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Question 1 (35 points)
John Jordan, an account executive, left CCC, a compensation consulting firm, because of a contract dispute. On April 10, 2014 he signed a three year contract that stated the following:
John Jordan hereby agrees to perform employment services for CCC and CCC hereby agrees to employ John Jordan for a term of three years commencing April 10, 2014. Jordan will be compensated with a fixed annual salary of $ 150,000 adjusted annually for cost of living adjustments not less than 5%. CCC will also pay Jordan an annual bonus equal to 10% of the fees Jordan generates for the firm from new or existing clients. Jordan may terminate this agreement by giving 6 months notice and CCC may terminate this agreement for cause, such as fraud, embezzlement, conflict of interests, and other forms of wrongdoing by Jordan. In the event of termination, Jordan may not be employed in the compensation consulting field for a period of 12 months nor may he solicit existing clients of the firm.
Jordan left the firm due to several disputes with respect to the above contract. Specifically, he claims:
Which of the above claims 1-5 made by Jordan would be admissible in court and which would not be admissible and why? ( Do not discuss whether you think his claim would be successful )
With respect to claim number 5 would Jordan be able to enforce the promise of a pay raise even if he could prove he was promised such a raise during the telephone conversation?
What is your opinion of Jordan’s claim with respect to the covenant not to compete?
Question 2 ( 15 points )
Assume that a federal labor statute provides that the following:
Unless otherwise excepted by this statute, all employees shall be paid overtime wages for hours worked in excess of 40 hours in any calendar week. Such overtime wages shall be paid at a rate of 150 percent of an employee’s regular hourly wage. Executive, managerial, and supervisory personnel are excepted from the above requirement.
The Department of Labor issued several regulations implementing the above statute. The regulations:
provided detailed rules for determining which employees are categorized as executive, managerial, and supervisory personnel
provided rules for calculating an employee’s “regular hourly wage,” including rules for converting salaried personnel to an hourly wage
stated that any employee who has not been employed with the company for at least one year is not entitled to overtime pay
provided detailed rules for determining how many hours an employee has worked in a given calendar week
In addition, state legislation was enacted after the passage of the above federal law that is identical to the federal law except that it provides overtime pay at a rate of 200 percent of regular hourly wages.
An individual brought a lawsuit claiming that the regulations issued by the Department of Labor are invalid. An employer brought a lawsuit claiming that the state statute providing a higher overtime rate of pay than the federal statute is invalid.
Which part or parts, if any, of the federal regulation do you believe is invalid and why?
What is your opinion of the employer’s argument regarding the state law? Do you need more information to come to a conclusion and, if so, what information?
Question 3 ( 35 points )
Donna Jones has been employed with the Boston Consulting Group ( BCG ) for two years. BCG is in the process of establishing offices in Singapore, Malaysia, and Thailand and, because Donna had a background in Asian history and languages, BCG solicited Donna to see if she would be interested in working in one of the Asian offices. The following events transpired:
January 10, 2014 - Michelle Green, the V.P., sent Donna an e-mail describing the opportunities in Asia. The e-mail stated, in part, that “accepting this position is a guaranteed career enhancer. With your ability you will be a V.P. within 2 years – I have faith in you.”
January 11, 2014 - Donna visited Michelle and they discussed the position at length. The job would involve staying at least five years in one of the Asian offices. Moreover, Donna would receive a substantial raise and promotion to be discussed later. As the meeting ended Donna asked for time to think about the job and Michelle responded by stating you have until the end of the month, but we need an answer by then.
January 18, 2014- In an effort to curry favor with Donna, the firm sent her a note stating that she would receive a bonus for her outstanding efforts in the previous year. She had never received bonus before nor had she expected one. Donna spoke to her present supervisor concerning the possibility of relocating. He was very displeased that she would consider leaving his group and questioned her loyalty.
January 20, 2014 - Donna spoke to Michelle and told her she was very close to making a decision but the only reservation she had was the five year commitment. She said that she was “still thinking hard about it but the decision would be easy if I could stay for only two years.” Michelle noted her concerns and told Donna she would consider those concerns and get back to her.
