Appeal from the Judgment entered May 13, 1986 in the Court of Common Pleas of Allegheny County Civil Division, No. GD83-13826.
Gary M. Davis, Pittsburgh, for appellant.
Robert J. Marino, Pittsburgh, for appellee.
Cirillo, President Judge, Rowley and Popovich, JJ. Popovich, J., concurs in result.
[ 363 Pa. Super. Page 538]
This is an appeal from a grant of summary judgment by the Court of Common Pleas of Allegheny County. We reverse and remand.
Appellant, William Greene began working for Grant Building, Inc. in 1959. Greene allegedly agreed to work at a pay rate below union scale in exchange for a promise that Grant would employ him "for life". In 1975, appellee Oliver Realty, Inc. took over management of Grant Building but Oliver's president assured former Grant employees that existing employment contracts would be honored. During that same year Greene explained the terms of his agreement to an Oliver Realty supervisor. The supervisor stated that he would look into the matter but never got back to Greene. The trial court found that Oliver had impliedly adopted the oral contract between Greene and Grant Building. In 1983, Greene was laid off and he brought this action for breach of contract. The trial court ruled that under Pennsylvania law a contract "for life" is a contract at will. The court also held that a contract at will may become a contract for a reasonable time if it is supported by sufficient additional consideration other than the employee's services. The court stated that there was no such consideration in this case. It found that Greene worked for subunion wages in order to avoid layoff not in exchange for lifetime employment. It also held that even if sufficient additional consideration was present, the period of 1975 to 1982 constituted a reasonable time. Therefore, there was no breach of the contract and the court granted Oliver's motion for summary judgment.
Appellant presents three issues for our review: (1) whether the issue of sufficient additional consideration should go to the jury; (2) whether the issue of "reasonable" period of time should go to the jury; and (3) whether Greene is entitled to reach the jury on the issue of equitable estoppel. Because of our disposition of this matter it is unnecessary for us to consider these issues separately.
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Contemporary contract law generally provides that a contract is enforceable when the parties reach mutual agreement, exchange consideration and have outlined the terms of their bargain with sufficient clarity. See Com. Dept. of Transp. v. First Penna. Bank, 77 Pa. Commw. 551, 466 A.2d 753 (1983). An agreement is sufficiently definite if the parties intended to make a contract and there is a reasonably certain basis upon which a court can provide an appropriate remedy. See Linnet v. Hitchcock, 324 Pa. Super. 209, 214, 471 A.2d 537, 540 (1984).
If an essential term is left out of the agreement, the law will not invalidate the contract but will include a reasonable term. For instance, if the parties do not specify price, a court will impose a reasonable price which will usually be the item's market value. See Murray, Murray on Contracts 48 (1974). See also Kuss Mach. Tool & Die Co. v. El-Tronics Inc., 393 Pa. 353, 143 A.2d 38 (1958). However, if the parties include the term but have expressed their intention ambiguously, the court will not impose a reasonable term and the contract may fail for indefiniteness. Id. 143 A.2d at 40. A court will not attempt to fix contractual terms which are inconsistent with the intent of the parties. That is because the paramount goal of contractual interpretation is to ascertain and give effect to the intent of the parties. See Burns Mfg. Co., Inc. v. Boehm, 467 Pa. 307, 313, 356 A.2d 763, 766 (1976). When the language of a written contract is clear and unequivocal, its meaning must be determined by its contents alone. Mears, Inc. v. National Basic Sensors, 337 Pa. Super. 284, 289, 486 A.2d 1335, 1338 (1984). Only if the words used are ambiguous may a court examine the surrounding circumstances to ascertain the intent of the parties. Kennedy v. Erkman, 389 Pa. 651, 655, 133 A.2d 550, 552 (1957). However, in cases involving oral contracts the complete agreement is not recorded. Therefore, in that situation, courts must always examine the surrounding circumstances to determine the parties intent. Westinghouse Elec. Co. v. Murphy, Inc., 425 Pa. 166, 171-72, 228 A.2d 656, 659 (1967). Because
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courts wish to effectuate the parties intentions, they may enforce an indefinite contract if its terms have become definite as the result of partial performance. One or both parties may perform in such a way as to make definite that which was previously unclear. Murray, Contracts at 51-52. See also Com. Dept. of Transp. v. Mosites Const. Co., 90 Pa. Commw. 33, 494 A.2d 41 (1985).
Traditional contract law distinguished between contracts involving two promises which were called bilateral and contracts involving only one promise which were called unilateral. Murray, Contracts at 9. A bilateral contract is created when one party promises to do or forbear from doing something in exchange for the other party's promise to do or forbear from doing something else. In a unilateral contract there is only one promise. It is formed when one party makes a promise in exchange for the other person's act or performance. Id. at 10. Mutuality of obligation means that both parties are under an obligation to perform their promises. It is often stated that a contract is unenforceable if there is no such mutuality but this principle is inapplicable to unilateral contracts. See Darlington v. General Elec., 350 Pa. Super. 183, 203, 205, 504 A.2d 306, 316, 317 (1986). If A promises B $100 if B walks across the Brooklyn Bridge, a unilateral contract will be formed if B does as A requests. It is a unilateral contract because it consists of a promise in exchange for a performance. However, the contract is not formed until B walks across the bridge. At that time, A owes B $100 even though B no longer has any obligation to A. A unilateral contract is formed by the very act which constitutes the offeree's performance. Therefore, mutuality of obligation will never exist in such a situation. By the time the contract is formed, only the offeror will remain obligated. The offeree will already have performed. This is why the Restatement provides that: "If the requirement of consideration is met, there is no additional requirement of . . . (c) 'mutuality of obligation.'" Restatement of Contracts (Second) § 79 (1981).
