In my opinion, ABC will win over the employees. Promises and agreements form daily aspects of life. Common law has a set of elements that determine whether these promises and agreements are legal or valid. These elements are outlined under the law of contracts. A valid contract must involve a well-communicated offer and an expression of acceptance between the two parties involved. Offer and acceptance are communicated orally, in written form, or in the contract. The contract needs to be legal in order to be valid. This implies that any contract whose terms consist of illegal activities is invalid or void. The informed and mutual consent of both parties is also essential for the validity of the contract. Further, a valid contract needs to communicate the intention of creating a legal relationship. In addition, a valid contract involves parties of contractual capacity, and this exempts minors, lunatics, and drunkards. Consideration is also essential when communicating the terms of a valid contract. To establish whether there was a breach of contract by the ABC Company, it is necessary to determine whether the contract was valid.
The promise made by ABC to the employees was clear. ABC was transparent enough to communicate its unavoidable failure and the chances of a merger in the future. It then promised to offer the employees who stayed with the firm 5% of the sale price in case of a merger. Thus, the offer and acceptance were communicated with the terms of staying with the company and earning 5% of the sale price upon acquisition. The contract was legal and the parties involved were of contractual capacity. The consideration of the price was also legal and it is clear that the employees expressed free consent through conduct (Chen-Wishart 103). This implies that the contract was valid. The employees will need to establish this fact in court.
ABC may counter the existence of this contract on grounds of the contract being illusory. An illusory contract comprises a promise made from one party to another without any obligation to fulfill the promise. In this case, ABC made the promise of paying the employees who stayed 5% of the sale price, but there is nothing in the contract to obligate ABC to honor this promise. Thus, ABC may choose to honor it, or not to. The employees did not sign the contract, nor did they communicate acceptance orally. This increases the indefiniteness of the contract. Moreover, the employees were not bound by the contract, as they were free to leave the company at any time, just as the eighth employee did, thus there was no clear mutuality (Frey and Phyllis 200).
ABC may also defend itself based on the statute of fraud. This statute enlists a number of contracts that are only enforceable if they are in written form. For an instant, any contracts that last for more than one year must be written in order to be enforceable. According to ABC, the company was sold after one year had elapsed since the promise was made. This breach of the statute of fraud will give ABC an upper hand in court. This implies that the contract is no longer valid since the employees did not sign any written document for the terms of the contract when it was formed. Unfortunately, the employees were ignorant or unaware of this fact initially, and the company took advantage of their ignorance (Emerson 134). Therefore, although the contract is valid, ABC will win on grounds of an illusory contract and statute of fraud. The employees will thus need to sue ABC on grounds of fraud rather than a breach of contract. Alternatively, the employees may counter the statute of fraud by indicating that the terms of the contract did not indicate that its performance would last for only one year. Thus, the statute does not apply in this case.
Chen-Wishart, Mindy. Contract Law. Oxford: Oxford University Press, 2012. Print.
Emerson, Robert W. Business Law. Hauppauge, N.Y: Barron’s Educational Series, 2009. Print.
Frey, Martin A, and Phyllis H. Frey. Essentials of Contract Law. Albany, NY: West/Thomson Learning, 2001. Print.Bottom of Form