Varney v. Ditmars
111 N.E. 822 (1916)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
For a contract to be valid, the agreement must be definite and explicit enough for the parties' full intention to be ascertained with reasonable certainty. A promise to pay 'a fair share of profits' is too vague, indefinite, and uncertain to be enforceable.
Facts:
- Varney, an architect and draftsman, was employed by Ditmars, an architect.
- To induce Varney to decline another job offer and remain in his employ, Ditmars told Varney he would offer him 'a better future than anybody else.'
- On February 1, 1911, Ditmars promised Varney and another designer a $5 per week raise and stated, 'on the first of next January I will close my books and give you a fair share of my profits.'
- Varney accepted the raise, continued working, and performed extra work on nights, Sundays, and holidays to complete important projects.
- On November 11, 1911, Ditmars fired Varney via letter, citing 'extreme disloyalty and insubordination' for Varney's failure to work on Election Day.
- After recovering from an illness, Varney offered to return to work, but Ditmars refused and denied the existence of any profit-sharing agreement.
Procedural Posture:
- Varney (plaintiff) sued Ditmars (defendant) in a New York trial court, seeking damages for wrongful discharge and breach of an employment contract.
- At the trial, after the plaintiff presented his case, the trial court granted the defendant's motion to dismiss the complaint.
- Varney (appellant) appealed the dismissal to the New York Court of Appeals, the state's highest court.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does an employer's promise to pay an employee 'a fair share of my profits' create a definite and enforceable contract?
Opinions:
Majority - Chase, J.
No. An employer's promise to pay an employee 'a fair share of my profits' does not create a definite and enforceable contract. The court reasoned that the term 'fair share' is too vague and indefinite because the minds of the parties never met on any particular share or on a method to compute it. Unlike a promise to pay a 'fair price' for goods, which can often be determined by market value, a 'fair share of profits' is pure conjecture and is affected by too many uncertain factors. Because the promise lacks certainty on an essential term (compensation), the agreement was never consummated and is therefore unenforceable as an executory contract.
Dissenting - Cardozo, J.
No, but for different reasons. While the plaintiff failed to prove damages, a promise to pay an employee 'a fair share of the profits' is not necessarily too vague to be enforced as a matter of law. The dissent argued that the plaintiff's failure was one of proof, not a fatal defect in the contract itself; he could have potentially supplied evidence, such as industry custom, to give the term 'fair share' a definite meaning. Furthermore, the dissent contended that the employment agreement plainly implied a term lasting until the end of the year, and Varney should have been entitled to recover his lost salary for the unexpired portion of the term after being discharged without cause.
Analysis:
This decision reinforces the common law principle that contractual terms, particularly those relating to compensation, must be definite to be enforceable. It establishes that vague, subjective promises like 'a fair share' are considered agreements to agree rather than binding contracts, placing the burden on employees to secure specific terms for bonuses or profit-sharing. The case distinguishes between indefinite terms for services, which courts are reluctant to enforce, and indefinite price terms for goods, where 'market value' can often provide a reasonable basis for enforcement. However, the opinion notes that a party who has already performed under such a vague agreement may still have a remedy in quantum meruit for the reasonable value of the services rendered.
Unlock the full brief for Varney v. Ditmars