Recent court decisions have provided some important reminders on contract enforceability. An enforceable contract requires an offer, acceptance, and consideration. In this newsletter, we will be discussing the concepts of acceptance and fresh consideration in greater detail.
Legal consideration is something of value being exchanged between the contracting parties. In the case of employment contracts when hiring an employee, consideration is the new employment position. For existing employees, however, continued employment does not constitute consideration. Accordingly, when an employer wants an existing employee to sign a new contract, the employer must provide the employee with fresh consideration for the new employment contract to be enforceable. For example, a promotion with a pay increase will constitute fresh consideration. The Ontario Court of Appeal recently reaffirmed that employment contracts for existing employees require fresh consideration.
In Goberdhan v. Knights of Columbus, 2023 ONCA 32, the employee signed three separate employment contracts with the employer over the course of eight years. When the employee was terminated in 2019, he filed a lawsuit for wrongful dismissal. The employer tried to rely on a provision in the employee’s most recent employment contract, which stated that the matter should proceed through arbitration. However, the employee argued that employer did not provide fresh consideration for the most recent contract, and the contract was void. The trial court found that there was not fresh consideration for the new contract. The Court of Appeal also affirmed that absent fresh consideration, a contract is unenforceable.
While the acceptance piece of a contract enforceability may seem like a straightforward concept, courts are faced with unprecedented contractual disputes with the use of text messaging. In South West Terminal Ltd. v. Achter Land, 2023 SKKB 116, a grain buyer with South West Terminal was interested in purchasing product from a farmer, Chris Achter. The buyer sent a picture of the contract via text message to the seller, asking him to confirm the contract in the message. The seller responded to the text message with a “thumbs-up” emoji, however, he did not deliver the product according to the contract. The parties disputed the enforceability of the contract and whether the “thumbs-up” constituted acceptance of the contract.
The judge ruled, “this court readily acknowledges that a emoji is a non-traditional means to ‘sign’ a document but nevertheless under these circumstances this was a valid way to convey …. a ‘signature.’ As a result, the seller was ordered to pay damages in the amount of $61,442.00 to the buyer. While this case was not an employment contract, the same concept with respect to the acceptance of terms of employment could apply.
These cases offer important lessons regarding employment contracts and their enforceability. If an existing employee is singing a new contract, it is important to consult an employment lawyer to ensure that proper fresh consideration is provided. The lawyers at Heeney Vokey LLP are happy to assist with your employment contract needs.