Question
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,
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 Inter-dependency 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....
ARS ... relies heavily on Martens v. Minnesota Minning & Manufacturing Co. 616 N.W. 2d 732 (Minn. 2000), but it is distinguishable. There, the Minnesota court held that a brochure touting equal compensation for technical and administrative employees was too indefinite to constitute an offer. The court noted that there was no suggestion that an individual would be entitled to specific pay, benefit level, or condition of employment, nor were there any criteria to determine when the rights to any benefits had been breached. Further, the prerogative to make decisions as to individual employee promotions, salaries, and so forth was clearly reserved to management based on an evaluation of the individual. By contrast, the interdependency Memo in this case does not merely set out general goals and philosophies of compensation. It sets out specific percentages of premiums that will go into the bonus pool as part of an "enhanced compensation structure." And, while no employee is entitled to a "formulaic" bonus and Managing Directors may decide how to allocate the bonus pool among their employees, their discretion is not unfettered. For example, managers cannot withhold payment of the pool amount; the Memo provides that the entire pool must be distributed annually. Thus, the mere
inclusion of possible judgment calls by management as to the manner of distribution among its employees does not, under these circumstances, render the Memo too indefinite to operate as an offer for a unilateral contract....
CONCLUSION
We affirm the jury's verdict for breach of a unilateral contract against ARS Arkansas and reinstate Meador's damages of $2,406,522.60 pertaining to the Dillard's transaction....
Must an offeree accept an offer by express agreement in order for a legally enforceable contract to be formed?
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