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Verbal Contracts Law
R. Alex Whitlock
As someone that has wasted hours of his life disputing an alleged "verbal agreement" that was quite different than what I did agree to, I'm not a really big fan of the concept of enforceable verbal agreements (unless somehow documented), as they pertain to, among other things,
lifetime employment:
Your question involves an area of contract law called the ''Statute of Frauds'' that requires certain types of verbal agreements to be in writing to be legally enforceable. Your oral lifetime employment agreement falls under the statute category called ''an agreement that is not to be performed within one year from the making thereof.'' This is interpreted by case law to mean contracts that definitely and unconditionally state a performance term of one year or more. The key is the agreement's specific wording, not what happens after the agreement is made. This is often called the one-year rule.
For example, A verbally hires B ''for one year'' and fires him one week later. Since the agreement has a definite term, it's ''within'' the statute. Without anything in writing, it's unenforceable no matter how many witnesses corroborate it. If, however, B is verbally hired ''for life'' and is then fired, the agreement is ''outside'' the statute and is verbally enforceable because of the uncertain duration of anyone's lifetime. Most all states enforce verbal ''for life'' hiring agreements, which they view as exceptions to the general rule requiring a written contract.
Unless I am misunderstanding this (and I may be, it's getting kind of late), what this is saying is that a lifetime verbal contract is enforceable and a six month verbal contract is not. If anything, I would have guessed it to be the other way around. I'm trying to determine the philosophical rationale for this (lifetime ok, six month no), but I am incapable.
Observations
Alex,
The Statute of Frauds is designed to provide an indicia of reliability to contracts by requiring most of them to be reduced to writing. This in general is a good policy, as I'm guessing you'll agree.
Re the specific question you're asking, the reason lifetime Ks generally do not have to be reduced to writing is because (at least in theory), contracts that require a long time to be executed are less likely to be entered into casually, with only a rudimentary effort given to working out the details, then a long-time relationship between the parties.
in short, a verbal agreement on a K that requires a lifetime to perform is likely to be much more significant to the parties than one that can be completed in 6 months, and therefore, more reliable even as a purely verbal contract.
I'm not saying you have to buy this, but I don't think it's outlandish.
That makes sense, I guess. I just look at it a bit differently. Long-term contracts, in my view, are less remediatable in case of unforseen events. In other words, in the events outlined in the letter, a one-year contract can be bought out. A verbal one, however, can't. Even though presumably lifetime employment *should* be more thought out than a contract one, things happen that nullify the spirit of a contact. A paper contract is more likely to have the terms of severance spelled out than a verbal one (the more complicated a contract, the more things ought to be written out if for no other reason than for reference later on). The longer a contract is, the more likely it is to be severed at some point due to changing circumstances. The employment contract mentioned here is the perfect example of that.
Of course, I also think "lifetime employment" should probably be non-enforceable as are unreasonable non-compete covenants, but no one asked me :).
In any case, I appreciate you explaining the rationale. I still don't agree with it, but I do understand it a bit better.
There are plenty of people who think the lifetime SOF rule is unwise. go to a library and do a Lexis-Nexis search, or even Google it, and I bet you'll find a bunch of critiques.
i think contracts for employment in general are absurd. at-will employment makes a whole lot more sense, IMO.
One of the interesting things about Idahoans is the accumulated bile on the subject of employment-at-will. I think it must be relatively recent because it's just a much bigger deal up here than it is in Texas.
I'm in favor of employment-at-will as far as the law is concerned (the subject of a whole nother post, probably), but I do think that employment contracts are underutilized in EAW states and I think the lack of loyalty involved hurts both parties. Higher turnover leads to increased training costs and the constant threat of layoff with little compensation creates higher turnover, and it becomes lose-lose. I guess I don't entirely buy in to the notion that the dynamism of our current economy is an unmitigated good.
That's my perspective, anyway.
Good link. I was considering posting on the subject myself. I mostly agree with Bainbridge and think that this, like the birth control issue, is an example of some libertarian-minded folk's tendency to believe their right to do what they want a right to do so without consequence, even to the point of coercing someone else to do what they don't wish to.
I was going to make a long-winded comment about at-will employment, as it is my supposed area of expertise, but I think TP and Bainbridge covered it quite well. I will point out that Montana is the only state in the country that does not at at-will employment (although, inefficient contract employment is the norm in many other countries) -- must be something in the water.
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