January 21, 2014 – Donna hears through the office grapevine that the position has been filled by another person. She immediately voice-mailed Michelle and accepted the position. Michelle was out of town.
January 25, 2014 - Michelle tells Donna that the position has been filled by another person with more international experience. Donna is upset. Moreover, she is told that the bonus that she was promised on January 18th would not be forthcoming due to budget pressures.
With respect to the events of January 10th:
An offer was made that included the promise that Donna would be promoted to VP within 2 years.
Question: Do you agree or disagree with the above statement and why?
With respect to the January 11th meeting:
An option contract was formed that requires the offer to held open until the end of the month
Question: Do you agree or disagree with the above statement and why?
With respect to the January 20th meeting:
If an offer was made earlier then Donna rejected it at this meeting because she made a counteroffer.
Question: Do you agree or disagree with the above statement and why?
Which of the following is the best argument that Donna did not accept the offer by her voice-mail on January 21st and why?:
The offer was revoked prior to Donna sending the voice-mail when she learned that the position had already been filled.
Michelle was not in her office on the day the voice-mail arrived
Which of the following is the best argument that Donna could make that the offer could not be revoked prior to her voice-mail and why?
An option contract was formed and the offer could not be revoked before the end of January
Promissory estoppel should apply
Is Donna entitled to the bonus she was promised on January 18th? Why or why not?
Assuming that she is not entitled to the bonus what additional facts or circumstances would entitle her to the bonus?
Question 4 ( 15 points )
Company X entered into a contract with Company Y to purchase a parcel of land. Company X is seeking to get out of the contract based on three factors:
A report prepared by an independent environmental inspection firm stated that the property was free of certain pollutants. This report was paid for by both companies and was delivered before the contract was executed. The report was determined to be in error and the property is, in fact, polluted.
The county is building a road nearby that will substantially diminish the value of the property. The plans for the road have been in the works for two years. Company X learned about the plans after the contract was executed but Company Y knew of these plans all along.
Company X believed that the zoning law applicable to the property would allow it to use the property as a distribution center. In fact, the zoning law does not allow such use.
Which, if any, of these factors would allow Company X to back out of the contract and why or why not?
Solution
Question 1:
In the above case, Jordan terminates the contract due to several contractual disputes arising between him and the company CCC. Among the contentions taken by him he can approach the court for the inconsistency in the oral and written contract regarding bonus and other provisions as mentioned under clause (1), (2) and (4). As regards the bonus promised to Jordan, it was agreed on April 8th that he would be entitled to 20% work bonus for new business and 10% for existing clients. The same formed a contractual relationship with the company accepting the same. The inconsistency in the terms of oral and written contract is a matter of dispute, which he can approach the court for a possible redressal. Similarly, the company by accepting to grant him the fringe benefit of providing him with the company car has entered into a contractual obligation. By not honoring the terms of contract as agreed upon by the parties on April 3rd, the company has committed breach of contract.
As regards question no. 2 whether Jordan is entitled to the raise in his salary over the telephonic conversation, there has been a clear case of offer and acceptance. While the contract law stipulates that the communication of acceptance has to be made, it has to be made by a proper channel. The offer made by Jordan was clearly acknowledged by CCC, which gives it enough grounds to prove that there has been contractual obligation between the parties.
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The answer to question 3 concerns the issue no. 6 concerning the covenant not to compete; I would state that the same is not enforceable as the termination of contract took place before the expiry of the contract period, for the breach of contractual obligations on the part of CCC. Where the employer is at fault for non-compliance of contractual obligations, the covenant cannot be made applicable to employees. Although in this case, Jordan quit voluntarily, it has to be noted that the company has not been able to abide by its contractual obligations mentioned by it at the time of entering into the contract. Jordan having terminated the contract well before the stipulated time will not violate the non-compete covenant. The burden of proof is on the Jordan here to prove that if the same is made applicable, it will result in extreme hardship and affect his livelihood to him.
