McIntosh v. Murphy
469 P.2d 177 (1970)
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Rule of Law:
An oral employment contract that would otherwise be unenforceable under the Statute of Frauds may be enforced under the doctrine of equitable estoppel if the employee's substantial reliance on the contract was foreseeable to the employer and injustice can only be avoided by enforcement.
Facts:
- In March 1964, George Murphy, owner of Murphy Motors in Hawaii, interviewed Dick McIntosh in California for a management position.
- On Saturday, April 25, 1964, Murphy telephoned McIntosh in California and offered him a one-year contract as an assistant sales manager in Hawaii, with work to begin on Monday, April 27, 1964.
- McIntosh accepted the offer during the telephone call.
- In reliance on the employment agreement, McIntosh moved some belongings from California to Hawaii, sold other possessions, leased an apartment in Honolulu, and forwent other employment opportunities.
- McIntosh began working for Murphy Motors on Monday, April 27, 1964.
- On July 16, 1964, after approximately two and a half months of employment, Murphy Motors discharged McIntosh.
Procedural Posture:
- Dick McIntosh sued George Murphy and Murphy Motors, Ltd. in a Hawaiian trial court for breach of an oral employment contract.
- At the conclusion of the trial, the defendants moved for a directed verdict, arguing the contract was unenforceable under the Statute of Frauds.
- The trial court denied the motion, ruling as a matter of law that the contract did not fall within the Statute.
- The jury returned a verdict in favor of the plaintiff, McIntosh, awarding him $12,103.40 in damages.
- The defendants, Murphy and Murphy Motors, appealed the judgment to the Supreme Court of Hawaii.
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Issue:
Does the doctrine of equitable estoppel allow for the enforcement of an oral, one-year employment contract that is otherwise unenforceable under the Statute of Frauds, where the employee has substantially and foreseeably relied on the contract to his detriment?
Opinions:
Majority - Levinson, J.
Yes. An oral employment contract for one year is enforceable, despite the Statute of Frauds, when a party has been induced by the other to seriously change his position in reasonable reliance on the contract. The court adopts the flexible approach of the Restatement (Second) of Contracts § 217A, which permits enforcement of an oral promise notwithstanding the Statute of Frauds if the promise induced action or forbearance and injustice can only be avoided by enforcement. The historical purposes of the Statute—to prevent perjury when jury systems were unreliable—are less compelling today. A mechanical application would lead to unconscionable injury here, as McIntosh's action of moving 2,200 miles was substantial, required for the job, and entirely foreseeable by Murphy. Therefore, enforcing the contract is necessary to avoid injustice.
Dissenting - Abe, J.
No. The court should not use its equity powers to circumvent the clear statutory mandate of the Statute of Frauds. The majority's holding begs the question by assuming a one-year contract existed, which is the central fact disputed by the defendant. The Statute of Frauds was enacted precisely to negate claims based on disputed oral agreements. By enforcing the contract based on reliance, the court usurps the legislature's power; if the statute is too harsh, it is the role of the legislature, not the judiciary, to amend it. The trial court's error in ruling that the contract fell outside the statute was prejudicial because the jury should have decided when the contract was formed, which could have rendered it unenforceable.
Analysis:
This decision significantly softens the rigid application of the Statute of Frauds' one-year provision in the context of employment contracts. By formally adopting the reliance-based exception articulated in the Restatement (Second) of Contracts § 217A, the court shifts the focus from technicalities (e.g., how to count the days) to principles of equity and fairness. This creates a powerful tool for employees who detrimentally rely on oral promises of long-term employment, making it more difficult for employers to use the Statute as a shield against liability after inducing an employee to make a substantial change in position, such as relocating.
