McInerney v. Charter Golf, Inc.
Annotate this Case
McInerney v. Charter Golf, Inc., No. 80248
NOTICE: Under Supreme Court Rule 367 a party has 21 days after
the filing of the opinion to request a rehearing. Also, opinions
are subject to modification, correction or withdrawal at anytime
prior to issuance of the mandate by the Clerk of the Court.
Therefore, because the following slip opinion is being made
available prior to the Court's final action in this matter, it
cannot be considered the final decision of the Court. The
official copy of the following opinion will be published by the
Supreme Court's Reporter of Decisions in the Official Reports
advance sheets following final action by the Court.
Docket No. 80248--Agenda 20--September 1996.
DENNIS McINERNEY, Appellant, v. CHARTER GOLF, INC., Appellee.
Opinion filed May 22, 1997.
JUSTICE HEIPLE delivered the opinion of the court:
Is an employee's promise to forgo another job opportunity in
exchange for a guarantee of lifetime employment sufficient
consideration to modify an existing employment-at-will
relationship? If "yes," must such an agreement be in writing to
satisfy the requirements of the statute of frauds? These questions,
among others, must be answered in plaintiff Dennis McInerney's
appeal from an order of the appellate court affirming a grant of
summary judgment in favor of the defendant, Charter Golf, Inc.
Although we conclude that a promise for a promise is sufficient
consideration to modify a contract--even an employment contract--we
further conclude that the statute of frauds requires that a
contract for lifetime employment be in writing.
The facts are uncomplicated. This case comes to us on a grant
of summary judgment, so our review is de novo (Barnett v. Zion Park
District, 171 Ill. 2d 378, 385 (1996)), and we will consider "the
pleadings, depositions, and admissions on file, together with the
affidavits, if any," to determine whether a genuine issue of
material fact exists (735 ILCS 5/2--1005(c) (West 1994)). From 1988
through 1992, Dennis McInerney worked as a sales representative for
Charter Golf, Inc., a company which manufactures and sells golf
apparel and supplies. Initially, McInerney's territory included
Illinois but was later expanded to include Indiana and Wisconsin.
In 1989, McInerney allegedly was offered a position as an exclusive
sales representative for Hickey-Freeman, an elite clothier which
manufactured a competing line of golf apparel. Hickey-Freeman
purportedly offered McInerney an 8% commission.
Intending to inform Charter Golf of his decision to accept the
Hickey-Freeman offer of employment, McInerney called Jerry Montiel,
Charter Golf's president. Montiel wanted McInerney to continue to
work for Charter Golf and urged McInerney to turn down the Hickey-
Freeman offer. Montiel promised to guarantee McInerney a 10%
commission on sales in Illinois and Wisconsin "for the remainder of
his life," in a position where he would be subject to discharge
only for dishonesty or disability. McInerney allegedly accepted
Charter Golf's offer and, in exchange for the guarantee of lifetime
employment, gave up the Hickey-Freeman offer. McInerney then
continued to work for Charter Golf.
In 1992, the relationship between Charter Golf and McInerney
soured: Charter Golf fired McInerney. McInerney then filed a
complaint in the circuit court of Cook County, alleging breach of
contract. The trial court granted Charter Golf's motion for summary
judgment after concluding that the alleged oral contract was
unenforceable under the statute of frauds because the contract
amounted to an agreement which could not be performed within a year
from its making. The appellate court affirmed, but on a wholly
different ground. No. 1--94--1764 (unpublished order under Supreme
Court Rule 23). The appellate court held that the putative contract
between McInerney and Charter Golf suffered from a more fundamental
flaw, namely, that no contract for lifetime employment even existed
because a promise to forbear another job opportunity was
insufficient consideration to convert an existing employment-at-
will relationship into a contract for lifetime employment.
This court accepted McInerney's petition for leave to appeal
(155 Ill. 2d R. 315), and for the reasons set forth below, we
affirm on other grounds.
ANALYSIS
Employment contracts in Illinois are presumed to be at-will
and are terminable by either party; this rule, of course, is one of
construction which may be overcome by showing that the parties
agreed otherwise. Duldulao v. St. Mary of Nazareth Hospital Center,
115 Ill. 2d 482, 489 (1987). As with any contract, the terms of an
employment contract must be clear and definite (Duldulao, 115 Ill.
2d at 490) and the contract must be supported by consideration
(Ladesic v. Servomation Corp., 140 Ill. App. 3d 489, 491 (1986);
Martin v. Federal Life Insurance Co., 109 Ill. App. 3d 596, 602
(1982); Heuvelman v. Triplett Electrical Instrument Co., 23 Ill.
App. 2d 231, 235 (1959)).
A. Consideration
Although the rules of contract law are well-established and
straightforward, a conflict has emerged in the appellate court
decisions on the subject of consideration in the context of a
lifetime employment contract. Several decisions have held that a
promise of lifetime employment, which by its terms purports to
alter an employment-at-will contract, must be supported by
"additional" consideration beyond the standard employment duties.
Heuvelman, 23 Ill. App. 2d at 235-36; Koch v. Illinois Power Co.,
175 Ill. App. 3d 248, 252 (1988); Ladesic, 140 Ill. App. 3d at 492-
93. These cases have held that an employee's rejecting an outside
job offer in exchange for a promised guarantee of lifetime
employment is not sufficient consideration to alter an employment-
at-will relationship. Heuvelman, 23 Ill. App. 2d at 236; Koch, 175
Ill. App. 3d at 252; Ladesic, 140 Ill. App. 3d at 492-93. The
premise underlying these cases is that the employee simply weighs
the benefits of the two positions, and by accepting one offer the
employee necessarily rejects the other. As such, these cases have
reasoned that the employee has not given up anything of value, and
thus there is no consideration to support the promise of lifetime
employment. Koch, 175 Ill. App. 3d at 252; Ladesic, 140 Ill. App.
3d at 492-93.
One case, however, has taken issue with this analysis. In
Martin v. Federal Life Insurance Co., the appellate court held that
an enforceable contract for lifetime employment was formed when an
employee relinquished a job offer in exchange for a promise of
permanent employment from his current employer. Martin v. Federal
Life Insurance Co., 109 Ill. App. 3d 596, 601 (1982). The Martin
court recognized that there was consideration in an exchange of
promises: the employer promised to give up his right to terminate
the employee at-will, and in exchange the employee agreed to
continue working for his current employer and to forgo a lucrative
opportunity with a competitor. Martin, 109 Ill. App. 3d at 601.
