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Promises, Promises. An Employer's Statements Can Be Binding

Can an employee recover damages for breach of contract? 

The Law Offices of Daniel Feder recently repesented a former employee of a large financial institution who was entitled, based on representations made to him both verbally and in writing, to receive a large bonus in the amount of $1.6 millon dollars "net."  The employer claimed after the payment that it didn't have a legally binding contract to pay him $1.6M net of taxes.  The employer was not able to articulate any defense to the action for wages, but claimed nevertheless that it was not obligated to pay the employee. 

An employer's promises concerning compensation, bonuses, vacation or benefits can be legally binding if the employee accepts the terms articulated and/or reasonably relies on the promises in accepting employment.  In this sense, the laws pertaining to employment agreements are in fundamental respects the same as those governing contracts generally.

"A contract must receive such interpretation as will make it lawful, operative, definite, reasonable, and capable of being carried into effect, if that can be done without violating the intention of the parties. ( Civ. Code, §§ 1643, 3541; see Rest., Contracts, § 236 (a).) When the language used is fairly susceptible to one of two constructions, extrinsic evidence may be considered, not to vary or modify the terms of the agreement but to aid the court in ascertaining the true intent of the parties ( Central Heights Improvement Co. v. Memorial Parks, Inc., 40 Cal.App.2d 591, 608 [105 P.2d 596]), not to show that 'the parties meant something other than what they said' but to show 'what they meant by what they said' ( Barnhart Aircraft, Inc. v. Preston, 212 Cal. 19, [6] 23 [297 P. 20]). Where any doubt exists as to the purport of the parties' dealings as expressed in the wording of their contract, the court may look to the circumstances surrounding its execution -- including the object, nature and subject matter of the agreement ( Wachs v. Wachs, 11 Cal.2d 322, 326 [79 P.2d 1085]) . . .." (Emphasis included.)

Although an agreement cannot be specifically enforced unless the terms are "sufficiently certain to make the precise act which is to be done clearly ascertainable" ( Civ. Code, § 3390, subd. 5), the modern trend of the law favors carrying out the parties' intentions through the enforcement of contracts and disfavors holding them unenforceable because of uncertainty. ( California Lettuce Growers v. Union Sugar Co. (1955) 45 Cal.2d 474, 481 [289 P.2d 785, 49 A.L.R.2d 496]; [20] Larwin-Southern California, Inc. v. JGB Investment Co. (1979) 101 Cal.App.3d 626, 641 [162 Cal.Rptr. 52]; Burrow v. Timmsen (1963) 223 Cal.App.2d 283, 288 [35 Cal.Rptr. 668, 100 A.L.R.2d 544].) " The defense of uncertainty has validity only when the uncertainty or incompleteness of the contract prevents the court from knowing what to enforce." ( Hennefer v. Butcher (1986) 182 Cal.App.3d 492, 500 [227 Cal.Rptr. 318].) At bottom, "[i]f the parties have concluded a transaction in which it appears that they intend to make a contract, the court should not frustrate their intention if it is possible to reach a fair and just result, even though this requires a choice among conflicting meanings and the filling of some gaps that the parties have left. [Fn. omitted.]" (1 Corbin on Contracts (1963) § 95, p. 400.) (Okun v. Morton (1988) 203 Cal.App.3d 805, 817 [250 Cal.Rptr. 220].)

Thus, in determining the terms of a contract, the judge or arbitrator will carefully evaluate the facts and circumstances relating to the formation of the agreement, and will interpret the languaged used according to objective criteria, not necessarly the actual intentions or undisclosed thoughts of the parties. 

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