Question No. 2
In the above case concerning the coverage of the employer’s under the Fair Labor Standards Act, the rules passed by the Federal and the State Government is applicable for all employees, unless otherwise mentioned. While the rules covers all the employees working in the enterprise, the same are not applicable for employees working in the executive, managerial and supervisory capacity. The regulations also stipulate rules and methods to assess and calculate as to who are governed by the regulations. In doing so, there are a number of parameters which have been adopted to calculate the regular hourly wage and the number of hours put in by the employee in the calendar week.
However, the Federal regulations are not made applicable to those employees who have not completed one year of service. The same is arbitrary and violates the principles of equity and the Fair Labor Standards. Therefore, my contention is that the regulations under clause (c) are invalid and therefore not maintainable in law and facts. While the Fair Labor Standards Act covers diverse range of workers and employees, who are in an employment relationship under employment coverage, it is silent on the minimum term of employment to be completed by employees to be eligible for overtime pay. The Act is made applicable to all employees, whether contractual, permanent, or temporary except personnel falling under category of ‘Exempt’ employees. In other words, the act does not state any rule stipulating the time limit to qualify for overtime pay. Therefore, the Department of labor has erred in fixing a ceiling of one year for employees to be entitled for overtime pay. While each state, ensures that labor laws are ‘welfare laws’, this principle is opposed to the basis of welfare legislations and fair labor standards.
In response to Question 2, the question arises whether the state laws have an overriding effect over the federal laws or otherwise. The employer is of the argument that the state government has passed a regulation necessitating the companies to pay an overtime pay of 200 percent of the regular hourly wages, while the federal laws has stipulated a rate of 150 percent of an employee’s regular hourly work.
In answer to the claim made by the employer, in situations where the federal, state and local laws are in conflict over certain terms and conditions, the regulations that are more favorable towards the employees apply to enterprises. The United States Department of Labor rules makes it clear that in cases where “the employee is subject to both the state and federal overtime laws, the employee is entitled to overtime according to the higher standard” i.e., the standard providing the higher overtime pay. The employer has to therefore comply with the provision that is most favorable to the employees, thereby paying 200 percent of the regular hourly wages.
In this regard, it is important to take into consideration whether the state has any special laws which establish different wage and hour rules to certain employees or industries. It is important to establish whether there are exemptions as to the specific type of business or work which necessarily requires long hours of work.
Question No. 3
In this case Donna Jones, an employee of Boston Consulting Group received a mail dated January 10, 2014 from Michelle Green for employment prospects in Asia. With respect to Question No.1, an offer was made with a promise that she would be made the VP within 2 years. This communication amounts to offer as Michelle communicated her intent that would bind both the parties into a contract if the same was accepted by Donna.
As regards Question No. 2, it can be implied that the Michelle had responded to Donna stating that she would keep the current position open till the end of the month, for an answer. Hence this amounts to option contract as the contract is made between the two of them to keep the offer open till the end of the month. Secondly, this offer is also purported by the consideration that Donna would receive a substantial raise, if she would take up the offer.
Question No. 3 pertains to the meeting held between the two on January 20th where Donna made an counter offer to Michelle that she would be keen on considering the position if she could stay for only two years instead of the earlier offer of five years proposed by Michelle. While in normal circumstances, counter offer results in repudiation of the earlier offer, in an option contract such as this, a counter offer made during the option period does not terminate the power of acceptance by the offeree. This is because the offeree has a contractual right to have the offer which is held open to him till the end of the month.
In answer to Question 4, the best argument that Donna did not accept the offer by her voice mail on January 21st was because Michelle was not in her office on the day the voice mail arrived. Hence, she was not aware of the same. The rule pertaining to contracts states that the communication regarding acceptance has to be communicated to the offerror. Since on this day, Michelle was not present at her office, the communication of acceptance was not conveyed to her.