What is consideration? Under the prevailing view, embodied in
the Restatement (Second) of Contracts, consideration is the
bargained-for exchange of promises or performances, and may consist
of a promise, an act or a forbearance. Restatement (Second) of
Contracts 71 (1981). Thus, a promise for a promise is, without
more, enforceable. Restatement (Second) of Contracts 79, Comment
a, at 200 (1981). In past cases, this court has recognized this
basic precept, i.e., mutual assent and an exchange of promises
provides consideration to support the formation of a contract. See,
e.g., Patton v. Carbondale Clinic, 161 Ill. 2d 357, 372 (1994);
Steinberg v. Chicago Medical School, 69 Ill. 2d 320 (1977) (holding
that any act or promise which is of benefit to one party or
disadvantage to the other is sufficient "consideration" to support
a contract).
While this court has never directly addressed the specific
requirements to establish a permanent employment contract, it has
held more generally that the employment relationship is governed by
the law of contract. Existence of an employment contract, express
or implied, is essential to the employer-employee relationship.
A.J. Johnson Paving Co. v. Industrial Comm'n, 82 Ill. 2d 341, 350
(1980). As with any contract, it is not possible for a contract of
employment to exist without consent of the parties. M&E Electric
Co. v. Industrial Comm'n, 57 Ill. 2d 113, 119 (1974). Indeed, this
court held in Duldulao, 115 Ill. 2d at 490, that an employee
handbook or other policy statement creates enforceable contractual
rights governed by the traditional requirements for contract
formation.
In the instant case, Charter Golf argues that an employee's
promise to forgo another employment offer in exchange for an
employer's promise of lifetime employment is not sufficient
consideration. But why not? The defendant has failed to articulate
any principled reason why this court should depart from traditional
notions of contract law in deciding this case. While we recognize
that some cases have indeed held that such an exchange is
"inadequate" or "insufficient" consideration to modify an
employment-at-will relationship, we believe that those cases have
confused the conceptual element of consideration with more
practical problems of proof. As we discussed above, this court has
held that a promise for a promise constitutes consideration to
support the existence of a contract. To hold otherwise in the
instant case would ignore the economic realities underlying the
case. Here McInerney gave up a lucrative job offer in exchange for
a guarantee of lifetime employment; and in exchange for giving up
its right to terminate McInerney at will, Charter Golf retained a
valued employee. Clearly both parties exchanged bargained-for
benefits in what appears to be a near textbook illustration of
consideration.
Of course, not every relinquishment of a job offer will
necessarily constitute consideration to support a contract. On the
related issue of mutuality of obligation, Charter Golf complains
that McInerney's promise to continue working was somehow illusory,
because it alleges that McInerney had the power to terminate the
employment relationship at his discretion while it lacked any
corresponding right. The court's decision in Armstrong Paint &
Varnish Works v. Continental Can Co., 301 Ill. 102, 108 (1922),
teaches that "where there is any other consideration for the
contract mutuality of obligation is not essential." Charter Golf's
argument on this point fails because McInerney continued working
for Charter Golf and relinquished his right to accept another job
opportunity. When, as here, the employee relinquishes something of
value in a bargained-for exchange for the employer's guarantee of
permanent employment, a contract is formed.
B. Statute of Frauds
So there is a contract, but should we enforce it? Charter Golf
argues that the oral contract at issue in this case violates the
statute of frauds and is unenforceable because it is not capable of
being performed within one year of its making. By statute in
Illinois, "[n]o action shall be brought *** upon any agreement that
is not to be performed within the space of one year from the making
thereof, unless *** in writing and signed by the party to be
charged." 740 ILCS 80/1 (West 1994). Our statute tracks the
language of the original English Statute of Frauds and Perjuries.
29 Charles II ch. 3 (1676). The English statute enacted by
Parliament had as its stated purpose the prohibition of those "many
fraudulent practices, which are commonly endeavored to be upheld by
perjury and subordination of perjury." 29 Charles II ch. 3,
introductory clause (1676). Illinois' statute of frauds seeks to do
the same by barring actions based upon nothing more that loose
verbal statements.
The period of one year, although arbitrary, recognizes that
with the passage of time evidence becomes stale and memories fade.
The statute proceeds from the legislature's sound conclusion that
while the technical elements of a contract may exist, certain
contracts should not be enforced absent a writing. It functions
more as an evidentiary safeguard than as a substantive rule of
contract. As such, the statute exists to protect not just the
parties to a contract, but also--perhaps more importantly--to
protect the fact finder from charlatans, perjurers and the problems
of proof accompanying oral contracts.
There are, of course, exceptions to the statute of frauds'
writing requirement which permit the enforcement of certain oral
contracts required by the statute to be in writing. One such
exception is the judicially created exclusion for contracts of
uncertain duration. In an effort to significantly narrow the
application of the statute, many courts have construed the words
"not to be performed" to mean "not capable of being performed"
within one year. See Restatement (Second) of Contracts 130 (1981).
These cases hold that if performance is possible by its terms
within one year, the contract is not within the statute regardless
of how unlikely it is that it will actually be performed within one
year. Under this interpretation, the actual course of subsequent
events and the expectations of the parties are entirely irrelevant.
Restatement (Second) of Contracts 130, Comment a (1981). A
contract for lifetime employment would then be excluded from the
operation of the statute because the employee could, in theory, die
within one year, and thus the contract would be "capable of being
performed."
We find such an interpretation hollow and unpersuasive. A
"lifetime" employment contract is, in essence, a permanent
employment contract. Inherently, it anticipates a relationship of
long duration--certainly longer than one year. In the context of an
employment-for-life contract, we believe that the better view is to
treat the contract as one "not to be performed within the space of
one year from the making thereof." To hold otherwise would
eviscerate the policy underlying the statute of frauds and would
invite confusion, uncertainty and outright fraud. Accordingly, we
hold that a writing is required for the fair enforcement of
lifetime employment contracts.
