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19. Is the employer likely to prevail in an action seeking reformation of the release to conform to the parties' oral agreement?
An employer offered to pay a terminated employee $50,000 to release all claims the employee might have against the employer. The employee orally accepted the offer. The employer then prepared an unsigned release agreement and sent it to the employee for him to sign. The employee carefully prepared, signed, and sent to the employer a substitute release agreement that was identical to the original except that it excluded from the release any age discrimination claims. The employer signed the substitute release without reading it. Shortly thereafter, the employee notified the employer that he intended to sue the employer for age discrimination.
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Most misrepresentations are affirmative statements. Historically, if a party simply failed to disclose information, it was more difficult to make a case for misrepresentation. However, courts today are much more willing to allow recovery based on a failure to give information. While it is true that there is no general duty to disclose information in a bargaining situation, there are a number of special situations in which courts have found a duty to disclose. If the party has taken a positive action to conceal the truth, the court will find actionable concealment even if the concealment was non-verbal.
C is correct. If one party makes a fraudulent misrepresentation and the other party justifiably relied on it, the contract is voidable. The employee engaged in fraudulent behavior by substituting the agreement the employer sent with an agreement that purposely omitted the release of any age discrimination claims. The employer, having not read the agreement sent by the employee, signed it, likely relying on the belief that there was no material alteration. Had the employer known of the alteration, the employer likely would not have signed it. The employee induced the employer to sign by misrepresenting what was actually on the agreement. There was no meeting of the minds, and therefore the employer is likely to prevail.
A is incorrect. A key requirement of a misrepresentation claim is that the claimant proves his reliance was justifiable. It was not unreasonable for the employer to believe that the agreement the employee sent back was the same agreement with no alterations.
B is incorrect. The parol evidence rule is not applicable to this question. The parol evidence rule, when applicable, is used to carry out the intention of the parties. Here, the intention of the parties was reduced to writing in the agreement that the employer produced. There is no further need for interpretation; the main issue is the differences between the two written agreements and whether the signed agreement has an effect.
D is incorrect. Mutual mistake relates to the essential terms of the agreement, and cannot be caused intentionally by one of the parties. The parties were not mutually mistaken, as the employee knew that the signed agreement did not include the release of the age discrimination claims.