Legal Theories
Mark could sue Turnip Plaza Hotel for breach of contract. Arguing for a breach of contract requires Mark to establish the existence of a valid contract between him and Turnip Plaza. Establishing a valid contract requires an offer, acceptance, consideration, and legality (University of Maryland Global Campus, n.d.-c). The manager, Edward, made an offer by promising Mark a promotion with a 50 percent raise and a guaranteed contract for a two-year term. Mark accepted this offer by turning down Stacey’s promise. Under contract theory, acceptance must meet specific standards depending on the nature of the contract (University of Maryland Global Campus, n.d.-c). The Mirror-Image Rule of acceptance applies to Mark’s case as the contract is not for the sale of goods.
The Mirror-Image Rule states that acceptance must mirror the original offer made by the offerer. Acceptance with additional terms does not meet this rule but constitutes a counteroffer. The facts of the case suggest that Mark accepted Edward’s offer without a counteroffer, indicating the intention of both parties to be legally bound by the terms of the agreement. The contract also met the element of consideration because it entailed exchanging something of value. Legally acceptable types of consideration include agreement to refrain, agreement not to sue, and prior consideration (University of Maryland Global Campus, n.d.-c). Mark agreed to refrain from taking Stacey’s offer and stayed with Turnip Plaza instead, which may constitute a consideration. Lastly, the contract met the legality element as both parties were mentally competent adults.
A breach of contract claim can be filed for both written and oral contracts. However, many jurisdictions, including Michigan, have statutes requiring certain contracts to be in writing to prevent fraud. Valid contracts that must be in writing include those involving the sale of an interest in land, a promise to pay another person’s debt, actions that cannot be completed within one year, and the sale of goods worth $500 or more (University of Maryland Global Campus, n.d.-c). Edward’s promise to Mark was to be fulfilled within a month; hence, the oral contract is valid and legally enforceable under Michigan law. Actions to be completed within one month of Edward’s promise were a promotion, a 50% salary increment, and issuance of a 2-year job contract. Thus, Mark can pursue a breach of contract claim in a court of law, seeking compensation for damages caused.
Mark might also enforce Edward’s promise using the promissory estoppel theory. Promissory estoppel is a legal doctrine that applies when the plaintiff relied on the defendant’s promise to their detriment (University of Maryland Global Campus, n.d.-c). For the promissory estoppel argument to succeed, Mark must prove that he reasonably believed and relied on Edward’s promise to his detriment. Mark could argue that he turned down Stacey’s lucrative offer in reliance on Edwards’s promise of a promotion, salary increment, and a guaranteed 2-year job contract, and therefore, Turnip Plaza should be stopped from reneging on the promise. The manager, Edward, knew of Stacey’s lucrative offer to Mark. The manager then made a promise countering Stacey’s offer and knew that Mark would rely on it. Mark relied on the promise to his detriment as he rejected Stacey’s offer and was dismissed before he could receive his new contract.
Mark will likely use the principal-agent relationship between Turnip Plaza and the manager, Edward, to reinforce his promissory estoppel claim by proving he reasonably relied on Edward’s promise. Mark could argue that he reasonably relied on Edward’s promise to his detriment because the manager had the authority to make it. Edward is a general agent of Turnip Plaza because he serves as its manager (University of Maryland Global Campus, n.d.-a). Mark could argue that Edward, being Turnip Plaza Hotel’s manager, had the apparent authority to make the promise on behalf of his employer. Mark could also use Edward’s past actions, customs, or traditions regarding salary increments, promotions, and employment contracts to establish authority. If it was customary for Edward and other Colossal Corporation managers to make promises regarding salary increments, job promotion, and employment contracts, Mark could argue that Edward had the authority to make the promise and that Turnip Plaza was liable for the detriment caused.
Damages or Remedies that Mark Might be Entitled to if He Files and Wins a Lawsuit
Compensatory Damages
Mark may be awarded compensatory damages by the court to cover damages caused by Turnip Plaza Hotel’s failure to honor Edward’s promise. Compensatory damages are monetary and are calculated based on the value of damages, losses, or injuries incurred by the plaintiff due to the contract breach (University of Maryland Global Campus, n.d.-b). Compensatory damages that might be awarded to Mark include the difference between Mark’s actual compensation and what he could have earned under the promised 50% salary increment and promotion for the next two years.
Punitive Damages
The court might award punitive damages in addition to compensatory damages if Mark proves Colossal Corporation acted recklessly or maliciously. The timing of the dismissal provides grounds for Mark to argue for malicious behavior or recklessness. Mark was dismissed just a week before he could receive his new contract. He could also argue that the hotel withheld information about the upcoming structuring, resulting in him accepting Edward’s offer to his detriment.
