When drafting a non-compete agreement, every lawyer repeatedly asks himself, "Are the limitations as to time, geography, and scope reasonable?" This thought becomes all-consuming because no attorney wants his agreement reformed by the courts, much to the – ahem – "disappointment" of his client. However, regardless of how reasonable the agreement may be, if the parties fail to sign the agreement, it may be just as unenforceable as if the employee was forever prohibited from working in the United States at any profession that earns an income.
In Holloway v. Dekkers, the Dallas Court of Appeals held that an employment agreement negotiated through in-person, phone and e-mail conversations was unenforceable because only the employee signed the formal, written contract.
Initially, the parties had verbally agreed on a three-year term of employment, as well as compensation and benefits. Negotiations continued via e-mail and telephone, which led to a revised agreement that the employee would work for one year, with an option for a three year extension based on his performance. Ultimately, the terms were written into a one-page agreement, but only the employee signed it.
When he was fired after only two months of employment, the employee sued for breach of contract and fraudulent inducement, alleging the employer had either lied to him about employing him for at least a year, or broken its promise.
On appeal, the Dallas Court held that a writing was required pursuant to the statute of frauds because the employee and employer had verbally agreed on at least a one-year employment term. The statute of frauds provides that a promise or agreement that cannot be completed within one year is not enforceable unless it is in writing and signed by the person required to act on the agreement. While the employee had a "signed" agreement, it was not enforceable because it was not signed by the person to be charged, which, in this case, was the employer. As there was no writing to back up the employee's oral understanding, he had no contract to enforce.
Though the contract in this case did not contain a non-compete, the importance of getting such an agreement signed still applies because non-competes fall within the statute of frauds if they cannot be performed within one year from the date the agreement is made. Thus, the agreement must be in writing and signed by the party to be charged. Ensuring both parties sign the agreement may seem like a small and obvious detail, but these small details are overlooked more often than you would think, and they can come back to haunt us years later. Bottom line – no "reasonable" agreement is enforceable unless it is signed. Without your John Hancocks, it may not be worth the paper it's written on.
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