is this an enforceable contract?

Question

Jason Novell, doing business as Novell Associates, hired Barbara Meade as an independent contractor. The parties orally agreed on the terms of employment, including payment of a share of the company's income to Meade, but they did not put anything in writing. Two years later, Meade quit. Novell then tol Meade tha she was entitled to $9602- 25% of the difference between the accounts payable as of Meade's last day of work. Meade disagreed and demanded more than $63500- 25% of the revenue from all invoices, less the cost of materials and outside processing, for each of the years that she had worked for Novell. Meade filed a lawsuit against Novell for breach of contract.
Questions:
Did the parties have an enforceable contract? Explain and discuss
Does the parties’ oral agreement fall within any exception to the Statute of Frauds? Explain and discuss
How would the lawsuit be affected if Novell admitted that the parties had an oral contract under which Meade was entitled to 25% of the difference between accounts receivable and payable as of the day Meade quit? Explain and disc

Answer 1

Bella,

 

The key here is to identify how/whether the statute of frauds applies and whether any exceptions to the statute of frauds applies.  Since the statute of frauds is a statute, much depends on the applicable statute which you have studied and any specific exceptions you have discussed.  The questions to ask and to then be prepared to discuss are

 

(1) Oral contracts are contracts, and absent some limitation are enforceable.

--Very seldom are employment/work related contracts put into writing but if there is an oral agreement as to the terms of employment they are enforceable.

--Course of performance, i.e. how the parties have acted during their employment relationship, is also strong evidence of the terms of the contract.

(2) Is the oral contract covered by the statute of frauds.

--Typical triggers for the statute of frauds include specified duration of the contract (typically more than 1 year) or dollar amount of the contract (the UCC is still $500, I think) or specific contractual issues (e.g. real estate).

   a.  How do you address whether the employment was at-will and thus, even though the agreement lasted 2 years, it could have ended at any time, i.e was not specifically for 1 year or more

   b.  Similarly, while the dollar amount now alleged might trigger the statute, did it specify the particular amount, i.e. if the venture was a flop, the contract amount might only have been $100.

(3) Do any exceptions to the statute of frauds apply?

   a.  Partial performance.  Often the performance of one side of the deal is sufficient evidence to overcome the statute; often this includes special orders of parts or specially performed services.

   b.  Defendant's admission.  (This is why Novell's admission might matter)

(4) Is there any signed writing by Novell evidencing the contract sufficient to satisfy the statute?

--Anything signed or in writing by Novell might be sufficient evidence of the contract and/or its terms.  Checks that Novell signed for the agreed upon amount, with a letter explaining calculations; fax communications/requests, etc.

 

Obviously, you need to identify material in your class materials to support and answer these questions, but this is where I would start. I hope this helps.  John

Answer 2

Hi Bella;

 

 

 

The most important issue here is the duration of Meade's employment; two years.  There must have been a payment history.  This may or may not be consistent with the oral agreement.  If it is consistent, the oral contract is fully enforceable.  If it is NOT consistent, any court will likely only consider the payment history, and assume that two years is adequate time to contest such.  However, this will vary between judges, and between courts.  Federal, state and local courts may have to observe different standards depending on the laws and statutes.

 

Either way, an enforceable contract exists.  It is the payment history.

 

The Statute of Frauds has the acronym of the MY LEGS doctrine.  It applies to...

MARRIAGE, including prenuptial.

YEAR...contracts which require more than one year to execute.

LAND...contracts of transfer of such interest.

ESTATES

GOODS...contracts of sales of items priced over $500.

SURETY...contract in which one party is established as a surety for the debts of another.

 

The only applicable clause is the Y.  However, the duration must be established in the contract, and it must be greater than one year.  While it is true that this contract existed for more than one year, there appears to be no specification of duration.  Henceforth, the Statute of Frauds is a non-issue.

 

However, the Second Restatement of Contracts may be an issue.  Section 208, UNCONSCIONABLE CONTRACT OR TERM, provides discussion of "overall imbalance".  The numbers you presented are...

$63500- 25% vs  $9602- 25%

This seems like an actionable case to me.  The plaintiff has nature of action, cause of action and object of action.  The only thing she needs to do is find a court which will not consider two years of tacit compliance as beyond the statute of limitations.