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Illinois Supreme Court - 176 Ill. 482, 176 Ill. 2d 482
Tags: Contracts, Statute of Frauds, One-year rule
tl;dr:
A company promised to pay an employee (who had just received an job offer from a competitor with better commissions) a 10% commission on his sales "for life." The employee agreed and passed on the other offer. Then, the company fired him.Video Summary
Case Summary
In McInerney v. Charter Golf, Inc. (1997), the Illinois Supreme Court considered if a verbal agreement for lifetime employment could be enforced according to the statute of frauds. Dennis McInerney, a sales representative for Charter Golf, was offered a job with a competitor. Charter Golf's president counter-offered with lifetime employment and a higher commission rate. McInerney accepted but was fired three years later.
McInerney sued for breach of oral contract, quantum meruit, and reliance damages. The trial court ruled in Charter Golf's favor, stating the oral contract couldn't be completed within a year as required by the statute of frauds. The appellate court agreed but for a different reason: McInerney deciding against taking the other job wasn't enough to change his at-will employment to a lifetime contract.
The Illinois Supreme Court eventually ruled in McInerney's favor, stating the oral contract had enough consideration and could, in theory, be performed within a year (e.g., if McInerney had passed away).
This case highlights that oral contracts can sometimes be enforced despite statutes and serves as an example of how consideration and the statute of frauds function in contract law.
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The Illinois Supreme Court ruled that a promise of lifetime employment must be in writing to be enforceable under the statute of frauds. Additionally, a promise to forbear another job opportunity is insufficient consideration to convert an existing employment-at-will relationship into a contract for lifetime employment. Employment contracts are generally at-will and can be terminated by either party, unless there is evidence of an agreement to the contrary. Consideration in an employment relationship can be the exchange of promises or performances, including a promise, an act, or a forbearance. An employee handbook or policy statement can create enforceable contractual rights, subject to the traditional requirements for contract formation. In McInerney v. Charter Golf, the court found that an employee's promise to forgo another employment offer in exchange for an employer's promise of lifetime employment constituted sufficient consideration. The court held that McInerney's continued work and relinquishment of his right to accept another job opportunity constituted consideration for the contract. The statute of frauds requires certain contracts to be in writing, but there are exceptions, such as the exclusion for contracts of uncertain duration.
Justice Nickels dissents from the majority's opinion that a written employment contract is required due to the statute of frauds. The Justice argues that contracts of uncertain duration, such as a contract of employment for life, are excluded from the provision. The Supreme Court of the United States held that the interpretation of a contract's terms determines whether it is subject to the statute of frauds, not the actual or expected performance of the contract. The one-year provision in contracts has been narrowly interpreted by courts due to its poor suitability for its intended purpose. The majority's decision only provides guidance for lifetime employment contracts and leaves contracting parties uncertain about whether their agreement must be in writing.
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