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Cook v. Coldwell Banker/Frank Laiben

    Brief Fact Summary. Plaintiff Cook was a real estate salesperson for Defendant Coldwell Banker at the time Defendant instituted a bonus program. After receiving the first part of her bonus, Plaintiff was informed that receiving the remaining portion of her bonus was contingent on continued employment. When Plaintiff left her job, Defendant refused to give her the remainder of her bonus.

    Synopsis of Rule of Law. An offer to enter into a unilateral contract may not be revoked once the offeree has made substantial performance.

    Facts. Plaintiff worked as a real estate salesperson Defendant. In March, 1991, Defendant announced a bonus program. The bonuses started at $500 for $15,000 in commissions. For commissions from $15,000 to $25,000, an agent would receive a twenty-two percent bonus. Commissions above $25,000 would entitle the agent to a thirty percent bonus. According to the original terms of the bonus plan, bonuses over $500 were to be paid at the end of the year.
    In September, Plaintiff received the first portion of her bonus and was informed that the remained of the bonus would not be given until March of the next year and that receiving the remainder of the bonus was contingent on continued employment. At this time, the Plaintiff had earned in excess of $32,400 in commissions. Plaintiff had already planned to continue her employment with Defendant through the end of the year, but left her job with Defendant in January.

    Issue. Was the unilateral contract enforceable?

    Held. Yes. The unilateral contract was enforceable because Plaintiff had already made substantial performance before Defendant attempted to revoke.
    A unilateral contract exists where one party makes a promise in exchange for the other party’s performance of a specified act or acts. An offer to enter into a unilateral contract is accepted by performance. In the present case, Defendant promised to pay Plaintiff a bonus in exchange for Plaintiff’s action of earning commissions. The Court found that the bonus program constituted an offer to enter into a unilateral contract.
    Defendant argues that when it changed the terms of the bonus program, it operated as a revocation of the previous offer and the creation of a new offer. Because Plaintiff had not yet completed performance, Defendant argued that the original offer could be revoked. Defendant further argues that there is not an enforceable unilateral contract from the second offer because Plaintiff did not remain employed by Defendant through March.
    Generally, an offer can be revoked before it is accepted in the absence of consideration. However, the offer may not be revoked if the offeree has substantially performed. Substantial performance may operate as consideration to make the offer irrevocable. In the present case, the Court finds that at the time of the attempted revocation, Plaintiff had substantially performed by remaining an employee of Defendant and earning over $32,400 in commissions.

    Discussion. In the present case, Plaintiff substantially performed under the unilateral contract by remaining employed and earning commissions sufficient to put her in the highest tier of the bonus program prior to Defendant’s attempt to revoke. Because Plaintiff had already substantially performed, Defendant’s attempt to revoke was ineffective.


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