[ 363 Pa. Super. Page 541]
The other problem with mutuality of obligation is that the doctrine is often confused and misinterpreted even in cases concerning bilateral contracts. Courts sometimes refuse to enforce a single promise made in exchange for several promises. See Perritt, Employee Dismissal Law and Practice, 47 (1984). They require that each promise must be supported by a separate consideration. This is usually done in the name of mutuality of obligation. However, if person A promises to do something in exchange for person B's promise to do three things, there is mutuality of obligation. A is obligated to do as he promised, as is B, though B's obligation entails three promises. Both parties are obligated, so mutuality of obligation is present. However, B's obligation appears greater than A's. Courts sometimes decline to force B to perform because of this difference in obligation. These courts are implicitly requiring that both parties to a contract must have concurrent or equivalent obligations. If one party is "more" obligated than another, the contract fails. This result is incorrect because consideration may be any bargained for exchange. Com. Dept. of Transp. v. First National Bank, N.A., 77 Pa. Commw. 551, 466 A.2d 753 (1983). If B desired A's promise sufficiently to make three promises of his own, there is no reason why the law should not enforce the arrangement. As in any other contract, each party bargained for what he wanted. Modern contract law recognizes that, "If the requirement of consideration is met, there is no additional requirement of . . . (b) equivalence in the values exchanged . . . ." Restatement of Contracts (Second) § 79 (1981). It then follows logically that, "[s]ince consideration is not required to be adequate in value (see § 79), two or more promises may be binding even though made for the price of one." Id. at § 80 comment a. See Thomas v. Thomas Flexible Coupling Co., 353 Pa. 591, 598, 46 A.2d 212, 216 (1946). Those courts which invalidated agreements like the one described above did so in the name of mutuality of obligation. But, as noted above, mutuality of obligation is present in this type of situation and equivalency of obligation is not required in contract
[ 363 Pa. Super. Page 542]
law. See Restatement § 79. Therefore, modern contract law recognizes such agreements as valid and enforceable.
However, there is one area of contract law which is strikingly idiosyncratic. That is the law of employment contracts. It has developed contrary to all of the standard, modern contract principles discussed above. If the parties to an employment contract do not specify the duration of the contract, a court will not imply a reasonable duration. The contract is considered terminable at will. If the parties contract for "lifetime" employment, many courts will refuse to enforce their bargain even if their intentions are clear. Even if the agreement is oral, courts refuse to consider the surrounding circumstances. Though mutuality of obligation is a discredited notion, it is often required in the employment context, even when the employment agreement is a unilateral contract. Also, courts routinely refuse to enforce employment contracts if they entail a single promise made in exchange for several promises. In reaching these results, courts rely on anachronistic theories which they would never apply in other fields of contract law. The strong resistance of employment law to modern contract doctrine is a testament to the influence of a uniquely American legal tradition: the at-will presumption.
A thorough analysis of this area of law demonstrates the continuing importance of this presumption. It is far from the antiquated and outmoded principle that its critics claim. The presumption is attacked because its theoretical underpinnings are inadequately understood. The same is true of our court system's reluctance to enforce lifetime employment agreements. The reasons given for this reluctance are so obviously insufficient that observers have concluded that there are no good reasons for the policy and such contracts should be readily enforceable. We agree that current rules of construction are too artificial. However, we also believe that there are good reasons why courts should be very careful before they enforce a lifetime employment contract.
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Despite the principle of contractual interpretation that courts must ascertain and give effect to the parties' intent, employment law creates a presumption which may be contrary to that intent. An employment agreement is presumptively terminable at will by either party. The employee may leave the job for any or no reason or the employer may terminate the employee for any cause or no cause. Darlington v. General Elec., 350 Pa. Super. 183, 188, 504 A.2d 306, 309 (1986). The party claiming that an agreement is for a definite period has the burden of proving that fact. Geary v. United States Steel Corp., 456 Pa. 171, 175, 319 A.2d 174, 176 (1974). This requirement is satisfied by clear proof that the parties contracted for a specific duration. See Maloney v. Madrid Motor Corp., 385 Pa. 224, 228-29, 122 A.2d 694, 696 (1956). When it is proven that the contract specified a definite period, the employee may not be terminated during that period unless the employer has "just cause". Darlington, 350 Pa. Super. at 204, 504 A.2d at 316. However, the presumption is strong enough that it usually is not rebutted by an agreement which specifies that it is for "permanent" or "lifetime" employment. For various reasons, the intent of the parties is often ignored in such a situation in deference to the at-will presumption. But, if such contracts was enforceable, the employee could not be terminated without cause.
A presumption is a procedural device which shifts the burden of persuasion. Bixler v. Hoverter, 89 Pa. Commw. 88, 91, 491 A.2d 958, 959, (1985). A presumption of law compels the fact finder to reach a particular conclusion in the absence of evidence to the contrary. Stine v. Borst, 205 Pa. Super. 46, 53, 205 A.2d 650, 654, (1964). Presumptions arise over the course of time through experience and common observation. When experience shows that a connection exists between things so that one usually follows the other, this connection may become the foundation for a legal presumption. Watkins v. Prudential Ins. Co., 315 Pa. 497, 504, 173 A. 644 (1934). A legal
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presumption may also be based upon procedural expediency or public policy. See Chadbourn & Wigmore, Wigmore on Evidence 287-91 (1981).
The at-will presumption is based on an uneasy marriage of procedure, policy and experience. Our review of the relevant cases and literature reveals that there are five policies underlying the presumption: (1) The policy of freedom of contract; (2) the need for mutuality of obligation; (3) common experience that it usually effectuates the intent of the parties; (4) as ...