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Business Litigation

Implied and Unsigned Agreements are (Usually) Enforceable July-Aug-07

                         As business and employment relationships become increasingly more complex, a written agreement setting forth the terms of the parties’ agreement becomes all the more important.  Problems often result when the parties fail to appropriately document their understandings.  In such instances, the parties’ understandings may only be implied by their discussions, correspondence, or written agreements never executed by the parties.  In such cases, the question arises as to whether an enforceable agreement exists.  The answer to this question is usually “yes,” as the cases discussed below demonstrate.   In Vandevier v. Mulay Plastics, Inc., a sales representative sought to collect unpaid commissions pursuant to an oral agreement.  The sales representative claimed he was entitled to a 5% commission on all sales, but was only paid 1%-5% commissions over a seven year period.  In determining whether an enforceable contract existed, the court stated, “(w)here the terms of a contract are unclear, or where there is an oral agreement, a meeting of the minds may be inferred from the construction the parties themselves give the contract, as evidenced by their actions.”  Accordingly, the court refused to enforce the oral contract for a 5% commission asserted by the sales representative because the testimony of the parties demonstrated they each understood the terms of such agreement differently.  Thus, the court concluded the lower commission arrangement, evidenced by the acceptance of payments under the lower commission schedule for seven years, was the enforceable contract between the parties.

                        In Landers-Scelfo v. Corporate Office Systems, Inc., Corporate Office Systems, Inc. (“COS”) agreed to pay Theresa Landers-Scelfo (“Scelfo”) commissions according to a formula set forth in a letter COS sent to Scelfo when she was hired.  Thereafter, COS, and the firm to which COS outsourced its human resource duties, paid Scelfo commissions consistent with the compensation formula until approximately one year prior to her termination.  In Scelfo’s suit to collect her commissions, the court found an employment agreement can be entirely implicit such as when an entity pays a worker according to a demonstrable formula for work done.  Thus, an agreement exists where the parties manifest assent to a transaction by either their words or their actions.  Accordingly, the COS letter constituted an enforceable employment agreement because the parties’ actions demonstrated their assent to it.

                        Finally, in Hedlund and Hanley, LLC v. The Board of Trustees of Community College District No. 508, the Board of Trustees of Community College District No. 508 (the “District”) retained Hedlund and Hanley, LLC (“Hedlund and Hanley”), a law firm, to pursue an accounting malpractice claim (the “Litigation”). Hedlund and Hanley drafted a fee agreement, which provided for a bonus payment upon the successful outcome of the Litigation.  Hedlund and Hanley forwarded the fee agreement to the District for execution, but the District never executed it.  Accordingly, Hedlund and Hanley was forced to file suit to collect the bonus after obtaining a successful outcome in the Litigation.  In holding that Hedlund and Hanley was entitled to the bonus, the court found that Hedlund and Hanley’s billing to the District according to the fee schedule set forth in the fee agreement and the District’s payment of such fees over a four year period demonstrated the District’s assent to the fee agreement. Consequently, the unsigned fee agreement was enforceable. 

                           If you have a question about whether an implied or unsigned agreement is enforceable, please telephone a member of the firm.

Attorney to Contact

• Jerome F. Crotty
• Ronald P. Duplack
• Kevin P. Brown
• Bernard A. Henry