Carla Baker v. Bristol Care, Inc., d/b/a Bristol Manor, and David Furnell
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Full Opinion
The majority opinion holds there was only one agreement between Ms. Baker and Bristol Care concerning her employment as facility administrator. I agree.
Where I part company with the majority opinion, however, is its conclusion that no contract
I. Arbitration-Neutral Principles of Missouri Law Govern Questions of Contract Formation
A promise to arbitrate can be part of a contract limited to that issue, or it can be contained in a contract that addresses arbitration among many other terms. Here, as Ms. Baker concedes (and the majority opinion holds), the contract between Ms. Baker and Bristol Care — if one was formed — deals with arbitration only as one of the terms of Ms. Baker’s promotion to facility administrator. The enforceability of this arbitration promise is controlled by the Federal Arbitration Act, 9 U.S.C. §§ 1-9 (the “FAA”), but the FAA looks to state law to decide the threshold questions of contract formation. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995). Accordingly, Ms. Baker’s claim that none of the promises between the parties is enforceable due to a lack of consideration raises a question of contract formation that must be resolved under Missouri law.
The FAA’s deference to state law on questions of contract formation is not unlimited, however. Given that one of Congress’s purposes in enacting the FAA was to overcome deeply entrenched judicial hostility toward arbitration contracts, see AT & T Mobility LLC v. Concepcion, — U.S. -, 131 S.Ct. 1740, 1745, 179 L.Ed.2d 742 (2011), the FAA defers only to principles of state law that apply generally to all contracts. See 9 U.S.C. § 2 (providing that all arbitration promises “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract”). In other words, state law principles that
Accordingly, Ms. Baker’s consideration claim must be analyzed only under principles of Missouri law that are “arbitration neutral,” i.e., that treat all contracts the same regardless of whether they contain a promise to arbitrate. Allied-Bruce Terminix Companies, Inc. v. Dobson, 513 U.S. 265, 281, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995) (“What States may not do is decide that a contract is fair enough to enforce all its basic terms (price, service, credit), but not fair enough to enforce its arbitration clause.”).
II. Consideration as an Element of Contract Formation
Ms. Baker does not challenge the formation of her contract with Bristol Care on the basis that there was no mutual assent, i.e., offer and acceptance. The two documents plainly reflect the terms on which Bristol Care offered the promotion to facility administrator, and Ms. Baker’s signatures evidenced «her acceptance of and assent to those terms. Instead, she claims that no contract was formed between herself and Bristol Care as to those terms because there was no exchange of consideration to make their respective promises binding. Consideration, like mutual assent, is one of the basic elements of contract formation. Nat'l Ref. Co. v. McDowell, 201 S.W.2d 342, 347 (Mo.1947) (“One of the essential elements of a contract is the consideration.”).
There have been numerous opinions from this Court and others on the subject of consideration, and scholars have filled countless pages in their efforts to explain what those opinions mean. The subtle nuances in the application of this doctrine at the outer edges are as complex as any in the common law. Corbin on Contracts (1995), §§ 5.1 and 5.2, pp. 5-6 and 11-13. But no matter how much these nuances may thrill scholars, haunt courts, and torture first-year law students, they are unnecessary to the decision of this case. This case requires only the straightforward application of three basic principles of consideration that have been stated and applied by Missouri courts without hesitation or qualification for generations.
A. A Bargained-For Exchange
The first relevant principle of consideration is that it is a bargained-for exchange. In other words, when a promise is given in exchange for a benefit to the promisor, or in exchange for a detriment to the promis-ee, this bargain supplies the consideration needed to form a contract. State ex rel. Kansas City v. State Highway Comm’n, 349 Mo. 865, 163 S.W.2d 948, 953 (1942) (“consideration of a contract can consist either in a benefit conferred upon the promisor or in a legal detriment to the promisee”). In this way, consideration demonstrates the seriousness of the parties’ bargain and provides assurance that they intended a promise to be enforceable in a court of law. Corbin on Contracts (1995), § 5.3, pp. 19-20.