The plaintiff argues that the statute of frauds writing
requirement is nonetheless excused because he performed, either
fully or partially, according to the terms of the oral contract. We
have held that a party who has fully performed an oral contract
within the one-year provision may nonetheless have the contract
enforced. American College of Surgeons v. Lumbermens Mutual
Casualty Co., 142 Ill. App. 3d 680, 700 (1986); Meyer v. Logue, 100
Ill. App. 3d 1039, 1043 (1981); Noesges v. Servicemaster Co., 233
Ill. App. 3d 158, 163 (1992). Full or complete performance of the
instant contract, by its terms, would have required the plaintiff
to work until his death, but our plaintiff lives.
A party's partial performance generally does not bar
application of the statute of frauds, unless it would otherwise be
"impossible or impractical to place the parties in status quo or
restore or compensate" the performing party for the value of his
performance. Mapes v. Kalva Corp., 68 Ill. App. 3d 362, 368 (1979);
see also Payne v. Mill Race Inn, 152 Ill. App. 3d 269, 278 (1987).
This so-called exception resembles the doctrines of restitution,
estoppel and fraud, and exists to avoid a "virtual fraud" from
being perpetrated on the performing party. Barrett v. Geisinger,
148 Ill. 98 (1898); see also Restatement (Second) of Contracts
130, Comment e (1981). In any event, our plaintiff has been fully
compensated for the work that he performed. Accordingly, part
performance--on these facts--will not take the case out of the
statute of frauds.
Finally, the plaintiff argues that the defendant should be
estopped from asserting the defense of statute of frauds.
Traditionally, a party's reliance estopped the other party from
asserting the statute only under the doctrine of equitable
estoppel. Ozier v. Haines, 411 Ill. 160, 163-65 (1952); Sinclair v.
Sullivan Chevrolet Co., 45 Ill. App. 2d 10, 17-19 (1964), aff'd, 31 Ill. 2d 507 (1964). Equitable estoppel is available if one party
has relied upon another party's misrepresentation or concealment of
a material fact. Absent such misrepresentation or fraud, the
defense is not available. Ozier, 411 Ill. at 165; Ceres Illinois,
Inc. v. Illinois Scrap Processing, Inc., 114 Ill. 2d 133, 148
(1986). No misrepresentation has been alleged here.
Rather, the plaintiff complains that he relied upon the oral
promises of his employer and makes much of the injustice done him--
indeed, too much. While agreeing to work for an employer and giving
up other employment opportunities can clearly be described as
reliance on the employer's oral promises concerning the terms of
employment, promissory estoppel does not bar the application of the
statute of frauds in Illinois. See Ozier, 411 Ill. 160; Sinclair,
31 Ill. 2d 507 (rejecting, at least implicitly, the suggestion that
promissory estoppel bars the application of the statute of frauds).
In the context of an employment relationship, reasonable reliance
is insufficient to bar the application of the statute of frauds.
Some authorities--reflected in the view of the Second Restatement--
have used promissory estoppel to bar the application of the statute
of frauds in a narrow class of cases in which a performing party
would otherwise be without an adequate remedy and there is some
element of unjust enrichment. Restatement (Second) of Contracts
139, Comment c, at 355-56 (1981). We do not believe that this case
is one which requires us to adopt such a rule. As we have observed,
McInerney has been compensated for his services, and the sole
injustice of which he complains is his employer's failure to honor
its promise of lifetime employment. Our plaintiff, however, is a
salesman--a sophisticated man of commerce--and arguably should have
realized that his employer's oral promise was unenforceable under
the statute of frauds and that his reliance on that promise was
misplaced. Our parties entered into this disputed oral contract
freely and without any hint of coercion, fraud or
misrepresentation, and thus we adhere to the rule of Ozier and
Sinclair and hold that the statute of frauds operates even where
there has been reliance on a promise.
In sum, though an employee's promise to forgo another job
opportunity in exchange for a guarantee of lifetime employment is
consideration to support the formation of a contract, the statute
of frauds requires that contracts for lifetime employment be in
writing. Accordingly, we affirm the judgment of the appellate
court.
Appellate court judgment affirmed.
JUSTICE NICKELS, dissenting:
I agree with the majority's conclusion that plaintiff's
promise to forgo another job opportunity is sufficient
consideration in return for defendant's promise of lifetime
employment to plaintiff. However, I disagree with the majority's
holding that the employment contract in the case at bar must be in
writing because it falls within the requirements of the Statute of
Frauds.
The writing requirement applies to "any agreement that is not
to be performed within the space of one year from the making
thereof." 740 ILCS 80/1 (West 1994). Commenting on this language,
the Restatement (Second) of Contracts observes:
"[T]he enforceability of a contract under the one-year
provision does not turn on the actual course of
subsequent events, nor on the expectations of the parties
as to the probabilities. Contracts of uncertain duration
are simply excluded; the provision covers only those
contracts whose performance cannot possibly be completed
within a year." Restatement (Second) of Contracts 130,
Comment a, at 328 (1981).
A contract of employment for life is necessarily one of uncertain
duration. Since the employee's life may end within one year, and,
as the majority acknowledges, the contract would be fully performed
upon the employee's death (slip op. at 6 n.1), the contract is not
subject to the statute of frauds' one-year provision. See
Restatement (Second) of Contracts 130, Illustration 2, at 328
(1981); see also 72 Am. Jur. 2d Statute of Frauds 14 (1974) ("The
rule generally accepted by the authorities is that an agreement or
promise the performance or duration of which is contingent on the
duration of human life is not within the statute"); J. Calamari &
J. Perillo, The Law of Contracts 19--20 (3d ed. 1987) ("if A
promises *** to employ X for life, the promise is not within the
Statute because it is not for a fixed term and the contract by its
terms is conditioned upon the continued life of X and the condition
may cease to exist within a year because X may die within a year").
It is irrelevant whether the parties anticipate that the employee
will live for more than a year or whether the employee actually
does so.
The majority acknowledges that "many courts" subscribe to this
view. More accurately, the Restatement rule represents "the
prevailing interpretation" of the statute of frauds' one-year
provision. Restatement (Second) of Contracts 130, Comment a, at
328 (1981). Only a "distinct minority" of cases have ascribed
significance to whether the parties expected that a contract would
take more than a year to perform. J. Calamari & J. Perillo, The Law
of Contracts 19--18, at 808 (3d ed. 1987). According to Williston
on Contracts:
"It is well settled that the oral contracts
invalidated by the Statute because not to be performed
within a year include only those which cannot be
performed within that period. A promise which is not
likely to be performed within a year, and which in fact
is not performed within a year, is not within the Statute
if at the time the contract is made there is a
possibility in law and in fact that full performance such
as the parties intended may be completed before the
expiration of a year.