Consequential Damages
Mark might also seek consequential damages by arguing that the manager, Edward, knew the consequences of not honoring his promise of salary increment, promotion, and guaranteed 2-year contract. Edward knew that a rival company, Huron Overnight Inn, had offered Mark a lucrative position. Mark would not have been unemployed if he had accepted the rival’s offer. Mark can argue that if he had resigned before the hotel decided to fire him, had he been informed about the upcoming corporate restructuring, or had been dismissed before his agreement with Edward, he would have accepted Stacey’s offer and continued his employment. The consequential damage could be the difference between the salary Huron Overnight Inn promised mark and what Turnip Plaza paid him.
Specific Performance
Mark might also be entitled to a specific performance remedy, especially if he wins the lawsuit using the promissory estoppel theory. Specific performance is a type of equitable remedy where the court compels the respondent to perform the actions specified in the contract (University of Maryland Global Campus, n.d.-b). In this case, Mark might file a lawsuit forcing Colossal Corporation to reinstate him and honor Edward’s promise. A specific performance remedy would compel Colossal Corporation to reinstate Mark and provide him with the promised salary increment, promotion, and guaranteed 2-year contract.
Ethical Implications
Turnip Plaza had the ethical responsibility to fulfill Edward’s promise to Mark under the ethical theories and principles of utility, deontology, and virtue ethics. According to deontology or Kantian ethics, we have the ethical responsibility to act in a manner that demonstrates respect for inherent human dignity, autonomy, and value (University of Maryland Global Campus, n.d.-d). Therefore, fulfilling promises is an ethical obligation that demonstrates respect for individuals. Failing to fulfill Edward’s promise to Mark and instead terminating his employment would suggest that the Turnip Plaza has little respect for its employees’ autonomy and dignity and only use them as a means to an end. Mark’s high adventure kayaking tours brought in significant revenue for the hotel; hence, the decision to terminate him contrary to Edward’s promise reinforces the idea that Turnip Plaza only uses its employees as a means to an end. The company’s failure to notify Mark about corporate concerns about high-adventure tours, the upcoming restructuring, and potential layoff also suggests the company has little regard for the well-being of its employees. From a deontological viewpoint, Turnip Plaza has an ethical obligation to fulfill the promise made to Mark as a show of individual respect regardless of convenience or cost to the organization.
Similarly, the concept of virtue ethics emphasizes the need for Turnip Plaza to act with honesty, integrity, fairness, and compassion. Fulfilling the promise made to Mark would communicate Turnip Plaza’s commitment to the virtues of honesty and integrity. Honoring the promise would also influence perceptions that Turnip Plaza is a reliable and trustworthy employer. Conversely, not fulfilling the promise made to Mark would create distrust in the workplace, which can lower employee morale and productivity. Laying off Mark was not a virtuous decision. The decision implied that Turnip Plaza was not compassionate, considering the facts of the case. Mark was a decorated employee who significantly contributed to the company’s financial success. Terminating his employment just a week before he could receive his new 2-year contract as promised was morally wrong. Other employees and external stakeholders might interpret the termination as Turnip Plaza’s way of distancing itself from Edward’s promise to Mark. Such negative perceptions can be damaging to Turnip Plaza’s reputation.
In line with the utilitarian theory of ethics, employers have an ethical responsibility to consider the consequences of their actions. According to utilitarianism, justifiable actions are those that maximize happiness, pleasure, or wealth (University of Maryland Global Campus, n.d.-d). Considering Mark’s contributions to Turnip Plaza, fulfilling Martin’s promise would maximize his happiness and fulfillment. Although the company had the right to lay off Mark, and it did so after deciding his high adventure tours were risky, Turnip Plaza had an ethical obligation to consider the consequences of the decision on Mark. The timing of the layoff, just weeks after Mark was promised a raise, promotion, and two-year contract, makes it unfair. Moreover, fulfilling Martin’s promise to Mark could have fostered a work environment where employees feel valued and respected. Mark’s unexpected termination just weeks after he was promised a raise, promotion, and a 2-year contract could result in resentment, feelings of betrayal, and decreased trust among employees. This could harm the overall workplace morale and productivity.
Recommendations
From an ethical perspective, Turnip Plaza should apologize to Mark and clarify if any miscommunication could have resulted in the unexpected termination. It is possible the manager, Martin, did not have timely or accurate information about the upcoming corporate restructuring, resulting in him making promises that could not be reasonably fulfilled. It is also ethically sound for the management to sit with Mark and agree on a just compensation, considering Martin’s promise and Mark’s contributions to the company. The management should communicate honestly, clarifying that reinstatement and honoring Martin’s promise is impractical due to corporate restructuring, and agree with Mark on alternative compensation options. In addition to compensation, Turnip Plaza should offer Mark assistance in finding a new employer if the position at Huron Overnight Inn is no longer available. Offering assistance would demonstrate Turnip Plaza’s compassion and commitment to employee well-being.