Question No. 5 relates to the question as to the argument that can be made by Donna, that the offer could not be revoked prior to her voice mail on 21st. The reason being, in an option contract was formed and the offer could not be revoked before the end of January. In cases of option contracts such as this, the offeror has promised to keep the job open for a certain period of time, with a consideration; albeit, a promise that if she would accept the offer, she would be made the VP within the next two years. The offer is irrevocable for the stated time period. Hence, in this case Donna’s acceptance is a valid one.
Question No. 6 relates to the fact whether Donna is entitled to bonus as per the conversation held on 18th January. While bonus was promised with an intention that she would accept the initial offer, the revocation of contract will not entitle her for the same. However, since during the conversation, it was stated that she is entitled to bonus in recognition to her past performances, the reason of budget constraints is not a valid excuse for the company to not give her the bonus. In this case, a contractual obligation arose between the company and Donna when a promise for bonus was made and was independent to the other facts, whether she would accept the offer of employment or not. Whether it is a case of oral or implied contracts, the courts have in a number of cases found that the employers have an obligation to pay to the employees the stipulated amount as bonus as promised. Donna, therefore has reasonable grounds to prove that she is entitled for the bonus for her commitment to the company and the past performances as well as the oral communication made on the 18th of January for a promise of paying bonus.
Question No. 4.
In the present case, the buyer X entered into a valid contract with Company Y for the purchase of land, and is presumed that he has taken all reasonable care and caution to ensure that the property is free of encumbrances. While the contract Law protects the rights of the buyer to seek information from the seller, the seller is not at an obligation to provide all the information that he knows about the property. In a case such as this if Y does not make known the facts pertaining to roads or zoning it does not amount to misrepresentation or mistake of facts. The buyer on the other hand has a duty to make use of all the readily available public information and take opportunity to inspect the property and assess the property and its neighborhood. In the present case, therefore, the fact that the county is building a road nearby is a matter of public knowledge as the plans for the road has been in works for two years prior to the execution of contract.
Similarly, the restrictions contained in local zoning laws applicable to the property that would allow it to use the property as a distribution center can be found out through the public records as the zoning ordinances is a matter of public information where the buyer can easily access such information. The seller can knowingly or unknowingly misrepresent the land use affecting the property, which does not provide a ground for the buyer the basis of rescission of contract. In both the cases mentioned in clause (b) and (c), the buyer need necessarily rely on the seller’s statement about the condition of the building, the nature of the neighborhood or regarding the zoning ordinances pertaining to the present property. Hence, in these cases, there is no misrepresentation on the part of the seller rendering it to be a voidable contract.
Company X can however, opt to back out of the contract based on the first factor mentioned in the case, due to the non-conformity of the report to the actual facts and dangers of the property. The fact that the inspection has been conducted is evident to prove that all reasonable care and caution has been taken to ensure that the property is in compliance with the environmental norms. While the X has exercised his right to seek information, Y has exercised his corresponding duty to speak, and therefore have appointed independent inspection.
However, in this case of the material misrepresentation, the inspection report stated that there were no defects in the property and was free of certain pollutants, while the property in actuality had latent defects and polluted. While in normal cases, misrepresentations may relate to matters that the buyer's inspection of the property can reveal, in the present case, the third party failed to report the latent defects in the property. This leads to reliance on the negligent misrepresentation of the third party report, thereby rendering it a voidable contract. The buyer has a remedy to revoke the contract, on the basis that the inspection report was found to be faulty and inaccurate.
In this case, the buyer could possibly take a contention that he relied on the fact that the property is free of all encumbrances, which prompted him to enter into the contract. Upon finding that the property did suffer from latent defects, he realized that he had relied on the negligent misrepresentation of the property report, which gives him a ground to back out from the contract. However, the onus and the burden of proof are now on the buyer to show that the latent defect is of serious nature and if he had known earlier, he would not have bought the property. The buyer has to also prove that the latent defects are of such nature so as to cause material destruction to property and health of the people residing in the premises, if he were to purchase the land belonging to Company Y.
The remedies available to the buyer is by way of rescission of contract, where he can set aside the contract, recover all the payments made to the seller and thereby put the parties back in their original position as though the contract has not been entered into at all.
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