The Law Office of Kurt H King

January 6, 2021

Oral Agreements Can Be Valid Contracts in Missouri

Missouri’s Statute of Frauds requires certain agreements/contracts to be in writing to be enforceable:

432.010.  Statute of frauds — contracts to be in writing. — No action shall be brought to charge any executor or administrator, upon any special promise to answer for any debt or damages out of his own estate, or to charge any person upon any special promise to answer for the debt, default or miscarriage of another person, or to charge any person upon any agreement made in consideration of marriage, or upon any contract made for the sale of lands, tenements, hereditaments, or an interest in or concerning them, or any lease thereof, for a longer time than one year, or upon any agreement that is not to be performed within one year from the making thereof, unless the agreement upon which the action shall be brought, or some memorandum or note thereof, shall be in writing and signed by the party to be charged therewith, or some other person by him thereto lawfully authorized, and no contract for the sale of lands made by an agent shall be binding upon the principal, unless such agent is authorized in writing to make said contract.

Fortunately, courts cut back the Statute by laying down several exceptions to its rule. Here are two exceptions that enable oral agreements to be binding contracts upheld in employment disputes by Missouri courts:

(1)   Full Performance–oral contracts are enforced where the plaintiff employee has fully performed since it is patently unjust to allow an employer to cry “no contract” after the employee has done his work for the employer. Koman v. Morrissey, 517 S.W.2d  929  (Mo. 1974) (concluding paragraph);

(2)  At Will Employment–An oral agreement of “at will” employment is an exception because both the employer and the employee have the right to terminate anytime, including within the one year. This exception applies even if the employment lasts longer than a yearKoman, supra; Null v. K & P Precast, Inc., 882 S.W.2d 705 (Mo. Ct. App. E.D. 1994).

Obviously, many workers hire on based on the employer’s spoken promise and a handshake–“you’re hired, be here Monday at 8 a.m., your pay is ‘x’.” Courts recognize this fact and make exceptions to the Statute of Frauds so that employees are paid in these situations. After all, Missouri law obligates the employer “to pay terminated employees for all wages, bonuses and/or commissions earned by the employee prior to the termination of the employment.”  Pratt v. Seventy-One Hawthorne Place, 106 S.W.3d 608 (Mo. Ct. App. W.D. 2003).

Kurt H. King

Law Office of Kurt H. King, 20 E. Franklin, Liberty, Clay County, Missouri 64068; 816.781.6000

Litigation, Employment Matters, General Practice

Contracts–Agreements–are Sufficiently Definite and Enforceable even without all the “Details and Particulars”

Case on point is Warren v. Tribune Broadcasting Company, LLC, 512 S.W.3d 860 (Mo. Ct. App. W.D. 2017).  There, Tribune appealed from a jury verdict awarding Warren an additional $34,000 of bonus on her count for breach of an oral agreement/contract.  The defense claimed that the bonus compensation arrangement was too vague and indefinite to constitute a valid and binding contract.  There the bonus formula varied as set by Tribune.

After listing five essential elements of a contract—(1) parties competent to contract, (2) proper subject matter, (3) legal consideration, (4) mutuality of agreement, (5) mutuality of obligation—the Western District of the Missouri Court of Appeals addressed Tribune’s argument that the fourth element of mutuality of agreement was absent because while Tribune contracted with Warren to pay her a bonus, the manner in which bonus was calculated varied.

The Court of Appeals rejected Tribune’s argument that the bonus agreement was too vague and indefinite to form a binding contract, instead finding a valid oral agreement existed such that if sales exceeded 101% of the revenue goal for that year, then Warren would receive a bonus that was determined by the formula then set by Tribune to compute bonuses.  The Court reasoned:

“While a contract’s essential terms must be sufficiently definite, the detail or particulars of the contract need not be.”

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“[A] court is guided by principles of law applied with common sense and in the light of experience.”

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“A contract should not be held void for uncertainty if there is a possibility of giving meaning to the agreement.”

512 S.W.3d at 864-65 (inside quotations and parentheses omitted).

The takeaway from the Warren v. Tribune Broadcasting case is it is not necessary that the parties’ agreement initially specify the precise steps by which plaintiff’s bonus would be calculated, as that may be set later. The contract/agreement was definite enough without the details and particulars as to how the bonus would be calculated since the parties did in fact agree that a bonus would be paid under certain circumstances.

But, for an agreement to be definite enough to be enforced by a Missouri court, essential terms such as (1) the price or compensation to be paid, and (2) what the other party is to perform or provide in return for that price/compensation, certainly should be clearly stated. Olathe Millwork Company v. Dulin, 189 S.W.3d 199 (Mo. Ct. App. W.D. 2006) (no valid contact to build home due to there being only an estimated purchase price, as well as inaccurate and incomplete specifications of labor and materials to not just reconstruct the owners home after it was destroyed by fire, but rather build a significantly larger house with upgraded materials and components).

Kurt H. King

Law Office of Kurt H. King, 20 E. Franklin, Liberty, Missouri 64068; 816.781.6000

Litigation and General Matters

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