Case Analysis Formation of a Contract

Group Case Analysis: Formation of a Contract Group B MBA 610 Economics for Business Southern New ampshire !ni"ersity #rofessor Cheryl $lsen

Case Analysis Formation of a Contract

Introduction %ali& employment contracts can ta'e se"eral forms( from a han&sha'e an& "er)al consent to an e*tensi"e compose& report+ ,he ma-ority of employees are hire& within the framewor' of a "er)al offer an& ac'nowle&.ment of a position/ with the wor'ers0 ri.hts represente& )y state an& fe&eral law an& wor' re.ulations+ Many employers in more competiti"e fiel&s or those with commensurate )enefits also pro"i&e written contracts to ac'nowle&.e an& &ocument )oth the offer an& compensation pro"i&e& to the offeree as well as their acceptance of the terms as written+ $ur case here in"ol"es a contact with a non1compete clause as part of its a.reement+ Non-Compete or Covenant Not to Compete (CNC) 2n an effort to protect ones0 )usiness or proprietary information/ employers create contracts with noncompetin. a.reements or clauses enclose&+ ,he Non1compete A.reement or co"enant not to compete 3CNC4 is an un&erstan&in. un&er which one party 3the 5Noncompetin. #arty54 concurs not to compete with another 3the 5#rotecte& #arty54 3,womey 6 7ennin.s/ 8019+4 ,he necessity for this 'in& of a.reement is )ase& on the premise that that upon an employee:s termination or resi.nation/ an employee mi.ht )e.in wor'in. for a competitor or start a )usiness/ .ainin. competiti"e a&"anta.e )y e*ploitin. classifie& information a)out their former employer0s operations+ As a contract pro"ision/ a CNC is )oun& )y tra&itional contract re;uirements inclu&in. the consi&eration &octrine+ ,he CNC must to )e si.ne& )y )oth parties an& is effecti"e as of the &ate specifie& in the A.reement 3,womey 6 7ennin.s/ 80194

Case Brief

Case Analysis Formation of a Contract

2n the case of Mi'e <oun.)loo& "+ Southwest/ #resi&ent an& owner #eter Schwimmer offere& <oun.)loo& a contract to wor' with Southwest as a recruiter for =8>+?0 per hour+ ,he contract in which <oun.)loo& a.ree& an& si.ne& containe& a CNC pre"entin. <oun.)loo& from wor'in. for a Southwest competitor for one year within a 1001mile ra&ius after termination of employment from Southwest+ @urin. their first con"ersation Schwimmer &i& not &iscuss with <oun.)loo& a)out the CNC enclose& in the contract+ owe"er upon meetin. in person to &iscuss the -o) Schwimmer says he Arecalls )riefly tellin. <oun.)loo& that he woul& )e e*pecte& to si.n a contract that contains a CNC a statement to which <oun.)loo& has state& he A&oes not remem)er whether Schwimmer mentione& the non1compete a.reementB+ $n the 86th of 7une 1>>> <oun.)loo& formally si.ne& the employment contract to which he ha& tentati"ely a.ree& to "ia a telephone con"ersation with Schwimmer+ Schwimmer state& that at this point he &oes not Aremem)er specifically tellin. <oun.)loo& a)out the non1compete a.reement/ )ut he recalls the he AusuallyB tells new hires a)out non1compete a.reementsB+ <oun.)loo& a.ain states that he &oes not recall Schwimmer mentionin. a non1compete a.reement &urin. any of their con"ersation+ <oun.)loo& at no point re;ueste& a copy of the contract for re"iew in&epen&ently prior to si.nin. an& has state& that he &i& not un&erstan& what the non1compete a.reement meant in 7une of 1>>> when he si.ne& it+ e continue& his tenure with the company an& mo"e& up in position an& responsi)ilities+ 2n 800C 39 years later4 <oun.)loo& resi.ne& from his current position of %ice #resi&ent of $perations for Southwest with an annual salary of =100/000 plus )enefits to accept a position with ,@2/ a 'nown competitor of Southwest+

