3

Amy has been working for Bill for 15 years. Despite the fact that Bill runs a very profitable company, and that Amy is a very productive employee, Bill has not given Amy a raise in 15 years. Bill has long promised he will give Amy a raise sometime in the future, but never does. Amy has threatened to quit, but Bill ignores this because he knows quitting and finding a new job will pose significant inconvenience to Amy.

So Amy goes to a third party, a signs a contract with the third party. The contract states that unless Amy has received a raise of $2.00/hr by January 1, the third party is entitled to all subsequent wages she earns from Bill.

The third party then gives the contract to Bill. Bill sees that if this contract is enforceable, then Amy must be very serious. Bill is a rational businessman, and calculates that the cost of giving Amy her well-deserved raise is much less than bringing on a new, untrained employee.

The only question is: Is this enforceable?

EDIT: Amy pays the third party a small fee. The third party is a business that specializes in these types of contracts.

(Amy and Bill are not real people, so they are having trouble contacting an attorney in their jurisdiction.)

1

It's not a contract because there is no consideration on the part of the third party. It's not enforceable.

Consideration is either:

a) giving up (or doing) something that you have a legal right to not give up (or not do) or

b) not giving up (or not doing) something that you have a right to give up (or do).

0

There is no contract in this situation.

Amy hasn't received any consideration from the "third party".

  • Say Amy pays the third party a fee for entering to into the contract, and the third party is a business who makes money in such a way. Both parties win. – RSWallingford Sep 4 '15 at 18:11
  • I'm not a lawyer (clearly) but my understanding of the considerations business is "both parties gain something." Amy is gaining leverage against Bill, and the 3rd party is gaining money. – RSWallingford Sep 4 '15 at 18:18
  • OK, I guess the definition should be "both parties lose something" In this case, can't the third party just charge an hourly consulting fee for his/her time just like anyone else offering a professional service? – RSWallingford Sep 4 '15 at 18:28
  • Aside from this example of a contract I gave, is there a way for Amy and a third party to structure such a contract that will be enforceable and will achieve the same end? – RSWallingford Sep 4 '15 at 18:40
  • Amy could enter a deed with the third party - a deed doesn't need consideration. – Dale M Sep 4 '15 at 22:39
0

There is no contract because Amy did not give the third party consideration for the contract and it is void for public policy reasons. The contract is unconscionable or unreasonably unfair and oppressive to Amy. The contract may be illegal in a jurisdiction that prohibits gambling or gambling on employment contracts. The contract may also be illegal for being an unreasonable restraint on trade because Amy would be required to end her employment with Bill unless she forgoes her entire paycheck.

-1

As a contract it lacks consideration and is unenforceable.

However, Amy could enter into a deed with the third-party which would be enforceable. A deed does not require consideration.

For information on the difference between deeds and agreements (contracts) in Australia see http://www.claytonutz.com/publications/edition/26_june_2014/20140626/arent_they_just_contracts_the_difference_between_deeds_and_agreements.page

Quoting (my emphasis):

The subject matter of a deed can vary greatly. It may, for instance, do one or more of the following:

  • pass or confer legal or equitable interests in property or some other rights;
  • create an obligation binding on some person; or
  • simply affirm an agreement that passes a legal or equitable interest in property or some other rights.

The major difference between a deed and an agreement is that there is no requirement for consideration in order for the deed to be binding. In short, the lack of consideration is overcome by the idea that a deed is intended by the executing party to be a solemn indication to the community that she or he really means uphold their promise.

  • @nomenagentis Why not? A deed must grant a right or privilege - future wages are a privilige. – Dale M Sep 5 '15 at 0:50

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