In the leading case on this section of the Statute
the Supreme Court of the United States said: `The parties
may well have expected that the contract would continue
in force for more than one year; it may have been very
improbable that it would not do so; and it did in fact
continue in force for a much longer time. But they made
no stipulation which in terms, or by reasonable
inference, required that result. The question is not what
the probable, or expected, or actual performance of the
contract was; but whether the contract, according to the
reasonable interpretation of its terms, required that it
should not be performed within the year.' " 3 W. Jaeger,
Williston on Contracts 495 at 575-79 (3d ed. 1960),
quoting Warner v. Texas & Pacific Ry. Co., 164 U.S. 418,
434, 41 L. Ed. 495, 504, 17 S. Ct. 147, 153 (1896).
Although the majority brands this interpretation "hollow and
unpersuasive" (slip op. at 7), it has a sound basis in the plain
language of the statute. Corbin notes:
"[Courts] have observed the exact words of [the one-year]
provision and have interpreted them literally and very
narrowly. The words are `agreement that is not to be
performed.' They are not `agreement that is not in fact
performed' or `agreement that may not be performed' or
`agreement that is not at all likely to be performed.' To
fall within the words of the provision, therefore, the
agreement must be one of which it can truly be said at
the very moment that it is made, `This agreement is not
to be performed within one year'; in general, the cases
indicate that there must not be the slightest possibility
that it can be fully performed within one year." 2 A.
Corbin, Corbin on Contracts 444, at 535 (1950).
See also 3 W. Jaeger, Williston on Contracts 495, at 585 n.7 (3d
ed. 1960) (criticizing Marshall v. Lowd, 154 Me. 296, 147 A.2d 667
(1958)).
It is well established that where the words of a statutory
provision are unambiguous, there is no need to resort to external
aids of interpretation in order to glean the legislature's purpose.
People v. Hicks, 164 Ill. 2d 218, 222 (1995). Although the
statutory language at issue in this case is clear and unambiguous,
the majority improperly relies upon policies identified in the
introductory clause to the original English statute of frauds (slip
op. at 5-6) in order to significantly expand the scope of the one-
year provision. Even assuming, arguendo, that it is proper to look
beyond the language of the statute in order to determine its
meaning, I do not find the majority's policy analysis to be
persuasive justification for the broad construction it gives the
statute.
The majority notes the dangers of stale evidence and faded
memories. Slip op. at 6. But the one-year provision does not
effectively guard against these dangers because " `[t]here is no
necessary relationship between the time of the making of the
contract, the time within which its performance is required and the
time when it might come to court to be proven.' " J. Calamari & J.
Perillo, The Law of Contracts 19--17, at 807 (3d ed. 1987),
quoting D&N Boening, Inc. v. Kirsch Beverages, Inc., 63 N.Y.2d 449,
454, 472 N.E.2d 992, 993, 483 N.Y.S.2d 164, 165 (1984); see also
E. Farnsworth, Contracts 6.4, at 391 (1982).
Courts have tended to give the one-year provision a narrow
construction precisely because of the lack of a discernable
rationale for it. J. Calamari & J. Perillo, The Law of Contracts
19--17, at 807 (3d ed. 1987); see also Restatement (Second) of
Contracts 130, Comment a, at 328 (1981) ("The design was said to
be not to trust to the memory of witnesses for a longer time than
one year, but the statutory language was not appropriate to carry
out that purpose. The result has been a tendency to construction
narrowing the application of the statute"). I am inclined to do
likewise. Since the one-year provision is so poorly suited to the
aims it was ostensibly designed to accomplish, I see no compelling
reason to expand the provision's scope beyond the class of
contracts to which it applies by its terms. The narrow and literal
interpretation that most courts have given to the language of the
one-year provision is entirely appropriate under these
circumstances.
Lacking any reasoned basis for its holding, the majority
resorts to nearly tautological wordplay, declaring that because a
"lifetime" employment contract is essentially a "permanent"
employment contract, it inherently anticipates a relationship of
long duration. Slip op. at 7. Merely labelling a lifetime
employment contract "permanent" should not change the result that
the statute of frauds is inapplicable. See 2 A. Corbin, Corbin on
Contracts 446, at 549-50 (1950) ("A contract for `permanent'
employment is not within the one-year clause for the reason that
such a contract will be fully performed, according to its terms,
upon the death of the employee. The word `permanent' has, in this
connection, no more extended meaning than `for life' "); 3 W.
Jaeger, Williston on Contracts 495, at 582 (3d ed. 1960) ("A
promise of permanent personal performance is on a fair
interpretation a promise of performance for life, and therefore not
within the Statute"). The parties in this case allegedly agreed to
plaintiff's employment for life. But with suitable modesty
befitting mere mortals, the parties did not stipulate how long
plaintiff's life should be. They left that matter--and hence the
duration of the contract--to a higher power (I do not refer to this
court).
The majority also suggests that its holding is necessary to
avoid confusion and uncertainty. Slip op. at 7. I fail to see how
the generally accepted rule that lifetime employment contracts need
not be in writing is any more confusing or uncertain than the
contrary rule adopted by the majority. Indeed, the majority's
reasoning is likely to cause greater confusion and uncertainty. A
lifetime employment contract is only one example of a broader
general category of contracts of uncertain duration. While the
majority has declared that lifetime employment contracts anticipate
a relationship of longer than one year, the decision in this case
supplies no guidance as to other types of contracts that do not, by
their terms, set forth a specific time frame for performance.
Contracting parties can no longer simply look to the actual terms
of their agreement to ascertain whether it must be in writing.
Instead, they are left to guess whether the type of contract they
have entered into will be viewed by a court as inherently
anticipating a relationship of more than one year.
In summary, the majority's holding: (1) is contrary to the
relevant statutory language and the great weight of authority; (2)
finds no justification in the policy considerations ostensibly
underlying the statute of frauds; and (3) is likely to increase,
rather than reduce, uncertainty regarding the application of the
one-year provision. I would hold that the statute of frauds does
not require the contract in this case to be in writing, and I would
reverse the judgments of the courts below. Accordingly, I
respectfully dissent.
