Varney v. Ditmars

New York Court of Appeals · 1916 · Contracts

Contractsindefinitenesscertaintyessential termsprofit sharingfair share of profitsexecutory contractquantum meruit

Facts

The plaintiff, an architect and draftsman, was employed by the defendant architect at first for $35 per week and later $40 per week. According to the plaintiff, the defendant told him and another employee that if they continued their work and helped get the office's delayed jobs started, then on the following January 1 the defendant would close his books and give them "a fair share of my profits." The plaintiff continued working, took on drafting responsibility, and worked overtime, Sundays, and holidays, but in November 1911 he was discharged after missing election day work and then became ill for several weeks. He sued to recover wages from November 7 to December 31, 1911, and a fair and reasonable percentage of the defendant's profits from February 1, 1911, to January 1, 1912.

Issue

Was the defendant's promise to give the plaintiff "a fair share of my profits" sufficiently definite to create an enforceable contract for profit-sharing? If not, was the plaintiff nonetheless entitled on this record to recover post-discharge wages at $40 per week through January 1?

Rule

For a contract to be valid, the parties' promise must be certain and explicit enough that their full intention can be ascertained to a reasonable degree of certainty. An executory promise to pay a "fair share" of profits is unenforceable when no particular share, standard, or method of computation is agreed upon; however, where services have been performed in reliance on such an indefinite agreement, recovery may still be had on quantum meruit for the reasonable value of the services actually rendered.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Seattle, Mara Collins worked as a project coordinator for Cedar Loft Interiors at a fixed weekly salary. The owner told her, "Stay through December, help me clean up our backlog, and I'll give you a fair share of the year's profits," but the parties never discussed a percentage, formula, or accounting method.

If Mara sues to enforce the profit-sharing promise after she completes the work, what is the strongest argument against enforcement of that promise as a contract term?

Explanation. The majority rule is that an executory promise to give an employee a "fair share" of profits is unenforceable when the parties never agreed on any definite share, standard, or method of computation. Without an objective way to determine the amount, the parties' intent is left to conjecture. The case does not impose a writing requirement, forbid salary-plus-profit arrangements, or deny consideration categorically.