1. Must an offeree accept an offer by express agreement in order for a legally enforceable contract to be formed?

2. Was the “Interdependency Memo” too indefinite to constitute an offer?

Aon Risk Services, Inc. (ARS Arkansas), and Combined Insurance Companies are subsidiaries of Aon Corporation. The parent corporation issued an “Interdependency Memo” dated February 2000, which encouraged ARS brokerage offices to place insurance business with Aon-affiliated companies. It also set up a bonus pool for revenues generated under the plan, with Combined agreeing to pay “30% of annualized premium on all lie products over 15-year term plus 15% 1 year for all other products.” John Meadors saw the memo in February 2000, and believed it would entitle him to this compensation over and above his employment contract. Meadors put Combined in touch with Dillard’s Department Stores and on March 24, 2000, Dillard’s and Combined executed a five-year agreement whereby Dillard’s employees could purchase life, disability, and other insurance policies through workplace enrollment. When Meadors did not receive bonus-pool money generated by the transaction, he sued his employer for breach of a unilateral contract. The employer’s defense was that the memo was not sufficiently definite to constitute an offer.

JUDICIAL OPINION

VAUGHT, J.… Meadors’s theory at trial was that the Interdependency Memo formed a unilateral contract. There are several instances where unilateral contracts commonly appear, such as where a reward is offered, e.g., Ark. Bankers’ Ass’n v. Ligon 174 Ark. 234, 295 S.W. 4 (1927), where a contest is announced, e.g., Mears v. Nationwide Mut. Ins. Co. 91 F.3d 1118 (8th Cir. 1996), or where changes are made and disseminated in an employee manual. See Crain Indus., Inc. v. Case 305 Ark. 566, 810 S.W.2d 910 (1991). In those situations, the offeree does not accept the offer by express agreement but by his performance. For example, in the case of a reward, the offeree accepts by performing the particular task, such as the capture of a fugitive, for which the reward is offered. Even though he has not directly communicated his acceptance, a contract is formed as the result of his performance. See Ligon, supra (recognizing that a unilateral contract is composed of an offer that invites acceptance in the form of actual performance), 17A AM. JUR. 2D Contracts § 5 (2d ed. 1991) (stating that, if performance occurs, then the offer has been accepted, and a contract is formed). The performance also constitutes consideration for the contract. 17A AM. JUR 2D Contracts § 5.

Definiteness of offer

ARS Arkansas argues first that the interdependency Memo was not sufficiently definite to constitute an offer for a unilateral contract. An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to the bargain is invited and will conclude it. An offer cannot be accepted so as to form a contract unless the terms are reasonably certain. Restatement (Second) of Contracts § 33 (1981). To bind the employer, an offer must be definite in form and must be communicated to the offeree. See Hardie v. Cotter & Co. 849 F.2d 1097 (18th Cir. 1988); Dumas v. Kessler & Maguire Funeral Home, Inc. 380 N. W.2d 544 (Minn. Ct. App. 1986). Whether a proposal is meant to be an offer for a unilateral contract is determined by the outward manifestations of the parties, and not by their subjective intentions. The principle issue is whether the employer’s statements are intended as an offer and accepted as such or are merely statements of policy and practice. id.… …………………………………….