JUSTICES MILLER and McMORROW join in this dissent.
NOTICE: Under Supreme Court Rule 367 a party has 21 days after
the filing of the opinion to request a rehearing. Also, opinions
are subject to modification, correction or withdrawal at anytime
prior to issuance of the mandate by the Clerk of the Court.
Therefore, because the following slip opinion is being made
available prior to the Court's final action in this matter, it
cannot be considered the final decision of the Court. The
official copy of the following opinion will be published by the
Supreme Court's Reporter of Decisions in the Official Reports
advance sheets following final action by the Court.
Docket No. 80248--Agenda 20--September 1996.
DENNIS McINERNEY, Appellant, v. CHARTER GOLF, INC., Appellee.
Opinion filed May 22, 1997.
JUSTICE HEIPLE delivered the opinion of the court:
Is an employee's promise to forgo another job opportunity in
exchange for a guarantee of lifetime employment sufficient
consideration to modify an existing employment-at-will
relationship? If "yes," must such an agreement be in writing to
satisfy the requirements of the statute of frauds? These questions,
among others, must be answered in plaintiff Dennis McInerney's
appeal from an order of the appellate court affirming a grant of
summary judgment in favor of the defendant, Charter Golf, Inc.
Although we conclude that a promise for a promise is sufficient
consideration to modify a contract--even an employment contract--we
further conclude that the statute of frauds requires that a
contract for lifetime employment be in writing.
The facts are uncomplicated. This case comes to us on a grant
of summary judgment, so our review is de novo (Barnett v. Zion Park
District, 171 Ill. 2d 378, 385 (1996)), and we will consider "the
pleadings, depositions, and admissions on file, together with the
affidavits, if any," to determine whether a genuine issue of
material fact exists (735 ILCS 5/2--1005(c) (West 1994)). From 1988
through 1992, Dennis McInerney worked as a sales representative for
Charter Golf, Inc., a company which manufactures and sells golf
apparel and supplies. Initially, McInerney's territory included
Illinois but was later expanded to include Indiana and Wisconsin.
In 1989, McInerney allegedly was offered a position as an exclusive
sales representative for Hickey-Freeman, an elite clothier which
manufactured a competing line of golf apparel. Hickey-Freeman
purportedly offered McInerney an 8% commission.
Intending to inform Charter Golf of his decision to accept the
Hickey-Freeman offer of employment, McInerney called Jerry Montiel,
Charter Golf's president. Montiel wanted McInerney to continue to
work for Charter Golf and urged McInerney to turn down the Hickey-
Freeman offer. Montiel promised to guarantee McInerney a 10%
commission on sales in Illinois and Wisconsin "for the remainder of
his life," in a position where he would be subject to discharge
only for dishonesty or disability. McInerney allegedly accepted
Charter Golf's offer and, in exchange for the guarantee of lifetime
employment, gave up the Hickey-Freeman offer. McInerney then
continued to work for Charter Golf.
In 1992, the relationship between Charter Golf and McInerney
soured: Charter Golf fired McInerney. McInerney then filed a
complaint in the circuit court of Cook County, alleging breach of
contract. The trial court granted Charter Golf's motion for summary
judgment after concluding that the alleged oral contract was
unenforceable under the statute of frauds because the contract
amounted to an agreement which could not be performed within a year
from its making. The appellate court affirmed, but on a wholly
different ground. No. 1--94--1764 (unpublished order under Supreme
Court Rule 23). The appellate court held that the putative contract
between McInerney and Charter Golf suffered from a more fundamental
flaw, namely, that no contract for lifetime employment even existed
because a promise to forbear another job opportunity was
insufficient consideration to convert an existing employment-at-
will relationship into a contract for lifetime employment.
This court accepted McInerney's petition for leave to appeal
(155 Ill. 2d R. 315), and for the reasons set forth below, we
affirm on other grounds.
ANALYSIS
Employment contracts in Illinois are presumed to be at-will
and are terminable by either party; this rule, of course, is one of
construction which may be overcome by showing that the parties
agreed otherwise. Duldulao v. St. Mary of Nazareth Hospital Center,
115 Ill. 2d 482, 489 (1987). As with any contract, the terms of an
employment contract must be clear and definite (Duldulao, 115 Ill.
2d at 490) and the contract must be supported by consideration
(Ladesic v. Servomation Corp., 140 Ill. App. 3d 489, 491 (1986);
Martin v. Federal Life Insurance Co., 109 Ill. App. 3d 596, 602
(1982); Heuvelman v. Triplett Electrical Instrument Co., 23 Ill.
App. 2d 231, 235 (1959)).
A. Consideration
Although the rules of contract law are well-established and
straightforward, a conflict has emerged in the appellate court
decisions on the subject of consideration in the context of a
lifetime employment contract. Several decisions have held that a
promise of lifetime employment, which by its terms purports to
alter an employment-at-will contract, must be supported by
"additional" consideration beyond the standard employment duties.
Heuvelman, 23 Ill. App. 2d at 235-36; Koch v. Illinois Power Co.,
175 Ill. App. 3d 248, 252 (1988); Ladesic, 140 Ill. App. 3d at 492-
93. These cases have held that an employee's rejecting an outside
job offer in exchange for a promised guarantee of lifetime
employment is not sufficient consideration to alter an employment-
at-will relationship. Heuvelman, 23 Ill. App. 2d at 236; Koch, 175
Ill. App. 3d at 252; Ladesic, 140 Ill. App. 3d at 492-93. The
premise underlying these cases is that the employee simply weighs
the benefits of the two positions, and by accepting one offer the
employee necessarily rejects the other. As such, these cases have
reasoned that the employee has not given up anything of value, and
thus there is no consideration to support the promise of lifetime
employment. Koch, 175 Ill. App. 3d at 252; Ladesic, 140 Ill. App.
3d at 492-93.
One case, however, has taken issue with this analysis. In
Martin v. Federal Life Insurance Co., the appellate court held that
an enforceable contract for lifetime employment was formed when an
employee relinquished a job offer in exchange for a promise of
permanent employment from his current employer. Martin v. Federal
Life Insurance Co., 109 Ill. App. 3d 596, 601 (1982). The Martin
court recognized that there was consideration in an exchange of
promises: the employer promised to give up his right to terminate
the employee at-will, and in exchange the employee agreed to
continue working for his current employer and to forgo a lucrative
opportunity with a competitor. Martin, 109 Ill. App. 3d at 601.
