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Requirements
to Create an
Employment
Contract
1. Capacity to contract:
Do both parties have the mental capacity
to understand what they are agreeing to?
2. Intention to create a legally enforceable
contract:
Did both parties intend to enter into an
enforceable contract?
3. Offer, Acceptance, Mutual Consideration
Applies to formation of employment
contracts and also amendments or
changes to employment contracts.
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• A contract (including employment contracts)
must have:
3. THE
ELEMENTS OF A
CONTRACT:
OFFER,
ACCEPTANCE,
MUTUAL
CONSIDERATION
• An Offer (“We are pleased offer you
employment….”)
• Acceptance of that offer (“I accept your
offer of employment.”)
• Mutual Consideration: Both sides receive
something of value
• Legal disputes can arise over whether one or
more of these requirements have been
satisfied.
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Mutual Consideration
Something of value, of which the party would
not otherwise be entitled, must flow to both
parties for a legally enforceable contract to be
created.
The value of the consideration is usually not
important: “WHERE IS THE PEPPERCORN!”
Mutual consideration not usually a problem at
the point an employment contract is created.
What does each party to an employment
contract typically receives by way of
‘consideration’?
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Modifications
to Employment
Contracts
• Competing Policy Interests
Employer flexibility vs. Predictability,
Stability for Employees
• Requirement
for
Mutual
Consideration provides a small
measure of protection for employees
while still permitting flexibility
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Stilk v. Myrick
(1809)
Mid-contract agreement by Employer to pay worker
more than originally agreed to perform same work is
NOT enforceable because Employer receives no new
consideration.
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Did Employee
Receive New
Consideration
in Exchange
for Accepting
Less Notice of
Termination?
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The Proper
Way to
Revise
Contract
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Lancia v. Park
Dentistry
(Box 7.7)
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• Sometimes an Employer attempting to amend a
contract for the employer’s benefit says: “In exchange
for you agreeing to this change, we won’t terminate
you.”
Is “Continued
Employment”
Fresh
Consideration?
• Courts have said “continued employment” alone is not
fresh consideration, because the employer already
must continue employment until it provide proper
notice of termination (see Globex Foreign Exchange, p.
101)
• BUT: If Employer says “if you agree to this change, the
employer agrees not to exercise its right to terminate
you with notice for at least the next 6 months”, that
MIGHT be fresh consideration, known as
“forbearance”.
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Scenario 2(b):
No contract
modification
clause,
employee does
NOT agree to
the modification
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