Stepp v. Freeman
119 Ohio App. 3d 68, 694 N.E.2d 510 (1997)
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Rule of Law:
A contract implied in fact may be established by the surrounding circumstances and the parties' course of conduct, which can create an enforceable duty to adhere to established customs, such as providing notice before removing a member from a group.
Facts:
- Donald Freeman and Lionel Stepp were members of a 20-person employee lottery pool that had been in existence for over five years.
- The group, managed by Freeman, had unwritten customs: they played when the jackpot reached $8 million, each member contributed $2.20, and Freeman notified members when payment was due, often by walking around with the member list.
- The group's practice was that members were only removed from the pool after a direct conversation with Freeman in which they expressed their intent to leave; no member had ever been unilaterally dropped for non-payment.
- Stepp's regular role within the group was to photocopy the lottery tickets for all members.
- In the week prior to the winning drawing, Freeman and Stepp had a serious work-related disagreement.
- When the lottery jackpot next reached $8 million, Freeman did not approach Stepp for his contribution, nor did he inform Stepp that the group was playing.
- Stepp, unaware the group was playing, did not offer his contribution.
- Freeman told other members that Stepp was out of the group but did not replace him from a waiting list. The group purchased 39 tickets (one more than needed for 19 members), and one of the tickets won the $8 million jackpot.
Procedural Posture:
- Lionel Stepp filed a complaint against Donald Freeman in the trial court, alleging breach of express contract, breach of implied contract, and equitable estoppel.
- The case was referred to a magistrate, who issued a finding in favor of Stepp on the implied contract and equitable estoppel claims.
- Freeman objected to the magistrate's findings.
- The trial court conducted an independent review and rendered a judgment in favor of Stepp on the implied contract and equitable estoppel claims.
- Freeman, as the appellant, filed a timely appeal of the trial court's decision to this Court of Appeals.
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Issue:
Does an implied-in-fact contract exist among members of an informal lottery pool, based on their long-standing customs and past practices, that is breached when the group leader unilaterally excludes a member without providing notice or an opportunity to contribute?
Opinions:
Majority - Frederick N. Young
Yes. An implied-in-fact contract exists where the circumstances surrounding the parties' transactions make it reasonably certain that an agreement was intended. The group's long-standing practices—including the method of notification for payment, the custom of covering for absent members, and the procedure for members leaving the group—created a tacit understanding among its members. Specifically, there was an implied agreement that a member would be informed when their contribution was due and would not be dropped from the group unilaterally without a conversation expressing their desire to leave. Freeman breached this implied contract when he failed to inform Stepp that the group was playing and unilaterally removed him from participation without following the group's established customs.
Analysis:
This case illustrates the principle that legally enforceable contracts can be formed through conduct and custom, even in the absence of a written agreement. The court's decision emphasizes that a consistent course of dealing among parties in an informal group can create binding obligations and expectations. This precedent is significant for disputes arising from informal arrangements, as it establishes that a party cannot unilaterally deviate from established practices to the detriment of another member. Future cases involving informal pools or associations will look to the parties' past conduct to determine their contractual rights and duties.