What is consideration? Under the prevailing view, embodied in
the Restatement (Second) of Contracts, consideration is the
bargained-for exchange of promises or performances, and may consist
of a promise, an act or a forbearance. Restatement (Second) of
Contracts 71 (1981). Thus, a promise for a promise is, without
more, enforceable. Restatement (Second) of Contracts 79, Comment
a, at 200 (1981). In past cases, this court has recognized this
basic precept, i.e., mutual assent and an exchange of promises
provides consideration to support the formation of a contract. See,
e.g., Patton v. Carbondale Clinic, 161 Ill. 2d 357, 372 (1994);
Steinberg v. Chicago Medical School, 69 Ill. 2d 320 (1977) (holding
that any act or promise which is of benefit to one party or
disadvantage to the other is sufficient "consideration" to support
a contract).
While this court has never directly addressed the specific
requirements to establish a permanent employment contract, it has
held more generally that the employment relationship is governed by
the law of contract. Existence of an employment contract, express
or implied, is essential to the employer-employee relationship.
A.J. Johnson Paving Co. v. Industrial Comm'n, 82 Ill. 2d 341, 350
(1980). As with any contract, it is not possible for a contract of
employment to exist without consent of the parties. M&E Electric
Co. v. Industrial Comm'n, 57 Ill. 2d 113, 119 (1974). Indeed, this
court held in Duldulao, 115 Ill. 2d at 490, that an employee
handbook or other policy statement creates enforceable contractual
rights governed by the traditional requirements for contract
formation.
In the instant case, Charter Golf argues that an employee's
promise to forgo another employment offer in exchange for an
employer's promise of lifetime employment is not sufficient
consideration. But why not? The defendant has failed to articulate
any principled reason why this court should depart from traditional
notions of contract law in deciding this case. While we recognize
that some cases have indeed held that such an exchange is
"inadequate" or "insufficient" consideration to modify an
employment-at-will relationship, we believe that those cases have
confused the conceptual element of consideration with more
practical problems of proof. As we discussed above, this court has
held that a promise for a promise constitutes consideration to
support the existence of a contract. To hold otherwise in the
instant case would ignore the economic realities underlying the
case. Here McInerney gave up a lucrative job offer in exchange for
a guarantee of lifetime employment; and in exchange for giving up
its right to terminate McInerney at will, Charter Golf retained a
valued employee. Clearly both parties exchanged bargained-for
benefits in what appears to be a near textbook illustration of
consideration.
Of course, not every relinquishment of a job offer will
necessarily constitute consideration to support a contract. On the
related issue of mutuality of obligation, Charter Golf complains
that McInerney's promise to continue working was somehow illusory,
because it alleges that McInerney had the power to terminate the
employment relationship at his discretion while it lacked any
corresponding right. The court's decision in Armstrong Paint &
Varnish Works v. Continental Can Co., 301 Ill. 102, 108 (1922),
teaches that "where there is any other consideration for the
contract mutuality of obligation is not essential." Charter Golf's
argument on this point fails because McInerney continued working
for Charter Golf and relinquished his right to accept another job
opportunity. When, as here, the employee relinquishes something of
value in a bargained-for exchange for the employer's guarantee of
permanent employment, a contract is formed.
B. Statute of Frauds
So there is a contract, but should we enforce it? Charter Golf
argues that the oral contract at issue in this case violates the
statute of frauds and is unenforceable because it is not capable of
being performed within one year of its making. By statute in
Illinois, "[n]o action shall be brought *** upon any agreement that
is not to be performed within the space of one year from the making
thereof, unless *** in writing and signed by the party to be
charged." 740 ILCS 80/1 (West 1994). Our statute tracks the
language of the original English Statute of Frauds and Perjuries.
29 Charles II ch. 3 (1676). The English statute enacted by
Parliament had as its stated purpose the prohibition of those "many
fraudulent practices, which are commonly endeavored to be upheld by
perjury and subordination of perjury." 29 Charles II ch. 3,
introductory clause (1676). Illinois' statute of frauds seeks to do
the same by barring actions based upon nothing more that loose
verbal statements.
The period of one year, although arbitrary, recognizes that
with the passage of time evidence becomes stale and memories fade.
The statute proceeds from the legislature's sound conclusion that
while the technical elements of a contract may exist, certain
contracts should not be enforced absent a writing. It functions
more as an evidentiary safeguard than as a substantive rule of
contract. As such, the statute exists to protect not just the
parties to a contract, but also--perhaps more importantly--to
protect the fact finder from charlatans, perjurers and the problems
of proof accompanying oral contracts.
There are, of course, exceptions to the statute of frauds'
writing requirement which permit the enforcement of certain oral
contracts required by the statute to be in writing. One such
exception is the judicially created exclusion for contracts of
uncertain duration. In an effort to significantly narrow the
application of the statute, many courts have construed the words
"not to be performed" to mean "not capable of being performed"
within one year. See Restatement (Second) of Contracts 130 (1981).
These cases hold that if performance is possible by its terms
within one year, the contract is not within the statute regardless
of how unlikely it is that it will actually be performed within one
year. Under this interpretation, the actual course of subsequent
events and the expectations of the parties are entirely irrelevant.
Restatement (Second) of Contracts 130, Comment a (1981). A
contract for lifetime employment would then be excluded from the
operation of the statute because the employee could, in theory, die
within one year, and thus the contract would be "capable of being
performed."
We find such an interpretation hollow and unpersuasive. A
"lifetime" employment contract is, in essence, a permanent
employment contract. Inherently, it anticipates a relationship of
long duration--certainly longer than one year. In the context of an
employment-for-life contract, we believe that the better view is to
treat the contract as one "not to be performed within the space of
one year from the making thereof." To hold otherwise would
eviscerate the policy underlying the statute of frauds and would
invite confusion, uncertainty and outright fraud. Accordingly, we
hold that a writing is required for the fair enforcement of
lifetime employment contracts.
