Showing posts with label meeting of minds. Show all posts
Showing posts with label meeting of minds. Show all posts

Tuesday, June 21, 2022

Court Rejects Claims for Unpaid Commissions When Details Were Never Agreed

Last month, the Montgomery County Court of Appeals affirmed an employer’s summary judgment on a claim for unpaid sales commissions.  Brown v. Fukuvi USA Inc., 2022-Ohio-1608.  The plaintiff alleged that he had been verbally promised sales commissions before accepting the job in 2006.  His offer letter – which he signed -- said that a commission structure would be discussed later,  and it was.  However, they could never come to an agreement on a salary and commission structure.  Instead, the employer kept his salary in place and eventually raised it several times before he finally sued in 2019.  The courts found that there was never a meeting of the minds or agreement on the details of a commission structure and, therefore, the employer was not obligated to pay any commissions. 

To be enforceable, contracts must be definite and certain.  An agreement to agree is only enforceable if it is sufficiently definite to be enforced. “When the terms of a contract are not sufficiently definite, the contract is unenforceable.  . . . ‘The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy.’ ””  The plaintiff’s offer letter offered a salary until 2007 and then a reduced salary with a commission – the details of which were to be discussed.  The details were never mutually agreed to and his salary remained unchanged.   “[N]o specific amount of commission or bonus was outlined. Furthermore, details were to be discussed at some future date, with no indication of what those details would be.”

The plaintiff

contends that he was told when he signed the Offer Letter that “his commission structure would operate in the same manner as the prior sale representative, which was a percentage on sales over an initial threshold or goal.”  . . . However, taking this statement at face value, it was made by a [HR] person who lacked authority to authorize payment of commissions; it was also inconsistent with the letter, which said that details would be discussed later. When “later” came, [the company president] elected not to pay commissions due to the severe financial position of the company, and this was communicated to [him]. At that point, if [he] were dissatisfied with the situation, he could have left the company. Instead, he chose to stay. Notably, his salary was not decreased to the considerably lower level mentioned in the Offer Letter.

“Here, the parties may have envisioned a commission and bonus structure, but the details were left to future discussion. Consequently, there was no enforceable promise.”

The court refused to find enforceable details from a commission policy document which the plaintiff had found in his predecessor’s files and which he claims had been referenced during his employment discussions.  The court refused to incorporate them into the offer letter without more evidence.  There was no evidence that the company had provided the policy to the plaintiff during their negotiations or were part of or intended to be part of his offer letter.  The document did not even indicate who prepared it.

The Court also rejected his claims for promissory estoppel, negligent and fraudulent misrepresentations and unjust enrichment on the grounds that they were time barred by the then six-year (and now four-year) statute of limitations.  It rejected his argument that the failure to pay commissions constituted a continuing violation because (1) the Supreme Court of Ohio had taken the position that courts are reluctant to apply this doctrine outside the civil rights context; (2) “continuing violations are distinguished from ‘continuing effects of prior violations’; in this context, ‘ “ ‘ “[a] continuing violation is occasioned by continual unlawful acts, not continual ill effects from an original violation” ’ ” ’ ”; and (3) the lack of authority in Ohio extending this doctrine to breach of contract cases.

The  Court also rejected his equitable estoppel claim because none of his allegations were sufficient to show that the company prevented him from filing suit earlier.   Indeed, a person of reasonable intelligence would have been on notice years earlier of his need to file suit. 

Finally, the plaintiff could not show that he had not been paid his wages under Ohio’s prompt payment act because there was no underlying obligation to pay him commissions.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Thursday, June 18, 2009

Franklin County Appeals Court: Doesn’t Pay to Be Too Clever By Half

Last week, the Franklin County Court of Appeals ruled in favor of the defendant employer and ordered the rescission of a severance agreement where a typographical error in the agreement provided the employee with twelve extra months of severance pay which the employer had not intended to provide. Faivre v. DEX Corp. Northeast, 2009-Ohio-2660 (6/9/09). The employee admittedly had been told that the employer was only offering him three months of severance and he indicated that he would need to have at least twelve months. When he reviewed the agreement in detail after returning home, he realized that the offered severance agreement (which had been drafted by the employer and had already been signed by the employer’s Senior Vice President of Human Resources) promised to pay him severance through 2007 instead of three months later in 2006. Rather than clarifying the issue with the employer, he instead signed and returned the agreement. Quickly realizing its error, the employer immediately asked him to sign a revised page and said that if he did not agree to reform the agreement, it would consider the agreement to be rescinded due to mistake.

Instead, the employee filed suit against the employer for breach of contract. The trial court ruled in favor of the employer, but ordered a reformation of the contract to provide for the three months of severance pay initially offered by the employer. Both sides appealed. On appeal the court of appeals agreed that the parole evidence rule – which typically would bar extrinsic or outside evidence to contradict the clear terms of a contract – did not bar evidence of mistake. In this case, the employer made a mistake and the employee was admittedly aware of the mistake.

The court also agreed that the trial court had authority to reform the contract. However, the court found that was not a proper remedy because there had never been a mutual agreement on the amount of severance. The employer offered three months and the employee wanted twelve. Because there had never been a “meeting of the minds,” there could be no contract to resurrect by reformation.

The court agreed to rescind the contract altogether (meaning the employee would receive no severance). This was pursuant to a Restatement provision:


Where a mistake of one party at the time a contract was made as to a basic assumption on which he made the contract has a material effect on the agreed exchange of performances that is adverse to him, the contract is voidable
by him if he does not bear the risk of the mistake . . .

Thus, unless the mistaken party bears the risk of a mistake, a court may rescind a contract if: (1) one party made a mistake at the time the parties executed the contract, (2) the mistake had a material effect on the agreed exchange of performances that was adverse to the mistaken party, and (3) the other party had reason to know of the mistake.


The court rejected the employee’s argument that the employer had assumed the risk of mistake when it unilaterally prepared and presented the agreement. First, the employee knew about the mistake because the agreement’s terms did not match what he had been told in his exit interview. Finally, the court refused to put the risk on the employer even though it negligently drafted the agreement: “Pursuant to Section 154 of the Second Restatement of Contracts:


A party bears the risk of a mistake when

(a) the risk is allocated to him by agreement of the
parties, or
(b) he is aware, at the time the contract is made, that
he has only limited knowledge with respect to the facts to
which the mistake relates but treats his limited knowledge as
sufficient, or
(c) the risk is allocated to him by the court on the
ground that it is reasonable in the circumstances to do so.

. . .

Subsection (c) is a "catchall provision" that permits a court to allocate the
risk of a mistake to the mistaken party if, under the totality of the circumstances, it would be more equitable or reasonable to do so. . . . " '[A] party's negligence is immaterial where the mistake is in the expression of the contract and the other party knew of the mistake and took advantage of it.' "

. . .

As we concluded above, [the employee] had reason to know that the severance agreement contained a typographical error. Instead of seeking clarification regarding the length of the severance period, [the employee] attempted to take advantage of [the employer’s] error. Therefore, equity and reasonableness do not require us to place the risk of the mistake on [the employer] due to its negligence.



Insomniacs can read the full decision at http://www.sconet.state.oh.us/rod/docs/pdf/10/2009/2009-ohio-2660.pdf

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.