Orville E. Fortune (Fortune), a former salesman of The National Cash Register Company (NCR), brought a suit to recover certain commissions allegedly due as a result of a sale of cash registers to First National
The issues before the court are raised by NCR's motion for directed verdicts.
Fortune was employed by NCR under a written "salesman's contract" which was terminable at will, without cause, by either party on written notice. The contract provided that Fortune would receive a weekly salary in a fixed amount plus a bonus for sales made within the "territory" (i.e., customer accounts or stores) assigned to him for "coverage or supervision," whether the sale was made by him or someone else.
In 1968, Fortune's territory included First National. This account had been part of his territory for the preceding six years; he had been successful in obtaining several orders from First National, including a million dollar order in 1963. Sometime in late 1967, or early 1968, NCR introduced a new model cash register, Class 5. Fortune corresponded with First National in an effort to sell the machine. He also helped to arrange for a demonstration of the Class 5 to executives of First National on October 4, 1968. NCR had a team of men also working on this sale.
On November 27, 1968, NCR's manager of chain and department stores, and the Boston branch manager, both part of NCR's team, wrote to First National regarding the Class 5. The letter covered a number of subjects, including price protection, trade-ins, and trade-in protection against obsolescence. While NCR normally offered price protection for only an eighteen-month term, apparently the size of the proposed order from First National caused NCR to extend its price protection terms for either a two-year or four-year period. On November 29, 1968, First National signed an order for 2,008 Class 5 machines to be delivered over a four-year period at a purchase price of approximately $5,000,000. Although Fortune did not participate in the negotiation of the terms of the order,
On January 6, 1969, the first working day of the new year, Fortune found an envelope on his desk at work. It contained a termination notice addressed to his home dated December 2, 1968. Shortly after receiving the notice, Fortune spoke to the Boston branch manager with whom he was friendly. The manager told him, "You are through," but, after considering some of the details necessary for the smooth operation of the First National order, told him to "stay on," and to "[k]eep on doing what you are doing right now." Fortune remained with the company in a position entitled "sales support."
Commencing in May or June, Fortune began to receive some bonus commissions on the First National order. Having received only 75% of the applicable bonus due on the machines which had been delivered and installed, Fortune spoke with his manager about receiving the full amount of the commission. Fortune was told "to forget about it." Sixty-one years old at that time, and with a son in college, Fortune concluded that it "was a good idea to forget it for the time being."
NCR did pay a systems and installations person the remaining 25% of the bonus commissions due from the First National order although contrary to its usual policy of paying only salesmen a bonus. NCR, by its letter of November 27, 1968, had promised the services of a systems and installations person; the letter had claimed that the services of this person, Bernie Martin (Martin), would have a forecasted cost to NCR of over $45,000. As promised, NCR did transfer Martin to the First National account shortly after the order was placed.
At the close of the plaintiff's case, the defendant moved for a directed verdict, arguing that there was no evidence of any breach of contract, and adding that the existence of a contract barred recovery under the quantum meruit count. Ruling that Fortune could recover if the termination and firing were in bad faith, the trial judge, without specifying on which count, submitted this issue to the jury. NCR then rested and, by agreement of counsel, the case was sent to the jury for special verdicts on two questions:
"1. Did the Defendant act in bad faith ... when it decided to terminate the Plaintiff's contract as a salesman by letter dated December 2, 1968, delivered on January 6, 1969?
"2. Did the Defendant act in bad faith ... when the Defendant let the Plaintiff go on June 5, 1970?"
The jury answered both questions affirmatively, and judgment entered in the sum of $45,649.62.
The central issue on appeal is whether this "bad faith" termination constituted a breach of the employment at will contract. Traditionally, an employment contract which is "at will" may be terminated by either side without reason. See Fenton v. Federal St. Bldg. Trust, 310 Mass. 609,
The contract at issue is a classic terminable at will employment contract. It is clear that the contract itself reserved to the parties an explicit power to terminate the contract without cause on written notice. It is also clear that under the express terms of the contract Fortune has received all the bonus commissions to which he is entitled. Thus, NCR claims that it did not breach the contract, and that it has no further liability to Fortune.
However, Fortune argues that, in spite of the literal wording of the contract, he is entitled to a jury determination on NCR's motives in terminating his services under the contract and in finally discharging him. We agree. We hold that NCR's written contract contains an implied covenant of good faith and fair dealing, and a termination not made in good faith constitutes a breach of the contract.
We do not question the general principles that an employer
On occasion some courts have avoided the rigidity of the "at will" rule by fashioning a remedy in tort.
