Cengage Advantage Books: Fundamentals of Business Law 9th Edition by Roger LeRoy Miller

Exercise 10

Schwarzrock v. Remote Technologies, Inc.
Court of Appeals of Minnesota, __ N.W.2d __ (2011).
FACTS Remote Technologies, Inc., is a Minnesota-based manufacturer of home-theater and home-automation controls. Remote employs product trainers to conduct training sessions for its dealers. Nick Schwarzrock contacted Peter Baker, Remote's vice president of sales and marketing, to apply for employment. Baker offered Schwarzrock a position as a trainer. In a letter, Baker wrote that the compensation was "$60,000 per year salary, plus bonus." The day after starting work, Schwarzrock signed an employment agreement (EA) that expressly "superseded all previous correspondence." The EA stated, in part, that the salary "constitutes the full and exclusive... compensation for... the performance of all Employee's promises." Less than three months later, Baker fired Schwarzrock for "lots of reasons." Schwarzrock filed a suit in a Minnesota state court against Remote. Among other things, he alleged breach of contract to recover what he believed he was owed as a bonus. On this claim, the court held that there was no breach of contract and that the bonus was discretionary. Schwarzrock appealed.
ISSUE Was Schwarzrock's employment agreement a bilateral contract?
DECISION No. The state intermediate appellate court affirmed the lower court's judgment that it was a unilateral contract.
REASON An employer's offer of a position on certain terms for an indefinite period becomes a unilateral contract on the employee's acceptance. Schwarzrock argued that "salary, plus bonus" was "an essential term of a bilateral negotiated contract," but he provided no proof that such a contract existed. Instead, the court reasoned that the EA was a unilateral offer of employment by Remote that specifically made any bonus subject to the employer's discretion. The EA explicitly stated that "any additional compensation to Employee (whether a bonus or other form of additional compensation) shall rest in the sole discretion of [the employer]." Schwarzrock accepted this offer when he signed the EA and continued working. Both Remote's EA and Baker's letter expressed the employer's intent to offer a salary and a potential bonus to Schwarzrock. Baker's letter may have implied that the bonus was not discretionary, but the EA clarified or modified the offer by clearly stating that it was.
WHAT IF THE FACTS WERE DIFFERENT? Suppose that the court had ruled that Schwarzrock was employed under a bilateral contract, as he alleged. Would the result have been different? Explain.