Contract Case Analysis
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Case Law Analysis - Contract Law
Robert
S. OHANIAN, Plaintiff-Appellee, Cross-Appellant,
v.
AVIS RENT A CAR SYSTEM, INC., Defendant-Appellant, Cross-Appellee.
779 F.2d 101 (1985)
Parties
: Robert S. Ohanian and Avis Rent-A-Car.
Court and Date Decided
: United States Court of Appeals, Second Circuit.
(Decided November 25, 1985.)
Background Facts
:
Robert S. Ohanian sued his ex-employer Avis Rent-A-Car for breach of an oral contract that
guaranteed him lifetime employment. After years of successful employment with Avis and
several promotions, Robert Ohanian was offered a position in a failing region that needed
new leadership. Robert had no desire to take the position due to the location change and also
other reasons. After several phone calls with Avis management, Ohanian decided to accept
the new position as Vice President of Sales for the Northeast Region. Robert Ohanian was
persuaded to take the position because he was told by Robert Mahmarian, a former Avis
general manager. Mahmarian testified about Ohanian success during his tenure at Avis. He
also testified to the convincing it took for Ohanian to accept the position. According to
Mahmarian, Ohanian took the position “On the basis of promise, that a good man is a good
man, and he has proven his ability, and if it didn't work out and he had to go back out in the
field, or back to California, or whatever else, fine. As far as I was concerned, his future was
secure in the company, unless — and I always had to qualify — unless he screwed up badly.
Then he is on his own, and even then, I indicated that at worst he would get his [severance]
because there was some degree of responsibility on the part of management, Calvano and
myself, in making this man make this change.”
Upon taking the position in New York, Ohanian soon realized after several months that he
was not satisfied with his new position and wanted his old position back. One month after
returning to his old position he was fired without severance pay.
Specific Disagreement and Ruling of the Court
During the trial Ohanian was able to prove to the jury that Avis agreed to employ him until
he retired or he was fired for a just cause. Avis was also unable to prove that they fired him
for a just cause. Ohanian was awarded $245,409 for lost wages, $59.284 in lost pension, and
$17,100 bonus that he was entitled to before he left.
The main argument of the defendant's is that the oral contract that the jury found existed is
barred under the statute of frauds, § 5-701 (subd. a, para. 1) of the General Obligations Law.
Section 5-701 which states in part that:
Every agreement, promise or undertaking is void, unless it or some note or memorandum
thereof be in writing, and subscribed by the party to be charged there with, or by his
lawful agent, if such agreement, promise or undertaking ... [b]y its terms is not to be
performed within one year from the making thereof or the performance of which is not to
be completed before the end of a lifetime.
The court decisions impact on legal and ethical compliance
This court decision of this impacts legal and ethical compliance in a business environment by
bringing attention to the importance of employers and management in a business sticking to their
word and following through with promises made to employees even verbally. Robert Ohanian
was comfortable and pleased with his position as the Vice President of Sales for Avis's Western
Region. Management also testified that he was directly responsible for the success of region.
Management at Avis told Ohanian what they needed to in order to get him to make a decision
that was in the best interest of the company, even though it conflicted with what was in his
personal best interest. With the court finding in favor for the plaintiff, it provides an example and
also a warning to businesses that they can’t just say and promise anything to their employees to
get them to go along with what they want. If they are going to make promises, they need to be
taken seriously even if there is given orally and not on a signed drafted contract.
Impacting a specific organization
Earlier this year at my employer Aldi I had a very similar situation happen as the one described
in this case. Upon returning from maternity leave my direct supervisor offered me a different
position in the purchasing department. This position change was not a promotion, but a lateral
move that was in the best interest of the company due to the previous persons unexpected
resignation. While out on maternity leave my direct supervisor called my personal phone and
offered me the position. He said that based off my success at my other position he thought I was
the perfect candidate and that the new position would be much more enjoyable for me since it
had less restrictive deadlines and more downtime. He also said that if at any point I did not like
my new position I could return to my previous one. All of the conversing and negotiating about
the new position was done via telephone, just an oral agreement with my supervisor and I. After
much thought, I ultimately accepted the position. The first couple months were very tough and I
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expressed to my supervisor that I did not agree that the position was easier, and I worked way
more overtime than I did at the old position. He expressed to me that my old position had already
been filled and there was not much he could do except for offer me more support and training
with the new position. Ultimately, my supervisor did not honor our verbal agreement that would
allow me to return to my previous position if I was not satisfied. The operating procedures at
Aldi did not require him to have an agreement in writing or even an offer letter before offering
me the new position. With the knowledge of this ruling and the oral contract being upheld, I
could see Aldi requiring all position changes to be written out with terms and listed agreements
signed by both parties. I could also see policy discouraging managers from having private
conversations with employees regarding position changes without terms drafted and another
party present as a witness.
Conclusion- Importance to Business Law & Ethical Implications
I agree with decision found by the jury in this case. Although, an oral contract can be very
difficult to uphold the plaintiff provided witness testimony into the conversations that were
had prior to him taking the new role as Vice president of sales in New York. Because Oha-
nian was able to prove that his decision to accept the role was solely based off of the fact that
he could return to his old position if he wanted, and that he had guaranteed employment with
the company. It is also important to note that Avis was not able to prove that the plaintiff was
fired for a just cause, which would be in direct breach of the oral contract established.
References
Ohanian v. Avis Rent A Car System, Inc., 779 F. 2d 101 - Court of Appeals, 2nd Circuit 1985