Cook v. Coldwell Banker

1 Cook v. Coldwell Banker/Frank Laiben Realty Co., 967 S.W.2d 654 (1998) Missouri Court of Appeals Plaintiff: Licensed real estate agent for defendant; independent contractor Defendant: Cause of Action: Breach of a bonus agreement Relief Sought: Damages of $18,404.31; amended petition for prejudgment interest Basis for Dispute: Law Facts:  Defendant (through Laiben, co-owner) orally announced a bonus program in order to remain competitive with other local brokerage firms and to retain its agents. This was announced in March 1991.  Bonus program provided that an agent earning $15k in commissions would receive a $500.00 bonus payable immediately  Agent earning between $15k and $25k in commissions would receive a 22% bonus  $25k+ would receive a 30% bonus  Bonuses over the first $500 were to be paid at the end of the year. Year of the program was January 1, 1991 to December 31, 1991 and would continue on an annual basis after that.  End of April 1991, plaintiff surpassed $15,000 and defendant paid her the $500 in September, 1991.  By September 1991, plaintiff had surpassed $32,400.00 in commissions.  In a meeting in September 1991, Laiben indicated that bonuses would be paid at a banquet to be held in March of the following year instead of at the end of the year. Plaintiff asked if this meant that an agent had to be “here” in March in order to collect the bonus. He said yes.  Plaintiff said that, at the time of the change in bonus agreement, she had no intention of leaving defendant but stayed w/ defendant until the end of 1991 in reliance on the promise of a bonus.  January 1992 – plaintiff accepted a position with Remax and advised Laiben of departure. Laibden informed her that she would not be receiving her bonus.  At the end of 1991, her total earnings were $75,638.47, entitling her to $17,391.54.  At trial, Laiben denied that at the March meeting he had stated the bonuses would be paid at the end of the year and testified that at that meeting he had told the agents the bonuses would not be paid until the following March. Disputed Facts: Plaintiff’s Argument: 2 Defendant’s Argument:  The salesperson failed to make a submissible case in that she did not accept the bonus offer before it was revoked.  Trial court errors relating to instructions, evidence, and closing arguments. Procedural History: Lower Court Disposition: The trial jury returned a verdict in favor of plaintiff and awarded her damages in the amount of $24,748.89. Issue(s): Did the plaintiff fail to make a submissible case of breach of the bonus agreement? Defendant claims that she did not adduce sufÏcient evidence to establish a reasonable inference that: o She tendered consideration to support defendant’s offer of a bonus contract, or o that she accepted defendant’s offer to give a bonus Application: Plaintiff adduced evidence of a unilateral k offered in March, 1991, to pay a bonus under certain conditions at the end of the year. She also adduced evidence that in September, 1991, defendant attempted to revoke that offer and make the bonus contingent upon the agent’s remaining until March of the following year.  Rule:  A unilateral contract is a contract in which performance is based on the wish, will, or pleasure of one of the parties. (Klamen v. Genuine Parts Co.,)  A unilateral k lacks consideration for want of mutuality, but when the promise performs, consideration is supplied, and the k is enforceable to the extent performed. Court’s Holding(s): There is sufÏcient evidence that the bonus offer induced plaintiff to remain w/ defendant through the end of 1991 and to earn a high level of commissions for the court to submit the issue of acceptance by performance to the jury. Issue2: It was free to revoke the first offer with the second offer because, as of the time the second offer was made, plaintiff had not yet accepted the first offer. Defendant maintains that, because plaintiff did not stay until March 1992, she did not accept the second offer and thus, did not earn the bonus. Rule: An offeror may not revoke an offer where the offeree has made substantial performance (1 Williston on Contracts, 3rd Edition Section 60A (1957)): Where one party makes a promissory offer in such form that it can be accepted by the rendition of the performance that is requested in exchange, without any express return promise or notice of acceptance in words, the offeror is bound by a k just as soon as the oferree has rendered a substantial part of that requested performance. 1 Corbin on Contracts Section 49 (1952): 3 The main offer includes a subsidiary promise, necessarily implied, that if part of the requested performance is given, the offeror will not revoke his offer, and that if tender is made it will be accepted. Part performance or tender may thus furnish consideration for the subsidiary promises. Moreover, merely acting in justifiable reliance on an offer may in some cases serve as sufÏcient reason for making a promise binding. Court’s Disposition: The court afÏrmed the verdict awarding the agent damages for breach of a bonus k. Rule: Restatement Section 45 Section 45. Revocation of Offer for Unilateral Contract; Effect of Part Performance or Tender If an offer for a unilateral contract is made, and part of the consideration requested by the offer is given or tendered by the oferree in response thereto, the offeror is bound by a contract, the duty of immediate performance of which is conditional on the full consideration being given or tendered within the time stated in the offer, or if no time is stated therein, within a reasonable time. Key: referring specifically to an offer that invites acceptance only by a performance and not by a promise. 4 Historical Development of the Law of Unilateral Contracts One of the principle characteristics of the offer for a unilateral contract in it sorigianl, “classical” form, was that it:  Remained revocable until the offeree’s full performance of the act(s) called for in the offer; when rendered, that performance furnished the acceptance of the offer, but ONLY then. The offeree’s performance also constituted the consideration necessary to bind the offeror to the promise expressed in her offer. This free-revocability rule potentially could result in injustice to the offeree who had begun to perform in reliance on the offeror’s expressed intention to contract, only to have that offer revoked. *Courts should not interfere with the operation of free-revocability rule merely because of “alleged fanciful hardship” Section 32 of Restatement – declares that in such cases of ambiguity, the court should assume that the offeror intended to allow the offeree to have the power to accept EITHER by making a return promise or by rendering the performance requested by the offeror. Does not apply when it is clear that the offeror sough an act AND ONLY AN ACT in exchange for her promise of performance. Section 45 Rest. – now provides that when an offeree tenders or begins the requested performance under a unilateral k, the offeror becomes bound and cannot revoke her offer so long as the offeree timely completes performance in accordance with the terms of the offer. (much broader protection to the offeree of a unilateral k) Dichotomy between unilateral & bilateral k’s.