Case Analysis Formation of a Contract

Analysis ,he case is limite& with information in some areas an& lac's "ali&ity( nonetheless/ <oun.)loo& coul& ha"e ta'en steps to ensure he un&erstoo& the contract he si.ne&+ By si.nin. the contract/ <oun.)loo& is sayin. he fully rea& an& un&erstoo& what the company was as'in. of him an& what the non1compete a.reement re;uire&+ <oun.)loo& &i& not as' for a &raft of the contract ha"in. after ha"in. a.ree& orally to the contract prior to si.nin.+ Con"ersely/ Schwimmer scarcely co"ere& what the non1compete a.reement was &urin. their telephone an& face to face meetin.s+ Southwest coul& ha"e ensure& that <oun.)loo& was pro"i&e& a copy of the contract an& non1compete a.reement e*plainin. fully to him what it meant an& also upon termination a.ain informin. him of the a.reement assumin. it was still "ali&+ owe"er there is no supportin. case for <oun.)loo&0s contract to )e uphel& other than parol e"i&ence+ ,his "er)al form of contract mo&ification has not )een uphel& in court an& is .enerally &eclare& non1)in&in.+ <oun.)loo& ;uit his -o) as the %ice #resi&ent of $perations at Southwest in 800C+ ,his position was a hu.e chan.e in responsi)ilities with a su)stantial pay increase from hourly to salary at =100/000 annually an& a )enefits pac'a.e from his initial Decruiter pay+ ,he case of F+ A+ BAD,EE,, ,DEE EF#ED, C$M#AN< "s+ G2EE2AM @+ BADD2NG,$N C?C Mass+ ?H? soli&ifies that with the &efen&ant0s rate of compensation an& position that such far reachin. chan.es stron.ly su..est that the parties ha& a)an&one& their ol& arran.ement an& ha& entere& into a new relationship. ,his is also supporte& )y another case/ the conte*t of AFC Cable Systems Inc. v. Clisham in reference to <oun.)loo&0s transition in employment+ is final position causes a si.nificant chan.e in his initial -o) responsi)ilities as well as metho& an& amount of compensation+ is

Case Analysis Formation of a Contract

chan.e from recruiter at an hourly wa.e of =8>+?0Ihr to a %# of $perations at a salary of =100/000Iyr plus incenti"es mar' a massi"e &ifference in pay rate as well as responsi)ilities an& le"el of company in"ol"ement+ ,he chan.es contin.ent with his role within the company cause more of an issue to the clause remainin. in effect+ Accor&in. to Clisham, transitionin. from an hourly employee with a territory to a position with a mana.ement role mar's a &efiniti"e chan.e with his position an& status within the company+ ,his woul& imply that a new contract/ e"en if informal/ has )een forme& at some point to &efine his new role+ As such/ his acceptance )ac' in 1>>> of the pre"ious contract woul& not necessarily apply to the new a.reement+ 2f his responsi)ilities/ compensation an& )enefits ha"e chan.e& alon. with his title an& position/ it woul& remain that his contract an& his non1compete shoul& ha"e )een up&ate& as well+ Conclusion ,he stan&in. of the ori.inal contract is in"ali& &ue to <oun.)loo&0s chan.e in position/ salary an& )enefits &urin. his tenure with Southwest+ ,his is supporte& )y F.A. Barlett an& Clisham's rulin.s+ ,he fact that he claims to )e unaware other than the ori.inal "a.ue "er)al &iscussion a)out his non1compete we here)y cite as parol e"i&ence/ since his role within the company un&erwent si.nificant mo&ification throu.h "er)al an& performance a.reements with no written contract up&ate or re"iew+ ,he cases of F+ A+ Barlett ,ree an& Clisham ha"e rulin.s which support the in"ali&ity of Southwest0s claim of infrin.ement )y ,@2 an& <oun.)loo& &ue to his hirin./ re.ar&less of the un&erlyin. circumstances+

Case Analysis Formation of a Contract

Deferences

F+ A+ BAD,EE,, ,DEE EF#ED, C$M#AN< "s+ BADD2NG,$N/ C?C Mass+ ?H?+ 3n+&+4+ Supreme 7u&icial Court of Massachusetts/ Mi&&lese*+ 1>6H+ Google Scholar+ N+p+/ n+&+ Ge)+ 80 7an+ 8019+ Jhttp:IIscholar+.oo.le+comIK+ AFC Ca)le Systems 2nc+ "+ Clisham/ 68 F+ Supp+ 8& 16L+ @istrict Court/ @+ Massachusetts+ 1>>>+ Google Scholar+ N+p+/ n+&+ Ge)+ 81 7an+ 8019+ Jhttp:IIscholar+.oo.le+comIK+ ,womey/ @a"i& #+/ an& Marianne M+ 7ennin.s+ Business Law: rinci!les "or #o$ay's Commercial %nvironment+ 9th e&+ 2n&epen&ence/ M<: Cen.a.e Eearnin./ 801C+ #rint+ Burton/ 2nc+ "+ @ur'ee/ 1?H $hio St+ C1C+ Supreme Court of $hio+ C @ec+ 1>?8+ Google Scholar+ N+p+/ n+&+ Ge)+ 86 7an+ 8019+ Jhttp:IIscholar+.oo.le+comIK+