Employer Can Enforce Unsigned (By It) Severance Agreement – Illinois Court

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In Wheeling Park District v. Arnold (2014 IL App (1st) 123185)), the First District addresses whether a party suing on a contract must sign it in order to enforce it.

The plaintiff  Park District sued to enforce a severance agreement it reached with a former employee.  Under the severance agreement, the District paid the employee three months of severance pay plus COBRA benefits in exchange for the employee releasing the District from all claims.

The employee signed the agreement, faxed it back to the District but had a change of heart before the District signed it but after it made the first severance payment.

The District then filed a declaratory judgment suit to enforce the agreement.  The Court granted the motion.

Affirming the trial court, the appeals court held that even though the District never signed the severance agreement, it was still enforceable because the defendant did sign it and the District performed by making the first severance installment.

Under black-letter contract principles, once a party signs an agreement and the other party (the non-signer) performs, the acceptance and consideration elements are met.  ¶ 20 (if a document is signed by the party being charged, the other party’s signature isn’t required if the document is delivered to the non-signing party who accepts through performance.)

Here, the defendant is the party being charged (sued) and the District performed: it sent three severance payments to defendant via direct deposit and also paid the contractually required COBRA benefits.  This performance was sufficient consideration for the employee’s acceptance of the severance agreement by signing it.

As a result, all basic contract elements were present: offer (the severance agreement), acceptance (the employee signed and delivered the agreement to the plaintiff) and consideration (the District paid three installment payments plus COBRA benefits to defendant).  The District’s signature on the severance agreement wasn’t required for the District to enforce it.

Afterwords:

– So long as the person “to be charged” signs the contract and the non-signing “charging” party performs, the contract is enforceable;

– if the plaintiff would have cancelled before the District paid, she would have a stronger argument.  Still, the District could argue that the parties had a binding contract or that it at least relied on plaintiff’s execution of the severance agreement.

 

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PaulP

Litigation attorney at Fisher Kanaris, P.C. representing businesses and individuals in all types of commercial disputes.