The plaintiff argues that the statute of frauds writing
requirement is nonetheless excused because he performed, either
fully or partially, according to the terms of the oral contract. We
have held that a party who has fully performed an oral contract
within the one-year provision may nonetheless have the contract
enforced. American College of Surgeons v. Lumbermens Mutual
Casualty Co., 142 Ill. App. 3d 680, 700 (1986); Meyer v. Logue, 100
Ill. App. 3d 1039, 1043 (1981); Noesges v. Servicemaster Co., 233
Ill. App. 3d 158, 163 (1992). Full or complete performance of the
instant contract, by its terms, would have required the plaintiff
to work until his death, but our plaintiff lives.
A party's partial performance generally does not bar
application of the statute of frauds, unless it would otherwise be
"impossible or impractical to place the parties in status quo or
restore or compensate" the performing party for the value of his
performance. Mapes v. Kalva Corp., 68 Ill. App. 3d 362, 368 (1979);
see also Payne v. Mill Race Inn, 152 Ill. App. 3d 269, 278 (1987).
This so-called exception resembles the doctrines of restitution,
estoppel and fraud, and exists to avoid a "virtual fraud" from
being perpetrated on the performing party. Barrett v. Geisinger,
148 Ill. 98 (1898); see also Restatement (Second) of Contracts
130, Comment e (1981). In any event, our plaintiff has been fully
compensated for the work that he performed. Accordingly, part
performance--on these facts--will not take the case out of the
statute of frauds.
Finally, the plaintiff argues that the defendant should be
estopped from asserting the defense of statute of frauds.
Traditionally, a party's reliance estopped the other party from
asserting the statute only under the doctrine of equitable
estoppel. Ozier v. Haines, 411 Ill. 160, 163-65 (1952); Sinclair v.
Sullivan Chevrolet Co., 45 Ill. App. 2d 10, 17-19 (1964), aff'd, 31 Ill. 2d 507 (1964). Equitable estoppel is available if one party
has relied upon another party's misrepresentation or concealment of
a material fact. Absent such misrepresentation or fraud, the
defense is not available. Ozier, 411 Ill. at 165; Ceres Illinois,
Inc. v. Illinois Scrap Processing, Inc., 114 Ill. 2d 133, 148
(1986). No misrepresentation has been alleged here.
Rather, the plaintiff complains that he relied upon the oral
promises of his employer and makes much of the injustice done him--
indeed, too much. While agreeing to work for an employer and giving
up other employment opportunities can clearly be described as
reliance on the employer's oral promises concerning the terms of
employment, promissory estoppel does not bar the application of the
statute of frauds in Illinois. See Ozier, 411 Ill. 160; Sinclair,
31 Ill. 2d 507 (rejecting, at least implicitly, the suggestion that
promissory estoppel bars the application of the statute of frauds).
In the context of an employment relationship, reasonable reliance
is insufficient to bar the application of the statute of frauds.
Some authorities--reflected in the view of the Second Restatement--
have used promissory estoppel to bar the application of the statute
of frauds in a narrow class of cases in which a performing party
would otherwise be without an adequate remedy and there is some
element of unjust enrichment. Restatement (Second) of Contracts
139, Comment c, at 355-56 (1981). We do not believe that this case
is one which requires us to adopt such a rule. As we have observed,
McInerney has been compensated for his services, and the sole
injustice of which he complains is his employer's failure to honor
its promise of lifetime employment. Our plaintiff, however, is a
salesman--a sophisticated man of commerce--and arguably should have
realized that his employer's oral promise was unenforceable under
the statute of frauds and that his reliance on that promise was
misplaced. Our parties entered into this disputed oral contract
freely and without any hint of coercion, fraud or
misrepresentation, and thus we adhere to the rule of Ozier and
Sinclair and hold that the statute of frauds operates even where
there has been reliance on a promise.
In sum, though an employee's promise to forgo another job
opportunity in exchange for a guarantee of lifetime employment is
consideration to support the formation of a contract, the statute
of frauds requires that contracts for lifetime employment be in
writing. Accordingly, we affirm the judgment of the appellate
court.
Appellate court judgment affirmed.
JUSTICE NICKELS, dissenting:
I agree with the majority's conclusion that plaintiff's
promise to forgo another job opportunity is sufficient
consideration in return for defendant's promise of lifetime
employment to plaintiff. However, I disagree with the majority's
holding that the employment contract in the case at bar must be in
writing because it falls within the requirements of the Statute of
Frauds.
The writing requirement applies to "any agreement that is not
to be performed within the space of one year from the making
thereof." 740 ILCS 80/1 (West 1994). Commenting on this language,
the Restatement (Second) of Contracts observes:
"[T]he enforceability of a contract under the one-year
provision does not turn on the actual course of
subsequent events, nor on the expectations of the parties
as to the probabilities. Contracts of uncertain duration
are simply excluded; the provision covers only those
contracts whose performance cannot possibly be completed
within a year." Restatement (Second) of Contracts 130,
Comment a, at 328 (1981).
A contract of employment for life is necessarily one of uncertain
duration. Since the employee's life may end within one year, and,
as the majority acknowledges, the contract would be fully performed
upon the employee's death (slip op. at 6 n.1), the contract is not
subject to the statute of frauds' one-year provision. See
Restatement (Second) of Contracts 130, Illustration 2, at 328
(1981); see also 72 Am. Jur. 2d Statute of Frauds 14 (1974) ("The
rule generally accepted by the authorities is that an agreement or
promise the performance or duration of which is contingent on the
duration of human life is not within the statute"); J. Calamari &
J. Perillo, The Law of Contracts 19--20 (3d ed. 1987) ("if A
promises *** to employ X for life, the promise is not within the
Statute because it is not for a fixed term and the contract by its
terms is conditioned upon the continued life of X and the condition
may cease to exist within a year because X may die within a year").
It is irrelevant whether the parties anticipate that the employee
will live for more than a year or whether the employee actually
does so.
The majority acknowledges that "many courts" subscribe to this
view. More accurately, the Restatement rule represents "the
prevailing interpretation" of the statute of frauds' one-year
provision. Restatement (Second) of Contracts 130, Comment a, at
328 (1981). Only a "distinct minority" of cases have ascribed
significance to whether the parties expected that a contract would
take more than a year to perform. J. Calamari & J. Perillo, The Law
of Contracts 19--18, at 808 (3d ed. 1987). According to Williston
on Contracts:
"It is well settled that the oral contracts
invalidated by the Statute because not to be performed
within a year include only those which cannot be
performed within that period. A promise which is not
likely to be performed within a year, and which in fact
is not performed within a year, is not within the Statute
if at the time the contract is made there is a
possibility in law and in fact that full performance such
as the parties intended may be completed before the
expiration of a year.