The requirement of good faith was reaffirmed in RLM Assocs. v. Carter Mfg. Corp., 356 Mass. 718 (1969). In that case the plaintiff (RLM), a manufacturer's representative of the defendant (Carter), was entitled to a commission on all of Carter's sales within a specified territory. Either party could terminate this arrangement on thirty days' notice. Carter cancelled the agreement shortly before being awarded a contract discovered and brought to Carter's attention by RLM. Because "[t]he evidence permitted the conclusion that Carter's termination of the arrangement was in part based upon a desire to avoid paying a commission to RLM" (id.), we held that the question of bad faith was properly placed before the jury. The present case differs from RLM Assocs., in that Fortune was credited with the sale to First National but was fired immediately thereafter. NCR seeks to avoid the thrust of RLM Assocs. by arguing that bad faith is not an issue where it has been careful to protect a portion of Fortune's bonus commission under the contract. We disagree. The fact that the discharge was after a portion of the bonus vested still creates a question for the jury on the defendant's motive in terminating the employment.
Recent decisions in other jurisdictions lend support to the proposition that good faith is implied in contracts terminable at will. In a recent employment at will case,
We believe that the holding in the Monge case merely extends to employment contracts the rule that "`in every contract there is an implied covenant that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract, which means that in every contract there exists an implied covenant of good faith and fair dealing' [emphasis supplied]. Uproar Co. v. National Broadcasting Co., 81 F.2d 373, 377 (1st Cir.), cert. denied, 298 U.S. 670 (1936), quoting from Kirke La Shelle Co. v. Paul Armstrong Co., 263 N.Y. 79, 87 (1933)." Druker v. Roland Wm. Jutras Assocs., 370 Mass. 383, 385 (1976). Restatement (Second) of Contracts § 231 (Tent. Drafts Nos. 1-7 (1973). 5 S. Williston, Contracts § 670 (3d ed. 1961).
In the instant case, we need not pronounce our adherence to so broad a policy nor need we speculate as to whether the good faith requirement is implicit in every contract for employment at will. It is clear, however, that, on the facts before us, a finding is warranted that a breach of the contract occurred. Where the principal seeks to deprive the agent of all compensation by terminating the
NCR argues that there was no evidence of bad faith in this case; therefore, the trial judge was required to direct a verdict in any event. We think that the evidence and the reasonable inferences to be drawn therefrom support a jury verdict that the termination of Fortune's twenty-five years of employment as a salesman with NCR the next business day after NCR obtained a $5,000,000 order from First National was motivated by a desire to pay Fortune as little of the bonus credit as it could. The fact that Fortune was willing to work under these circumstances does not constitute a waiver or estoppel; it only shows that NCR had him "at their mercy." Commonwealth v. DeCotis, 366 Mass. 234, 243 (1974).
NCR also contends that Fortune cannot complain of his firing in June, 1970, as his employment contract clearly indicated that bonus credits would be paid only for an
Conversely, the jury could have found that Fortune was assigned by NCR to the First National account; that all he did in this case was arrange for a demonstration of the product; that he neither participated in obtaining the order nor did he assist NCR in closing the order; and that nevertheless NCR credited him with the sale. This, however, did not obligate the trial judge to direct a verdict. Where evidence is conflicting, the rule is clear: "If upon any reasonable view of the evidence there is found any combination of circumstances from which a rational inference may be drawn in favor of the plaintiff, then there was no error in the denial of the motion, even if there may be other and different circumstances disclosed in the evidence which, if accepted as true by the jury, would support a conclusion adverse to the plaintiff." Howes v. Kelman, 326 Mass. 696, 696-697 (1951).
We think that NCR's conduct in June, 1970 permitted the jury to find bad faith.
NCR also argues that Fortune failed to follow the notice and grievance procedure
Finally, NCR argues that Fortune is not entitled to recover because he failed to bring his suit within two years after the cause of action accrued as required by the contract.
Judgment of the Superior Court affirmed.
Although the order called for purchase of 2,008 Class 5 machines for a total sale of $5,040,080, at trial the parties stipulated that "1,503 machines were actually delivered and installed" under the First National order. The stipulated damages in the instant case were based on the number of registers actually delivered and installed.
"VI. CLAIMS FOR BONUS CREDIT, LIMITATION OF CLAIMS AND ACTIONS
"Objections to the computation of your monthly bonus during your employment or to any monthly statement of your Account, at any time, shall be in writing. If such objection is made within thirty days from the time a statement of such account is furnished to you, or if any error is discovered by us within such period, adjustment shall be made for that month if you are then employed by us. If you are not then employed by us or if your objection is made later than thirty days, or if the error is not discovered by us within such period, the adjustment shall be made in the month when your claim is approved by us or in the month when the error is discovered by us if the same was not brought to our attention by you."
"B. SETTLEMENT OF BONUS DISPUTES You agree to permit the head of our Sales Division or the person designated by him to arbitrate any controversy between you and any other salesman, or between you and your Branch Manager, concerning the bonus credit which may be properly due you or such other salesman on any customer's order and the decision made in such controversy shall be final."
"VI. CLAIMS FOR BONUS CREDIT, LIMITATION OF CLAIMS AND ACTIONS
"No action at law or in equity shall be brought on any claims arising out of or in any way connected with this contract prior to the expiration of sixty days after you notify us in writing of the basis of your claims, nor shall any such action be brought at all unless brought within two years from the time the same accrues."