Identifying a bargained-for exchange, therefore, is the key to determining whether consideration was given. “[Cjonsider-ation may consist of some right, interest, profit or benefit accruing to [the promi-sor], or some forbearance, loss or responsibility given, suffered or undertaken by the [promisee].” Perbal v. Dazor Mfg. Corp., 436 S.W.2d 677, 697 (Mo.1968). When the
For example, consider the simple contract in which A promises to pay $100 to B if B mows A’s lawn. When B mows the lawn, A’s promise to pay is binding (i.e., a contract is formed) because A gave it in exchange for: (1) the benefit to A of having the lawn mowed (which A otherwise would not have received), or (2) the detriment to B of having mowed A’s lawn (a chore B otherwise would not have performed).
The foregoing example is a unilateral contract because the offeror requires the offeree to manifest acceptance by tendering performance, not by making a promise to perform. In a bilateral contract, on the other hand, the offeree accepts by making the promise(s) sought by the offeror. Even though the nature of the exchange between the parties is different than in a unilateral contract, the consideration analysis remains the same. In both circumstances, the focus is on identifying a bargained-for exchange consisting of a benefit to the promisor or a detriment to the promisee.
For example, consider the following bilateral contract: A promises to pay $100 to B, and B promises to mow A’s lawn. A’s promise is supported by consideration because A gave it in exchange for: (1) the benefit to A of obtaining B’s promise to mow the lawn (which A otherwise had no right to make B give), or (2) the detriment to B of undertaking the obligation to mow A’s lawn (which B otherwise did not owe). At the same time, B’s promise to A is supported by consideration because B gave it in exchange for: (1) the beneñt to B of having A’s promise of a $100 payment (which B otherwise had no right to make A give), or (2) the detriment to A of assuming the obligation to pay $100 to B (which A otherwise did not owe).
As this second example shows, bilateral contracts — by definition — are supported by consideration. “In any bilateral contract, each promise is the consideration for the other promise. Such is the bargain.” Corbin on Contracts (1995), § 5. 20, p. 102. “This has been true for at least four centuries, ever since bilateral contracts [as relative newcomers to the law of contracts] were recognized.” Id. § 5.25, p. 126 (citing cases from as early as 1555). This
It is the recognized general rule that a promise by one party to a contract is a sufficient consideration for a promise by the other party. If, therefore, there is a promise on the part of a purchaser to buy and pay the purchase price, this itself is a sufficient consideration for the promise of a vendor to sell and convey.
Ragan v. Schreffler, 306 S.W.2d 494, 499 (Mo.1957). Thus, it is clear that it is not the price that supplies the necessary consideration but the offeree’s promise to pay it.
Of course, not every promise will supply consideration. For example, a promise does not constitute consideration if the performance promised would not, itself, constitute consideration. -See Restatement (Second) of Contracts, § 75 (a promise is not consideration when the promisor knows at the time the promise is made that the promise can be performed by an act that would not be consideration for a unilateral contract, e.g., payment of a preexisting debt). In the absence of such an exception, however, the general rule remains: a bargained-for exchange of promises supplies the consideration needed to bind both parties to their promises.
B. Courts Do NOT Evaluate Consideration for “Adequacy”
The second relevant principle regarding consideration is that it requires no qualitative analysis. Consideration either is present (and a contract is formed), or it is not. Courts have no authority to attempt to value the bargained-for consideration in an effort to determine whether the promisor is — or is not — receiving “adequate” return for the promise given.
It is unnecessary that the consideration should be adequate in point of actual value, the law having no means to decide upon this matter. If the least benefit or advantage be received by the promisor from the promisee, or a third person, or if the promisee sustain any, the least injury or detriment, it will constitute a sufficient consideration to render the agreement valid.
Marks v. Bank of Missouri, 8 Mo. 316, 319 (1843) (emphasis added), overruled on other grounds by Wild v. Howe, 74 Mo. 551, 553 (1881). See also Weinstein v. KLT
Accordingly, any bargained-for exchange will supply the consideration needed to form a contract, regardless of whether a court believes (with the benefit of hindsight) that the promisor gave a promise that was worth more — even far more— than the benefit or detriment received in the exchange.