References
University of Maryland Global Campus. (n.d.-a). Agency and liability. Retrieved January 28, 2024, from https://leocontent.umgc.edu/content/scor/uncurated/mba/2218-mba630/learning-resourcelist1/agency-and-liability.html?ou=1202138
University of Maryland Global Campus. (n.d.-b). Breach of contract. Retrieved January 28, 2024, from https://leocontent.umgc.edu/content/scor/uncurated/mba/2218-mba630/learning-resourcelist1/breach-of-contract.html?ou=1202138
University of Maryland Global Campus. (n.d.-c). Contract law. Retrieved January 28, 2024, from https://leocontent.umgc.edu/content/scor/uncurated/mba/2218-mba630/learning-resourcelist1/contract-law.html?ou=1202138
University of Maryland Global Campus. (n.d.-d). Ethical business decision making. Retrieved January 28, 2024, from https://leocontent.umgc.edu/content/scor/uncurated/mba/2218-mba630/learning-topic-list/ethical-businessdecisionmaking.html?ou=1202138
Colossal’s International Legal Challenges
Question 3: Colossal management also needs to know whether arbitration is a good idea for a dispute resolution provision for both domestic and international contracts and why.
Including arbitration clauses in both domestic and international contracts is a good idea as it offers several benefits. Firstly, arbitration is more flexible than civil litigation. Conflicting parties in an arbitration agreement can flexibly set their procedural rules and the location of the hearing (University of Maryland Global Campus, n.d.-a). They can also agree on hearing extensions without being limited to the rules of the courts. Arbitration’s flexibility is particularly vital for international contracts where conflicting parties are from different cultural and legal backgrounds.
Compared to civil litigation, arbitration levels the playing field and creates perceptions of objectivity and stability through the use of neutral expert arbitrators. All conflicting parties have a say on the choice of arbitrators selected to settle the legal dispute. The freedom to choose arbitrators helps to ensure that the selected third parties are experts in the subject matter of the legal dispute (University of Maryland Global Campus, n.d.-a). The ability to appoint neutral expert arbitrators increases objectivity of the final resolution than in civil litigation where biased judges or jurors may be used. This is specifically important in international business contracts where one party has a ‘home advantage’ stemming from familiarity with local legal system.
Additional benefits of arbitration over civil litigation include increased privacy, efficiency, and global enforceability. Unlike civil litigation, the arbitration process is private, which may be beneficial if either party has concerns over reputational risk (University of Maryland Global Campus, n.d.-a). The arbitration process is also efficient due to increased flexibility and limited grounds for appeal. Another critical benefit of arbitration in international contracts is global enforceability. It easier to get recognition and enforcement for arbitration awards in nearly every country than domestic court judgments due to existence of the Convention on the Enforcement of Arbitral Awards or the New York Convention (University of Maryland Global Campus, n.d.-b). Countries that have signed the New York Convention are required to enforce arbitral awards.
Question 4: The parent company, Colossal Corporation, has been sued in the country of Notso in South America. The lawsuit claims millions of dollars in damages due to supposed pollution at a mine that Colossal owned there. Since Colossal has already decided to exit that country and sold the mine there, the company’s regional VP believes there is no risk if the company is taken to court in Notso. He says that even if Colossal loses there and a court judgment is rendered against it, there is no danger because the company will have left the country. The VP needs to know if he is right.
Although Colossal Corporation has exited Notso, the company is facing significant legal risks when jurisdiction principles are taken into consideration. Under US law, general jurisdiction lies in the location where the company is incorporated or the primary place of business (University of Maryland Global Campus, n.d.-c). Thus, Notso has no general jurisdiction over Colossal Corporation and its corporate members such as directors since the company is incorporated in the US. However, it is widely recognized that courts only require specific jurisdiction, which arises from the defendant’s connections with the territory where the harm or damage is alleged (University of Maryland Global Campus, n.d.-c). The fact that Colossal Corporation conducted business activities in Notso is sufficient to establish specific jurisdiction even if the company has exited the country. This means that Colossal Corporation is subject to lawsuit where the claimed damage occurred even though Notso lacks general jurisdiction.
The fact that Colossal Corporation has exited Notso does not necessarily mean that judgments rendered by Notso courts cannot be enforced against it in the US. Contrary to other nations, the US is usually willing to enforce judgments provided they meet established domestic standards including whether the foreign court had jurisdiction and the defendant was given adequate notice (University of Maryland Global Campus, n.d.-b). Countries may also enforce foreign judgments as part of treaty obligations. Therefore, Colossal Corporation should review any existing treaties between the US and Notso and how they can affect the lawsuit.
References
University of Maryland Global Campus. (n.d.-a). Alternative dispute resolution. Retrieved January 28, 2024, from https://leocontent.umgc.edu/content/scor/uncurated/mba/2218-mba630/learning-resourcelist1/alternative-disputeresolution.html?ou=1202138
University of Maryland Global Campus. (n.d.-b). International dispute resolution. Retrieved January 28, 2024, from https://leocontent.umgc.edu/content/scor/uncurated/mba/2218-mba630/learning-topic-list/international-disputeresolution.html?ou=1202138
University of Maryland Global Campus. (n.d.-c). International law. Retrieved January 28, 2024, from https://leocontent.umgc.edu/content/scor/uncurated/mba/2218-mba630/learning-topic-list/international-law.html?ou=1202138
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