Sunday, October 7, 2012

Question Four: Who wants to be a Dental Hygienist (Contracts, Remedies)

Question Four is a pretty standard contracts and remedies question.  I score this one as a curveball because you have to untangle the contract mess in order to get to the remedies question.  I provided a pair of pretty good strategies for handling these kinds of questions a little over a year ago:

With general inquiries in contract questions there are two basic ways to approach the question. Dan Shemer, who taught my first bar review in Maryland liked the pneumonic: Until Fall Test Pressure Exhaustion Both Threaten Romance (UCC, Formation, Terms, Performance, Breach, Third Parties, Remedies). Another strategy is to consider the elements for a breach of contract in California: 1) A valid contract 2) plaintiff’s performance 3) defendant’s breach and 4) damages. I think you could use either here successfully.

From the California State Bar:

Peter responded to an advertisement placed by Della, a dentist, seeking a dental  hygienist.  After an interview, Della offered Peter the job and said she would either: (1) pay him $50,000 per year; or (2) pay him $40,000 per year and agree to convey to him a  parcel of land, worth about $50,000, if he would agree to work for her for three consecutive years.  Peter accepted the offer and said, “I’d like to go with the second option, but I would like a commitment for an additional three years after the first three.”  Della said, “Good, I’d like you to start next week.”
After Peter started work, Della handed him a letter she had signed which stated only that he had agreed to work as a dental hygienist at a salary of $40,000 per year.
After Peter had worked for two years and nine months, Della decided that she would  sell the parcel of land and not convey it to him.  Even though she had always been satisfied with his work, she fired him.
What rights does Peter have and what remedies might he obtain as to employment and the parcel of land?  Discuss.
Of course, we will do that after the jump.


I.  The Common Law governs the relationship between Peter and Della since this is a common law contract.

The issue is whether this interaction is governed by the Uniform Commercial Code (UCC) or the common law.  Contracts for the sale of goods are governed by the UCC.  Employment contracts and land sale contracts are governed by the common law.  This is either an employment contract, a contract for the sale of land or both.  Therefore, the common law applies.

II. Peter and Della formed a bilateral contract.

The issue is whether Peter and Della formed a contract. A contract requires an offer, acceptance and consideration. An offer is a promise to do something or to refrain from doing something conditioned on the offeree’s acceptance. An oral offer lasts until the end of the conversation. Acceptance is a voluntary act of the offeree where the offeree exercises the power conferred by the offer. Consideration is a legally sufficient detriment to make a contract a binding obligation instead of a gift.

Here, Della promised to either (1) pay Peter $50,000 per year; or (2) pay Peter $40,000 per year and agree to convey to him a  parcel of land, worth about $50,000 in exchange for his labor as a Dental Hygienist for three consecutive years. Della may argue that this is not a valid offer since terms were proposed in the alternative and were not sufficiently definite and that this was merely an agreement to seek further agreement.  Peter can respond that these terms were sufficiently specific as to the services to perform and that the only vague point was compensation which Peter clarified within the same conversation.  Peter's argument will prevail because the term did not render the contract so indefinite as to indicate that the parties had not agreed.

Next, Della can argue that Peter's response to her offer constituted a counteroffer and rejected her offer in its entirety.  Peter can respond that even if that was true, Della accepted the counteroffer and a contract was created anyway.  Again, Peter prevails because the parties agreed that Peter should work for Della in exchange for some compensation to be clarified below.

Finally, the last formation issue is whether this is a unilateral or bilateral contract.  The critical difference being that a unilateral contract can be cancelled by a party at any time prior to full performance and a bilateral contract cannot be cancelled after performance begins.  A bilateral contract involves both parties giving consideration in exchange for performance.  Here Della is promising money and Peter is promising labor, that's a bilateral contract.  Della can argue that this is an installment contract that involves three one-year terms, even if that is true she cannot cancel the contract after the beginning of each one-year period.

III.  The Statute of Frauds Prevents enforcement of the land sale provision (but see IV below).

The issue is whether, assuming a contract exists, the statute of frauds prevents its enforcement. The statute of frauds states that contracts for the sale of land, or contracts for personal services that will last more than a year, must be in writing unless an exception applies. Della can argue that the agreement was for money and that she never signed a contract that could be enforced against her. Peter can respond that this was a contract for personal services for three one-year periods, since each period could be completed within a year, they do not, in the aggregate, frustrate the statute of frauds. Peter’s argument fails, since the oral agreement contains an interest in land, that portion must be in writing sufficient to satisfy the statute of frauds.

IV.  Promissory Estoppel brings the interest in land back into play.

The issue is whether promissory estoppel remedies all of the problems heretofore listed for Peter. Courts will enforce a contract where a plaintiff has relied on a representation of the defendant to his detriment. Here, Peter believed that he had elected a lower salary in exchange for an interest in land in three years.  Della was aware he believed this and removed that portion from the written agreement.  However, Peter never signed the agreement only Della did.  Therefore Della cannot use this writing as a memorial of the agreement and cannot invoke the parole evidence rule.  Peter's reliance on Della's promise was reasonable he took $30,000 less in salary for a $50,000 parcel of land.  Therefore, Peter c an use promissory estoppel to enforce the interest in land clause of the agreement.

V. Remedies: Peter can obtain salary for the rest of the year.

The issue is whether Peter can obtain his salary for the final quarter of the year he was fired.  As noted above, a bilateral contract cannot be terminated once performance begins.  Therefore, since Della "had always been satisfied with his work" Peter was performing and Della is obligated to perform as well.  Since Peter's quarterly salary is $10,000.  Peter is entitled to $10,000.

VI. Remedies: Peter can obtain the land by specific performance.

The issue is whether Peter can obtain the land by specific performance.  Specific performance is available when (1) legal remedies are inadequate; (2) the underlying contract that reasonable, supported by adequate consideration and contains definite terms so that the court knows what to enforce; (3) the existence of a mutuality of remedies;  and (4) a substantial similarity of the requested performance to that promised in the contract.

Peter can argue that legal remedies are inadequate because all parcels of land are unique and that the parcel here is a unique remedy for which monetary compensation is insufficient.  Next, he can argue that the contract was valid as noted above. Della can respond that mutuality of remedies cannot exist in employment contracts because she could not have compelled Peter to finish working because Courts are reluctant to require a person to labor.  Peter can respond that in land for labor cases mutuality is not so rigidly enforced for the laborer.  Peter's argument is correct because case law loosely enforces mutuality requirements.  Finally, Peter substantially performed by working 75% of the year.

Therefore Peter should be able to obtain the parcel of land by specific performance.

3 comments:

  1. Could there be an argument for punative damages Della. For instance if this is a reoccurring theme. Hiring people making false offers and firing them when her performance comes due.

    I bit of a stretch....but what do you think?

    2nd Timer

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  2. I took too much time in the contract formation. I just saw a lot of facts for an offer, counteroffer, etc.

    ReplyDelete
  3. Anonymous 11/6, I'm missing something, punitive damages are for intentional torts, what tort are you thinking of? Employment discrimination?

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