Cook v. Coldwell Banker/Frank Laiben Realty Co.

Nature of the Case

Brokerage firm Coldwell Banker (D) appealed from a judgment awarding Cook (P) damages for breach of a bonus agreement. Coldwell claimed that Cook did not accept the offer before it was revoked.

Facts

Cook (P) was a licensed real estate agent who worked for Coldwell Banker/Frank Laiben Realty Co. as an agent under a verbal agreement. In a sales meeting, Coldwell orally announced a bonus program that provided that an agent earning $15,000 in commissions would receive a $500 bonus payable immediately. Agents earning $15,000 to $25,000 would receive a 22 percent bonus and an agent earning above $25,000 would receive a 30 percent bonus. Bonuses over the first $500 were to be paid on an annual basis and the program would run for the year 1991 and would continue on an annual basis thereafter.

Cook surpassed $32,400 in commissions by September. At a sales meeting Coldwell indicated that the bonuses would be paid at a banquet in March and that the sales people had to be there in order to collect. Cook was contacted by REMAX and accepted a position with them in January 1992. Cook told Coldwell of her departure and at that time she had accrued a bonus of $17,391.54. In March 1992, Cook sent a demand letter to Coldwell seeking payment of her bonus and the company refused payment. Cook then filed an action against Coldwell and the jury awarded her $24,748.89. Coldwell appealed.

Issue

May an offeror withdraw a unilateral offer after the offeree has made substantial performance?

Holding and Rule of Law

No. An offeror may not withdraw a unilateral offer after the offeree has made substantial performance.

A unilateral contract is a contract in which performance is based on the wish, will, or pleasure of one of the parties. A promissor does not receive a promise as consideration for his or her promise in a unilateral contract. A unilateral contract lacks consideration for want of mutuality, but when the promisee performs, consideration is supplied and the contract is enforceable to the extent performed. An offer to make a unilateral contract is accepted when the requested performance is rendered. A promise to pay a bonus in return for an at-will employee’s continued employment is an offer for a unilateral contract which becomes enforceable when accepted by the employee’s performance.

There was sufficient evidence that the bonus offer induced Cook to remain with Coldwell through the end of 1991 and to earn a high level of commissions. Coldwell contends it was free to revoke the first offer with the second offer because, as of the time the second offer was made, P had not yet accepted the first offer. The company maintains that, because Cook did not stay until March, 1992, she did not accept the second offer and thus did not earn the bonus.

An offeror may withdraw an offer at any time prior to acceptance unless the offer is supported by consideration. However, an offeror may not revoke an offer where the offeree has made substantial performance. Where one party makes a promissory offer in such form that it can be accepted by the rendition of the performance that is requested in exchange, without any express return promise or notice of acceptance in words, the offeror is bound by a contract just as soon as the offeree has rendered a substantial part of that requested performance. Part performance or tender may thus furnish consideration for the subsidiary promises. Moreover, merely acting in justifiable reliance on an offer may in some cases serve as sufficient reason for making a promise binding. In the context of an offer for unilateral contract, the offer may not be revoked where the offeree has accepted the offer by substantial performance.

The fact that Coldwell attempted to change the offer in September of that year is of no import as Cook had already substantially performed. The consideration for such a unilateral offer is Cook’s performance of the requested act; staying until the end of the year to get a bonus.

Disposition

Affirmed.