In the leading case on this section of the Statute
the Supreme Court of the United States said: `The parties
may well have expected that the contract would continue
in force for more than one year; it may have been very
improbable that it would not do so; and it did in fact
continue in force for a much longer time. But they made
no stipulation which in terms, or by reasonable
inference, required that result. The question is not what
the probable, or expected, or actual performance of the
contract was; but whether the contract, according to the
reasonable interpretation of its terms, required that it
should not be performed within the year.' " 3 W. Jaeger,
Williston on Contracts 495 at 575-79 (3d ed. 1960),
quoting Warner v. Texas & Pacific Ry. Co., 164 U.S. 418,
434, 41 L. Ed. 495, 504, 17 S. Ct. 147, 153 (1896).
Although the majority brands this interpretation "hollow and
unpersuasive" (slip op. at 7), it has a sound basis in the plain
language of the statute. Corbin notes:
"[Courts] have observed the exact words of [the one-year]
provision and have interpreted them literally and very
narrowly. The words are `agreement that is not to be
performed.' They are not `agreement that is not in fact
performed' or `agreement that may not be performed' or
`agreement that is not at all likely to be performed.' To
fall within the words of the provision, therefore, the
agreement must be one of which it can truly be said at
the very moment that it is made, `This agreement is not
to be performed within one year'; in general, the cases
indicate that there must not be the slightest possibility
that it can be fully performed within one year." 2 A.
Corbin, Corbin on Contracts 444, at 535 (1950).
See also 3 W. Jaeger, Williston on Contracts 495, at 585 n.7 (3d
ed. 1960) (criticizing Marshall v. Lowd, 154 Me. 296, 147 A.2d 667
(1958)).
It is well established that where the words of a statutory
provision are unambiguous, there is no need to resort to external
aids of interpretation in order to glean the legislature's purpose.
People v. Hicks, 164 Ill. 2d 218, 222 (1995). Although the
statutory language at issue in this case is clear and unambiguous,
the majority improperly relies upon policies identified in the
introductory clause to the original English statute of frauds (slip
op. at 5-6) in order to significantly expand the scope of the one-
year provision. Even assuming, arguendo, that it is proper to look
beyond the language of the statute in order to determine its
meaning, I do not find the majority's policy analysis to be
persuasive justification for the broad construction it gives the
statute.
The majority notes the dangers of stale evidence and faded
memories. Slip op. at 6. But the one-year provision does not
effectively guard against these dangers because " `[t]here is no
necessary relationship between the time of the making of the
contract, the time within which its performance is required and the
time when it might come to court to be proven.' " J. Calamari & J.
Perillo, The Law of Contracts 19--17, at 807 (3d ed. 1987),
quoting D&N Boening, Inc. v. Kirsch Beverages, Inc., 63 N.Y.2d 449,
454, 472 N.E.2d 992, 993, 483 N.Y.S.2d 164, 165 (1984); see also
E. Farnsworth, Contracts 6.4, at 391 (1982).
Courts have tended to give the one-year provision a narrow
construction precisely because of the lack of a discernable
rationale for it. J. Calamari & J. Perillo, The Law of Contracts
19--17, at 807 (3d ed. 1987); see also Restatement (Second) of
Contracts 130, Comment a, at 328 (1981) ("The design was said to
be not to trust to the memory of witnesses for a longer time than
one year, but the statutory language was not appropriate to carry
out that purpose. The result has been a tendency to construction
narrowing the application of the statute"). I am inclined to do
likewise. Since the one-year provision is so poorly suited to the
aims it was ostensibly designed to accomplish, I see no compelling
reason to expand the provision's scope beyond the class of
contracts to which it applies by its terms. The narrow and literal
interpretation that most courts have given to the language of the
one-year provision is entirely appropriate under these
circumstances.
Lacking any reasoned basis for its holding, the majority
resorts to nearly tautological wordplay, declaring that because a
"lifetime" employment contract is essentially a "permanent"
employment contract, it inherently anticipates a relationship of
long duration. Slip op. at 7. Merely labelling a lifetime
employment contract "permanent" should not change the result that
the statute of frauds is inapplicable. See 2 A. Corbin, Corbin on
Contracts 446, at 549-50 (1950) ("A contract for `permanent'
employment is not within the one-year clause for the reason that
such a contract will be fully performed, according to its terms,
upon the death of the employee. The word `permanent' has, in this
connection, no more extended meaning than `for life' "); 3 W.
Jaeger, Williston on Contracts 495, at 582 (3d ed. 1960) ("A
promise of permanent personal performance is on a fair
interpretation a promise of performance for life, and therefore not
within the Statute"). The parties in this case allegedly agreed to
plaintiff's employment for life. But with suitable modesty
befitting mere mortals, the parties did not stipulate how long
plaintiff's life should be. They left that matter--and hence the
duration of the contract--to a higher power (I do not refer to this
court).
The majority also suggests that its holding is necessary to
avoid confusion and uncertainty. Slip op. at 7. I fail to see how
the generally accepted rule that lifetime employment contracts need
not be in writing is any more confusing or uncertain than the
contrary rule adopted by the majority. Indeed, the majority's
reasoning is likely to cause greater confusion and uncertainty. A
lifetime employment contract is only one example of a broader
general category of contracts of uncertain duration. While the
majority has declared that lifetime employment contracts anticipate
a relationship of longer than one year, the decision in this case
supplies no guidance as to other types of contracts that do not, by
their terms, set forth a specific time frame for performance.
Contracting parties can no longer simply look to the actual terms
of their agreement to ascertain whether it must be in writing.
Instead, they are left to guess whether the type of contract they
have entered into will be viewed by a court as inherently
anticipating a relationship of more than one year.
In summary, the majority's holding: (1) is contrary to the
relevant statutory language and the great weight of authority; (2)
finds no justification in the policy considerations ostensibly
underlying the statute of frauds; and (3) is likely to increase,
rather than reduce, uncertainty regarding the application of the
one-year provision. I would hold that the statute of frauds does
not require the contract in this case to be in writing, and I would
reverse the judgments of the courts below. Accordingly, I
respectfully dissent.
JUSTICES MILLER and McMORROW join in this dissent.
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