Business Law and the Regulation of Business 11th Edition by Richard Mann, Barry Roberts

تمرين 5

FACTS Kasch and his brother owned M.W. Kasch Co. Kasch hired Skebba as a sales representative, and over the years promoted him first to account manager, then to customer service manager, field sales manager, vice president of sales, senior vice president of sales and purchasing, and finally to vice president of sales. When M.W. Kasch Co. experienced serious financial problems in 1993, Skebba was approached by another company to leave Kasch and work for them. When Skebba told Kasch he was accepting the new opportunity, Kasch asked what it would take to get him to stay. Skebba told Kasch that he needed security for his retirement and family and would stay if Kasch agreed to pay Skebba $250,000 if one of these three conditions occurred: (1) the company was sold; (2) Skebba was lawfully terminated; or (3) Skebba retired. Kasch agreed to this proposal and promised to have the agreement drawn up. Skebba turned down the job opportunity and stayed with Kasch from December 1993 through 1999 when the company assets were sold.
Over the years, Skebba repeatedly but unsuccessfully asked Kasch for a written summary of this agreement. Eventually, Kasch sold the business receiving $5.1 million dollars for his 51 percent share of the business. Upon the sale of the business, Skebba asked Kasch for the $250,000 Kasch had previously promised to him. Kasch refused and denied ever having made such an agreement. Instead, Kasch gave Skebba a severance agreement, which had been drafted by Kasch's lawyers in 1993. This agreement promised two years of salary continuation on the sale of the company, but only if Skebba was not hired by the successor company. The severance agreement also required a set-off against the salary continuation of any sums Skebba earned from any activity during the two years of the severance agreement. Skebba sued, alleging breach of contract and promissory estoppel.
The jury found there was no contract, but that Kasch had made a promise upon which Skebba relied to his detriment, that the reliance was foreseeable, and that Skebba was damaged in the amount of $250,000. The trial court concluded that, based on its reading of applicable case law, it could not specifically enforce the promise the jury found Kasch made to Skebba because there were other ways to measure damages. The trial court held that since Skebba could not establish what he had lost by relying on Kasch's promise he had not proved his damages.
DECISION Order of trial court reversed and case remanded.
OPINION Kessler, J. Kasch did not promise to pay Skebba more than Skebba would have earned at the job Skebba turned down. Kasch did not promise that total income to Skebba would be greater than in the turned-down job, no matter how long he remained with Kasch. Kasch only promised that if Skebba stayed, Kasch would pay Skebba $ 250,000 (the sum Skebba wanted for his retirement), at the earliest of (1) Kasch selling the business, (2) Skebba retiring, or (3) Skebba being lawfully terminated. Skebba stayed. Kasch sold the business while Skebba was still employed by Kasch. Kasch refused to pay as promised.
The purpose of promissory estoppel is to enforce promises where the failure to do so is unjust. U.S. Oil Co., Inc. v. Midwest Auto Care Servs., [citation]. In this case, the trial court specifically relied on parts of [the] Hoffman [case] in determining that specific performance of the promise could not be awarded and in concluding that Skebba had not properly established damages. Hoffman was the first case in Wisconsin to adopt promissory estoppel. *** [T]he Hoffman court explained its adoption of a cause of action based on promissory estoppel as grounded in section 90 of the Restatement of Contracts which:
does not impose the requirement that the promise giving rise to the cause of action must be so comprehensive in scope as to meet the requirements of an offer that would ripen into a contract if accepted by the promisee. Rather the conditions imposed are:
1. Was the promise one which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee?
2. Did the promise induce such action or forbearance?
3. Can injustice be avoided only by enforcement of the promise?
[Citation.]
The Hoffman court explains that the first two of these requirements are facts to be found by a jury or other fact-finder, while the third is a policy decision to be made by the court. [Citations.] In making this policy decision, a court must consider a number of factors in determining whether injustice can only be avoided by enforcement of the promise. U.S. Oil, [citation]. The court in U.S. Oil adopted those considerations set forth in the Restatement (Second) of Contracts § 139(2), (1981):
a. the availability and adequacy of other remedies, particularly cancellation and restitution;
b. the definite and substantial character of the action or forbearance in relation to the remedy sought;
c. the extent to which the action or forbearance corroborates evidence of the making and terms of the promise, or the making and terms are otherwise established by clear and convincing evidence;
d. the reasonableness of the action or forbearance; [and]
e. the extent to which the action or forbearance was foreseeable by the promisor.
[Citation.]
The record does not indicate that the trial court here applied the considerations our supreme court announced in U.S. Oil. Instead, the trial court apparently relied on the Hoffman court's discussion of various damage theories that the court explained might be appropriate once the determination had been made to enforce the promise by application of promissory estoppel. ***
***
A court, in fashioning a remedy, can consider any equitable or legal remedy which will ''prevent injustice.'' ***
As later commentators have noted, Wisconsin, with its landmark Hoffman decision, is one of a small group of states which recognizes that to fulfill the purpose of promissory estoppel-i.e., prevent injustice-a court must be able to fashion a remedy that restores the promisee to where he or she would be if the promisor had fulfilled the promise. [Citation.] In this case, Skebba performed-he remained at M.W. Kasch-in reliance on Kasch's promise to pay $250,000 to him if one of three conditions occurred. Kasch enjoyed the fruits of Skebba's reliance-he kept on a top salesperson to help the company through tough financial times and he avoided the damage that he believed Skebba's leaving could have had on M.W. Kasch's reputation in the industry. Accordingly, to prevent injustice, the equitable remedy for Skebba to receive is Kasch's specific performance promised-payment of the $250,000.
The record in this case, considered in light of the U.S. Oil tests and the jury's findings, compels specific performance of the promise because otherwise Kasch will enjoy all of the benefits of induced reliance while Skebba will be deprived of that which he was promised, with no other available remedy to substitute fairly for the promised reward. *** [In short, every factor this court requires to be considered supports enforcement of the promise through promissory estoppel. The trial court submitted the promissory estoppel cause of action to the jury. The jury concluded that the promise had been made, that Skebba relied on the promise to his detriment, and that such reliance was foreseeable by Kasch. The jury also found that Skebba's damages were the amount Skebba testified Kasch promised to pay Skebba if he was still employed when the company was sold, that is, $250,000. ***
*** In this case, specific performance is the necessary enforcement mechanism to prevent injustice for Skebba's reliance on the promise the jury found Kasch had made to him.
INTERPRETATION The courts will enforce a promise that the promisor should reasonably expect to induce detrimental reliance by the promisee if the promisee takes such action and justice requires enforcement.
ETHICAL QUESTION Did Kasch act ethically? Explain.
CRITICAL THINKING QUESTION What could Skebba have done to better protect his interests? Explain.