Case 2: The White Arch Casino

Case Description

The case involved Enoch Thompson, a poker dealer at White Arch Casino, that is part of divisional companies for Colossal Corporations in the entertainment industry. To prevent Enoch Thompson from taking a position at a rival casino, WAC’s Manager, Sal Pending made a promise to him that should he stay he would be promoted in the following year and get a 50% pay increase and a five-year contract. This offer prompted Enoch to stay. However, Enoch was later dismissed as a result of corporate downsizing. The concern at hand is that Thompson might try to hold to the promise made to him. Would this promise be legally enforced?

Contract as a Promise

The contract offered by Pending to Thompson is enforceable. It contains the elements of an enforceable contract that include an offer, acceptance, legal capacity to contract, lawful subject matter, consideration, and mutual agreement. In this case, Pending made an offer to Thompson for him to remain as a poker manager at White Arc Casino and he would be promoted the following and get a pay rise. Thompson accepted the offer and rejected the job he had given at a rival casino as he chose to remain at White Arc Casino. Both parties have a legal capacity to enter in a binding contract where Pending was acting as an agent for WAC thus any contracts he entered into would be binding to WAC. The subject matter was a lawful matter as it involved employment contracts. In return for his continued service as WAC, the consideration promised was a a five-year contract and doubling of the salary in one year’s time. None of the two parties had entered into the agreement with coercion. As the contract satisfied these elements, it is thereby enforceable to White Arc Casino.

The oral nature of the contract makes it subject to a Statute of Frauds where White Arch Casino might use this as a defense. The Statute of Frauds provides that an oral contract is incapable to be performed within a year. However, in this case, the contract was entered into nine months before, which implies that White Arch Casino cannot use this as a defense.

To determine whether Thompson can legally enforce Pending’s Promise, it will be important to consider whether the promise amounted to a contract that would be biding to the White Arc Casino. A promise is referred to as a communication of an intention to undertake or assume an obligation. A contract itself is a promise made in a way that it satisfies the requirements of law to make it legally binding (Valente, 2010). To determine whether Pending’s promise can be enforced, it is important to consider whether it created a legal obligation or a moral obligation. In this case, the promise made by Pending had the following conditions. Mutual consent where the parties agreed on the desired course of action, consideration as Thompson was promised a promotion, a salary increase and a five-year contract, and both parties had the intention of accomplishing their part. Using these conditions, the promise given by Pending to Thompson can be enforced. Under the law of agency, Pending was acting on behalf of the White Arc Casino. The relationship in this case was established through employment contract where as the manager, his decision would have legal implications to the White Arch Casino

Theories by Thompson to Enforce Pending’s Promise

The Theory of Promissory estoppel

In this case, Thompson, may seek to use the theory of Promissory estoppel. This is a legal promise that is enforceable by law despite the promise having been made without formal consideration. This is used when a promisor makes a promise to a promisee who then uses this to make subsequent decisions that later put him at a disadvantage. In this scenario, Thompson relied on the promise by Pending and rejected an offer for a job at another Casino where he had been offered an increment on the salary. Thompson lost the opportunity to accept the offer only to later lose his job at White Arch Casino.

The application of the promissory estoppel in this case is meant to limit the promisor from raising an argument that the promise made should not be legally upheld. The successful application of this theory requires the fulfillment of the following three things:

• A promisor
• A promise
• A detriment that promisee has suffered.

The situation at hand, satisfied the above conditions and thus Thompson will be justified to rely on the promissory estoppel principle in an attempt to enforce the promise made by Pending.

Bargaining Theory

This theory is at the center of the law of contract as it tackles the issue of consideration, which is a component of a legally binding contract. This theory indicates that any promise that is bargained in exchange for a promise is a consideration of a promise (Kessler, Gilmore, & Kronman, 2014). In the scenario, Pending made a promise in the process of bargaining with Thompson. This implies that using this theory, Thompson can establish that the promises given to him were the consideration of the contract promised thereby justifying his case for making the promise legally binding.

