(May 11, 2016) Doing business “on your word” and with a hand shake is nothing new. Many businesses trust that those they do business with will treat them fairly and live up to their end of the deal. Unfortunately, that does not always happen and, when a dispute arises, it often comes down to a “he-said, she said” argument. While in today’s digital world, there will likely be emails and other documents that help explain the terms of the oral agreement, at the end of the day if there is a reasonable dispute over the terms or meaning of those terms, the parties will likely find themselves in court. And, if and when that happens, credibility becomes a key issue, as the case hinges on who the court or jury believes is telling the truth about the oral agreement.
This situation recently played out in a case in the Kent County Business Court. Our client, a West Michigan business, hired the plaintiff as its sales manager and orally agreed to pay him commissions for customers he “went out and got” for the company. After his hiring, numerous new customers called in and the plaintiff, as the sales manager, assisted those customers. The company began mistakenly paying the plaintiff commissions on those sales. After his termination, the plaintiff sued our client, arguing that he was entitled to continuing, post-termination commissions on all sales to the customers for which he was the “procuring cause.” During the case, the plaintiff filed numerous affidavits, swearing under oath that he was the “exclusive” reason the customers were doing business with our client and otherwise stating that he was the reason for all of the post-termination sales to those customers.
The plaintiff claimed that the intent of the oral agreement was to continue to pay him commissions, even after his termination, for sales to any customer he negotiated with during the course of his employment and thereby “procured.” Looking at future sales, the plaintiff stated that he was owed over $1 million. Our client, however, stated that the intent was to only pay commissions while the plaintiff was employed and only for customers the plaintiff actually “went out and got” on his own. Because the plaintiff’s employment was terminated and none of the customers came to the business because of the plaintiff’s efforts, our position was that the plaintiff was not owed any more commissions. But because the agreement was oral, and because the parties presented much different interpretations of that agreement, the issue had to be decided by the jury.
Given the fundamental dispute over the intent and meaning of the agreement, credibility was key. The jury would have to decide who was telling the truth about the oral agreement. With this in mind, at trial, we focused on the numerous affidavits that the plaintiff had filed throughout the case – affidavits that were littered with false, over-the-top statements made in an effort to convince the court and jury that the plaintiff was the “procuring cause” of the customers and sales at issue. Using technology, we were able to confront the plaintiff at trial with his affidavits and then, side-by-side, show the jury why the plaintiff’s statements were false and completely contradicted by emails and other evidence. In addition, using the documentary evidence and facts of the case, we put together a timeline to establish that the plaintiff knew he was not entitled to any further commissions and that his claims were really just manufactured after-the-fact. We also presented numerous witnesses – including company employees as well as customer representatives – to establish that the plaintiff was not the “procuring cause” of those customers and that the business was obtained through a team effort.
At the end of the two-week trial, the plaintiff asked the jury to award him $1.2 million in sales commissions and penalties under the Michigan Sales Representative Commission Act. We, on the other hand, asked the jury to find that there was no breach of contract by our client and to award the plaintiff nothing. The jury returned a verdict finding no breach of contract by our client and awarding the plaintiff no money. As a result of the verdict, our client was also able to seek recovery of its legal fees from the plaintiff.
While it is preferable to get agreements in writing, the reality is that doing business on a handshake is sometimes the practical, realistic, or only option. When disagreements arise over the terms or meaning of an oral agreement, it is imperative to be truthful and honest. Exaggerated or manufactured statements about the agreement, made in an effort to bolster your position, may get you to a jury, but the damage to your credibility may end up losing you the case.More Publications