Ms. Baker argues that grossly inadequate consideration may suggest that a contract is voidable due to fraud, duress, or unconscionability. See Vondera v. Chapman, 352 Mo. 1034, 180 S.W.2d 704, 705 (1944). This may be, but such defenses have nothing to do with contract formation. In fact, these defenses assume a contract was formed, i.e., that consideration was bargained for in exchange for each party’s promise(s). See Restatement (Second) of Contract, § 208, comment c (“Inadequacy of consideration does not itself invalidate a bargain, but gross disparity ... may be an important factor in a determination that a contract is unconscionable”); Arthur Fels Bond & Mortg. Co. v. Pollock, 347 Mo. 853, 149 S.W.2d 356, 359 (1941) (“inadequacy does not constitute a failure of consideration”).
C. Separate Consideration is Not Needed for Each Contemporaneous Promise
The third relevant principle is that all contemporaneous promises by one party are deemed to have been given in exchange for the aggregate benefit to that party or the aggregate detriment to the other party. See Restatement (Second) of Contracts, at § 80(1) (“There is consideration for a set of promises if what is bargained for and given in exchange would have been consideration for each promise in the set if exchanged for that promise
This principle likely is a corollary of the principle stated above, i.e., that courts cannot assess the value of the consideration in determining whether consideration existed.
If one or more of several considerations, which are recited as the ground of a_ promise, be only frivolous and insufficient, but not illegal, and others are good and sufficient, then undoubtedly the considerations may be severed, and those which are void disregarded, while those which are valid will sustain the promise.
Drummond Realty & Inv. Co. v. W.H. Thompson Trust Co., 178 S.W. 479, 482 (Mo.1915) (quoting Parsons on Contracts (9th Ed.), Vol. 1, p. 455). See also Fullington v. Ozark Poultry Supply Co., 327 Mo. 1167, 39 S.W.2d 780, 783-84 (1931) (“If, without deciding, the recited purchase of stock is not a consideration supporting respondent’s hiring of appellant, the other consideration of mutual promises [to hire and to serve] is sufficient....”) (citing Drummond Realty); Y.W. By & Through Smith v. Nat’l Super Markets, Inc., 876 S.W.2d 785, 791 (Mo.App.1994) (“contract which has several items of consideration, one sufficient and one insufficient, may be upheld on the strength of the valid consideration”) (citing Calamari & Perillo, Contracts (2d ed.1977), § 4.23, Corbin, Corbin on Contracts (1952), § 126); Empire Gas Corp. v. Small’s LP Gas Co., 637 S.W.2d 239, 246 (Mo.App.1982) (“even if there be partial failure of consideration, yet if there is a substantial consideration left it will be sufficient to sustain the contract”) (citing 17 C.J.S. Contracts, §§ 129-30, pp. 848-852).
As noted, however, this principle applies only to contemporaneous promises. When a party makes a new promise after a contract is formed, benefits or detriments bargained for as part of the original contract cannot serve as consideration for the subsequent promise. Corbin on Contracts (1995), § 7.1, p. 342. For example, this Court held that there was no consideration to support an employee’s promise not to compete with the employer after his employment because the promise was given after — but during the term of — the beginning of the employment contract. Nat’l Motor Club of Mo., Inc. v. Noe, 475 S.W.2d 16, 21 (Mo.1972) (no consideration because employee “did not get a new position when he signed [the covenant not to compete], or anything new”).
This distinction between multiple promises that are part of an initial contract and subsequent promises was the focus of Purcell Tire & Rubber Co. v. Executive Beechcraft, Inc., 59 S.W.3d 505 (Mo. banc 2001). There, Purcell Tire hired Beechcraft to inspect a plane Purcell Tire was considering buying. Their contract included a cap on Beechcraft’s liability to Purcell Tire in the event Beechcraft either failed to inspect the plane or failed to inspect it competently. In response to Purcell Tire’s claim that this liability cap or waiver was invalid for lack of separate consideration, this Court noted the general rule that, when such a promise is made after the parties’ initial contract is formed, new consideration is required to make that promise binding. Id. at 509. But Beechcraft’s liability cap was part of the parties’ origi
Accordingly, a promise to arbitrate need not be supported by separate consideration if it is made at the same time as other promises and those promises, viewed collectively, were supported by consideration. When several promises are given as part of a bargained-for exchange that results in any benefit to the promisor or any detriment to the promisee (or both), a contract is formed with respect to all of the promises made.
