Our case study involves a brand new lawyer, Bud, who has to decide whether or not to accept some unusual verbal agreements offered by Mr. Cheatham of the law firm of Cheatham and Moore. Cheatham either hypothetically tells Bud that his starting salary will be “what [Cheatham and Moore] think he is worth” or tells Bud that he will be paid “the average starting salary paid of new associates at midlevel law firms in their city”. We were asked to determine whether both, either or neither of these offers were valid, and to defend our rationale.
The first offer Cheatham makes to Bud to pay Bud what Cheatham and Moore “think he is worth” would fall under both the “statements of intent (future offers)” and “preliminary negotiations” umbrellas that would render the offer invalid both because no firm terms have been made (and who knows what the company will determine Bud’s “worth” to be in the future regardless of his performance at the job), and (to a lesser extent) because Bud would be foolish not to make a counteroffer–thus rejecting the vague original offer–with a clearly-stated salary request. Cheatham is essentially telling Bud that the company will pay him only what it feels like it should; such a promise is too vague to be binding or satisfactory, and a good contract attempts to avoid any unclear descriptive language that can potentially be interpreted in various different ways by individuals, thus inserting ambiguity into the picture. In re Hubert Plankenhorn 228 BR 638 (ND Ohio 1998), the phrase “a damn good job” was not precise enough to bridge the gap of mutual misunderstanding between a car owner, Larry Browneller, and a car restorer and painter, Hubert Plankenhorn, over what, precisely, each party felt would be a “quality” paint job (Twomey, 2011).
If Cheatham is basing the “average starting salary” only on his personal observations (i.e., his opinion), it is probably not a valid offer and he and Bud will have to reach a definitive mutual agreement regarding the definition of what an “average starting salary” actually is. If Cheatham is basing the “average starting salary” on some verifiable statistics and figures, and if Bud can thus force Cheatham to be pinned down to a particular salary figure, it is a valid offer once Bud accepts it.
Valid contractual offers must contain definiteness (“An offer, and the resulting contract, must be definite and certain” (Twomey, 2011)), which means it must include a precise definition of what the consideration will be. Since Cheatham and Moore are making an offer to Bud which he may or may not choose to accept (or may or may not choose to respond to with a counter-offer), the consideration (in this case, the exchange of Bud’s valuable item, his time and labor, for Cheatham and Moore’s valuable item, a salary) must be clearly defined for the contract to be valid.
Verbal contracts are as legally binding as written contracts in many cases, but are much more difficult to enforce in a court of law if one of the involved parties chooses to breach that verbal agreement, especially if the terms and conditions are not clearly outlined, if there are no witnesses to or recorded evidence of the agreement, and / or if the parties involved have a serious dispute about the terms of the contract (Crystal, 2012). “As I always say, “If it isn’t in writing, it doesn’t exist.” Or, as Sam Goldwyn said, “A verbal contract isn’t worth the paper it’s printed on”” (Murray, 2011).
A binding verbal agreement technically requires merely that the parties have agreed orally that a service will be performed and that remuneration for that service will follow. Common problems with verbal offers of employment:
1. If there is a dispute or misunderstanding, the employee will find it difficult to prove his or her version of events;
2. The employer’s representative who made the offer may no longer hold the same position within the company (s/he may quit, be transferred, or be fired), thus unable to confirm or deny the terms of the agreement;
3. The employer’s representative may not have been authorized to make an offer or that particular offer to the employee and the company may refuse to uphold the agreement on those grounds; and
4. Even if the employee receives an offer letter confirming the offer, there may be problematic “wiggle room” language negating the value of the offer letter as a valid contract such as “terms outlined in this offer letter may be subject to change” or “all employees must abide by employment terms as set forth in the company’s employee handbook” (which is an item a potential employee is unlikely to have access to pre-hire, and which may also be subject to change at the company’s whim) (Dietz, n.d.).
An acceptable employment contract includes details about the express terms relevant to the precise position which has been offered and accepted (such as the responsibilities and expectations the company has for the employee doing that particular job, and whether the job is a full time, part time, contracted, permanent or temporary position) and the exact compensation that will be paid, including benefits such as how many days the employee will be granted for vacation and sick leave, and who will be responsible for filing any relevant tax documents. Such contracts often have implied terms that are dictated by law, such as local custom and practice or by a pre-existing statute (Dietz, n.d.). An implied term could be something such as “it is customary that any employee who wishes to quit must file a two weeks’ notice to the employer” or it could encompass existing legal policies against discrimination or against sexual harassment by superiors directed at underlings (or by workplace peers) which are generally expected to be understood to be applicable to all workplaces in a particular jurisdiction.
Regardless of Cheatham’s intentions (since Bud has applied for a position at a law firm, it is possible Cheatham is making these unusual verbal offers to test how knowledgeable and savvy Bud really is about contracts, how knowledgeable Bud is about the requirements related to and typical salary figures for the position he has applied to fill, and how assertive he is), Bud needs to get any employment offer which he wishes to accept in writing, and to make sure that the terms of any contract for employment lack any problematic ambiguous language but also clearly define both the scope of the position being offered at Cheatham and Moore (what he is expected to do for the firm in exchange for a salary) as well as a specific salary figure (what he can expect to receive for performing specific work duties) and not a vague and (possibly deliberately) subjective promise that he will be paid what the firm decides he is “worth” at some undefined point in the future. Bud should also be wary of accepting a verbal agreement that he be paid an “average starting salary” if what that means, precisely, has not been discussed in detail so that the firm’s representative, Cheatham, and Bud both can understand what an “average starting salary” actually means to all involved parties.
In both cases, the offer needs to be clearly defined (the suggestion that Cheatham and Moore pay Bud what they “think he is worth” is insufficient, whereas the offer to pay Bud an “average starting salary” is slightly more informational but still needs clear definition) and Bud has to clearly accept the terms; lastly, both parties have to agree on the considerations (what Bud is required to do to be paid a particular salary) for either of the contracts to be valid.
Twomey, D. P., and Jennings, M. M. (2011) Anderson’s Business Law and the Legal Environment. Retrieved from http://digitalbookshelf.southuniversity.edu
Crystal, G. (2012, September). The Law & Verbal Agreements. Retrieved from http://www.contractsandagreements.co.uk/law-and-verbal-agreements.html
Dietz, B. C. (n.d.). Employment Contracts: Everyone needs promise protection. Retrieved from http://www.asktheheadhunter.com/gv050701.htm
Rich, D. (2011, January 17). Is An Oral Agreement Of Employment Enforceable In New York? Retrieved from http://www.davidrichlaw.com/new-york-business-litigation-and-employment-attorneys-blog/2011/01/is-an-oral-agreement-of-employment-enforceable-in-new-york/
Lee, J. (2010, February 25). My Word Isn’t Good Enough? Verbal Job Offers… Retrieved from http://fistfuloftalent.com/2010/02/my-word-isnt-good-enough-verbal-job-offers-final.html
Blackburn, M. (n.d.). We Fight For Fair: Employment Contract Law [in Australia]. Retrieved from http://www.mauriceblackburn.com.au/areas-of-practice/employment–industrial-law/your-employment-contract.aspx
Murray, J. (2011, August 20). Are Verbal Contracts Legal? Retrieved from http://biztaxlaw.about.com/b/2011/08/20/are-verbal-contracts-legal.htm