiben Realty Co. (defendant), operating under a verbal agreement as an independent contractor. To enhance competitiveness and retain agents, Coldwell Banker announced in March 1991 a bonus program tied to agents’ commission earnings for the year, with the top tier promised for those earning over $25,000 in commissions.
By September, Cook had earned in excess of $32,000, well-positioning her for the highest bonus tier. However, a subsequent announcement stipulated that bonuses would now be paid at a banquet in March 1992 and required agents to stay with the company until that date to qualify.
Cook left Coldwell Banker in January 1992 for another firm and was subsequently denied the substantial bonus she had earned, leading to legal action against her former employer on grounds of breach of contract.
Procedural Posture and History
- Cook filed suit against Coldwell Banker for breach of the bonus agreement.
- The trial court ruled in favor of Cook, awarding her damages for breach of contract.
- Coldwell Banker appealed to the Missouri Court of Appeals citing lack of consideration and acceptance issues.
I.R.A.C. Format
Issue
Whether Cook was entitled to receive her bonus despite leaving the company before the revised payout date and whether there was sufficient consideration and acceptance for the bonus agreement to be enforceable.
Rule of Law
In contracts involving unilateral agreements, performance constitutes acceptance and provides consideration, thus making such contracts enforceable upon completion of the requested performance.
Reasoning and Analysis
The court determined that Cook’s sustained employment and commission earnings amounted to substantial performance under the original terms of Coldwell Banker’s offer. This performance rendered the contract enforceable despite Coldwell Banker’s attempt to revise the terms later.
The appellate court found that Cook acted on the initial offer by staying with the company and generating significant commissions with the expectation of receiving a bonus, thereby meeting her part of the unilateral contract.
It was further reasoned that defendant’s late modification of terms could not revoke an offer where substantial performance had already taken place.
Conclusion
The appellate court affirmed the trial court’s judgment in favor of Cook, upholding her entitlement to the unpaid bonus as damages for breach of contract by Coldwell Banker.
Key Takeaways
- A unilateral contract is accepted through performance rather than a return promise or express notice.
- An offeror is bound by a contract once substantial part of requested performance is given and cannot revoke an offer after such performance has been made.
- An at-will employee can accept an offer for a unilateral contract by continuing employment until they have performed sufficiently to earn the promised benefit.
Relevant FAQs of this case
What constitutes sufficient performance in a unilateral contract?
Sufficient performance occurs when the party accepting the offer by performance completes the significant acts necessary to fulfill the terms of the contract, thus making the offeror’s promise enforceable.
- For example: If a homeowner offers to pay $100 to anyone who returns their lost dog, the return of the dog by someone would constitute sufficient performance, obligating the homeowner to pay the reward.
Can an offeror modify the terms of a unilateral contract after acceptance through performance has begun?
An offeror cannot unilaterally modify the terms of a contract once the offeree has begun performing. At that point, the original terms of the offer remain binding.
- For example: If a fitness app company offers a year-long premium subscription for users who complete a six-month fitness challenge, they cannot change it to a more stringent challenge mid-way through without mutual agreement.
How does at-will employment affect the enforceability of a unilateral contract promise made by an employer?
In at-will employment, an employer’s unilateral contract promise becomes enforceable once the employee provides substantial part of the requested performance, even if employment could be terminated at any time.
- For example: An employer promises a bonus to employees who stay with the company for a full project cycle. An employee who works through most of the cycle before being let go may still be entitled to a pro-rata bonus.
References
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