1. MEMORANDUM
TO: ALBERT SCHMAUCH, ESQ
FROM: NICOLE WILLIAMS
SUBJECT: SMITH V. PRESTIGE UNIVERSITY
DATE: NOVEMBER 9, 2015
Questions Presented:
Was there a valid oral contract for permanent employment between the two
parties made? If there was a valid oral contract made, was it terminable at will?
Brief Answer:
Yes, there was a valid oral contract for permanent employment made between the
plaintiff and the defendant. Probably yes, the contract was terminable at will.
Facts:
Plaintiff Howard Smith was a college administrator at State University for the
past ten years as Vice President for Development in Springtown, Illinois. Plaintiff gained
a national reputation for successful fundraising, he also held the faculty rank of full
professor with tenure. In spring 2012, defendant Prestige University in Urban, Illinois
which is a private university 200 miles north of Springtown, was searching for a new
Vice President of Development. Smith was referred by a colleague to apply for the
position, therefore Plaintiff submitted the application to Mark Clark, whom is defendant’s
president.
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The interviews went extremely well for the plaintiff and defendant Clark knowing
about plaintiff’s reputation offered the job to him. Plaintiff considered the job but
explained to Defendant that “It would have to be a major deal. I’d be giving up a happy
situation and a very secure position with tenure and all.” Defendant responded by stating
“I think that we can make you even happier. We will offer you $200,000 a year to start,
plus a new car. And I look forward to having you at Prestige University for the rest of
your life.” Plaintiff then again specified his concerns “The money is great, but I am
concerned about the job security and moving 200 miles.” Defendant Clark answered
“Like I said, I look forward to your presence at Prestige for the rest of your life.”
Plaintiff Smith immediately accepted the position at Prestige. There was no
written contract signed between the two parties, the two men did however shake hands
immediately after Smith stated his acceptance. Plaintiff soon resigned from his position at
State University, moved his family 200 miles to Urban and purchased a $500,000 home.
He began working immediately as the new Vice President of Development for Prestige.
Nonetheless, within five months, Smith and Clark had several disagreements over
fundraising strategies. When the disagreements continued, Defendant Clark fired Plaintiff
Smith less than ten months after the agreement was completed.
Discussion:
According to the case Molitor v Chicago Title & Trust Co. 235 Ill. App. 124, 59
N.E.2d 695 (1945), plaintiff Molitor sued defendant Chicago Title & Trust Co for breach
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of contract pertaining to permanent employment. Plaintiff Molitor moved to Chicago
from New York with his family on the acceptance from Defendant that his position was
going to be permanent and that he could give up his current profession as a lawyer.
Within a year and a half of being employed by the defendant, plaintiff was discharged by
defendant. The holding of that case was that a contract for lifetime employment is in
effect if the intention of the parties is clear even if the only consideration for the contract
is the promise of the employee to render the service called for by the contract.
This is the scenario in Plaintiff Smith’s case, plaintiff moved 200 miles and gave
up his secured position at his previous employment at State University for Prestige that is
the consideration for a valid contract. By defendant stating that he was looking forward to
Smith working for Prestige for the rest of his life as Vice President of Development,
indicated that it was to be a lifelong position. This describes perfectly as “permanent
employment” because the situation and the relationship between the two parties was
understood and there was consideration of the words used to make the contract.
In the case Heuvelman v Triplett Elec. Instrument Co. 23 Ill. App. 2d 231, 161
N.E.2d 875 (1959) however is the same kind of oral contract. Plaintiff Heuvelman sued
Defendant Triplett Elec. Instrument Co for a breach of oral contract for permanent
employment. The plaintiff was hired by the defendant as a sales representative in January
1933. The agreement specified no definite time of employment, while employing plaintiff
Heuvelman defendant hired another sales representative in April 1933 to work with the
plaintiff. The plaintiff consented to enter into a sales partnership with the new
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representative on the basis of the plaintiff having a permanent position with the
defendants company. A competitor offered the plaintiff a job in the year 1940 which he
refused after speaking with defendant, when the plaintiff’s partner resigned plaintiff
received an offer from another employer. Plaintiff then mentioned that offer to defendant,
plaintiff claims that the defendant told him, orally, that the employment was permanent
as they walked together down State Street.
However, the defendant denied the claim and in October 1955, defendant
terminated plaintiff’s employment as of November 30, 1955. The holding for this case
states that there was no oral contact between the two parties because there was no
consideration. The reasoning for this is because terminating other employment is not
sufficient enough to make a new contract binding if there is no detriment to the
employee. Oral contracts for permanent employment are valid as long as they are
supported by a consideration other than the obligation of services to be performed on the
one hand and wages to be paid on the other. Contracts should have the basis on definite
and mutual promises, words should not be of informal character expressing goodwill and
hope for eternal association.
In Plaintiff Smith’s case, the acceptance of the oral contract for permanent
employment for both parties was the handshake. The "handshake" began as a means for
the two parties to assure one another that there was an understanding about the terms and
conditions of the oral contract. A handshake deal is always more binding when there are
witnesses to the agreement, in our case there were no witnesses.
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Conclusion:
Plaintiff Smith’s complaint for breach of contract is valid against the
defendant mostly because of the consideration that took place. Plaintiff Smith had
acknowledged to defendant that he would be giving up his secure position at his current
employer for the position offered at Prestige University. Defendant recognized that
consideration and still proceeded to make an oral contract with the plaintiff for permanent
employment at Prestige. Furthermore, even though it is a valid contract, it is still able to
be terminated at will because during the ten months that plaintiff was employed for
defendant, there were numerous disagreements between the two about the position.