Damages for the Breach of Contract

In a situation where Thompson files a lawsuit and wins, Colossal will be required to pay for damages and offer other remedies as may be applicable in the scenario. One of the damages that the organization may be required to make may be based on the three-damage interest. The first damage is based on the expectation that aims to put the promised person in the position he would be in had the contract been upheld. This measures the actual wealth that the promisee would have acquired. In our case, the wealth would be the salary he would be receiving, which can be described as compensatory damage. The second way of measuring damage is based on reliance which takes into account the losses incurred due to the expectation. This aims at returning the promisee in a position he would be at, had the contract never been made. In this case, this denotes the salary that Thompson had been offered at the rival Casino. This will be awarded under consequential or special conditions. The special conditions in this is that had Thompson failed to take up the offer by WAC, he would have joined the rival casino and start earning his salary immediately. The third damage is on restitution that is based on down payment and deposit which puts the promisor back in the position that he would have been had the promise been made. In this case, it means that the White Arch Casino would lack the services of Thompson, who had a reputation as a skillful high-stakes poker dealer who was favorite among top poker players. This will be paid under the punitive damages that would be aimed at punishing the White Arch Casino for the breach of contract.

Another remedy that may be charged in this case would be remoteness or foreseeability of harm. The promisor is only held liable for damage that could be foreseen or which could be reasonably anticipated by both parties when the agreement was made. Such being the case at Worth Arch Casino, the foreseeable loss was the salary that Thompson had been promised at the other Casino.

Another likely remedy that the court may issue is on specific performance. A specific performance is a court order that prompts for a certain enactment, as stated in the contract (Shavell 2005). This is regarded as an equitable remedy and an alternative to awarding damages. This remedy is common in situations where the settlement of damages would not be sufficient and to protect the blameless party in the contract. In this instance, the specific performance would require that Thompson be re-hired and that after the time that had been earlier agreed, he gets the promotion, a salary increment, and an extension of contract for five years as agreed.

Recommendations

These issues introduce not just a legal issue but an ethical issue as well. Using the utilitarian approach indicates that the best decision is the one that produces the greatest good and does least harm. In this case, maintaining Thompson at his position would have produced the greatest good. Under the rights approach, the best ethical action is one that ensures protection and respect to the moral rights of those affected. This would have required WAC to treat Thompsons as a human being and honor the contract rather than a mere means of achieving their targets. Applying the fairness or justice approach indicates the need to treat all people equally and fairly based on a set of standards. In this scenario, the contract between Thompsons and Pending should be upheld since it was prompted by his good performance. The virtual ethical approach indicates that virtues are dispositions and habits that help people act in a manner that reflects their highest potential of character. WAC’s management should use the virtue of honesty, integrity, and fairness to honor its commitment.

It presents the issue of trust and loyalty between the management and the employees. Thompson had consulted his colleagues about the job offer he had received. This implies that they know why he rejected the offer and stayed at White Arch Casino, only for him to be fired a week later. This may make the remaining employees uncertain of their job security which might affect their motivation thereby affecting the sales at the Casino. Therefore, this sensitive issue requires careful handling.

It appears that the promise made to Thompson by Pending was an oral contract and therefore legally enforceable. The promise had all the elements of a contract including, an offeror, offeree, an offer, and a consideration. Failure to enforce it might expose the company to risk of litigations leading to more expensive damages being charged for remedying. It would, therefore, be wise for Colossal Corporation to find ways of settling it.

Having made such as promise to Thompson, it was only morally right to enforce it. This is exemplified because Thompson missed an opportunity that would have assured him of work as he based his decision on the premises of the promise made. Downsizing Thompson in this case was not right. This can only be viewed as a use of principle of employment at will where the employer is allowed to terminate the employment of an employee without notice or sufficient reason. Thompson had proved to be an industrious and high-stakes poker dealer whom even top pokers requested for. It is untrue that he did not make an impact in the organization. Even the employment at will have its exceptions and the one on employee would actually prevent White Arch Casino from firing Thompson. Concerning whether Pending had the authority to make such promises, I would use the agency law to indicate that as the manager, he was acting on behalf of White Arch Casino under the agency-principal relationship.

References

Kessler, Gilmore, & Kronman. (2014). The Bargain Theory of Contracts and the Reliance Principle. Harvard Law.

Shavell, S. (2005). Specific performance versus damages for breach of contract: An economic analysis. Tex. L. Rev., 84, 831.

Valente, D. (2010). Enforcing Promises: Consideration and Intention in the Law of Contract. University of Otago.