III. There was Consideration for the Parties’ Exchange of Promises
Prior to her promotion as facility administrator, Ms. Baker worked as an hourly (i.e., “non-exempt”) employee pursuant to a simple unilateral contract. Bristol Care promised to pay a specified wage if Ms. Baker worked — not promised to work — in Bristol Care’s facilities. That contract was terminable at any time by either party. The agreement with respect to Ms. Baker’s promotion to facility administrator, however, was quite different. As Ms. Baker concedes, she was “required to sign the employment document and the arbitration document as a condition of her employment” as facility administrator. The following is a list of some, though not all, of the promises each party made to the other at the outset of their new arrangement.
Bristol Care promised:
• To employ Ms Baker as the Administrator of its facility for an indefinite term, subject to its right to terminate her employment: (a) without notice for certain specified grounds, and (b) with either five days’ notice or five days’ pay in all other circumstances
• To pay Ms. Baker a monthly salary for her services
• To advance, without interest, $350 to Ms. Baker in the middle of each month against her salary, which was to be paid at the end of each month
• To pay Ms. Baker a bonus if specified financial targets are met, the amount of which would be increased or decreased based on Ms. Baker’s performance, though Bristol Care retained the right to eliminate the bonus program without notice
• To allow Ms. Baker a specific number of paid vacation days during her first three and a half years of service and, thereafter, in accordance with company policy
• To provide Ms. Baker (and one approved co-habitant) with living accom*785 modations in the company’s facility during her employment and subject to stated limitations
• To provide all utilities, including basic cable television, for Ms. Baker’s living accommodations
• To arbitrate, with specified exceptions, all claims or controversies Ms. Baker may have against the company arising out of, relating to, or in association with her employment â–
• To arbitrate, with specified exceptions, all claims or controversies the company may have against Ms. Baker arising out of, relating to, or in association with her employment
• To initiate and conduct the arbitration of such claims before a single arbitrator using the procedures (including the arbitrator selection procedures) in the American Arbitration Association’s Rules for the Resolution of Employment Disputes in effect at the time the claim is filed
• To pay all arbitration fees, including the arbitrator’s fees and expenses, except for the filing fee for claims initiated by Ms. Baker or the fees and expenses of Ms. Baker, her attorney, and her witnesses
• To maintain the confidentiality of the existence, subject, and results of any arbitration with Ms. Baker
Ms. Baker promised:
• To serve as Administrator in Bristol Care’s facility for an indefinite period, subject to her right to terminate this employment with 60 days prior notice
• To operate the facility in accordance with state rules and regulations governing residential care facilities, as well as the Bristol Care’s Administrative Guide and other policies, and to manage facility staff in accordance with the Bristol Care Employee Handbook
• To refrain, during her employment and for a period of two years thereafter, from disseminating any of Bristol Care’s confidential information to individuals outside the company
• To refrain, during her employment and for a period of two years thereafter, from soliciting or rendering residential care services to persons who were (a) residents of the facility during the last year of Ms. Baker’s employment, or (b) solicited to become residents by Ms. Baker during the last six months of her employment
• To refrain, during her employment and for a period of two years thereafter, from disrupting or interfering with contractual or other relationships between Bristol Care and its residents, managers or vendors
• To abide by the policies of Bristol Care and the State of Missouri concerning residents’ rights and the handling of residents’ funds, and to refrain (and ensure that all hourly employees at the facility and all of Ms. Baker’s relatives residing with her at the facility refrain) from engaging in specified transactions with residents
• To arbitrate, with specified exceptions, all claims or controversies Bristol Care may have against her arising out of, relating to, or in association with her employment
• To arbitrate, with specified exceptions, all claims or controversies she may have against Bristol Care arising out of, relating to, or in association with her employment
• To initiate and conduct the arbitration of such claims before a single arbitrator using the procedures (including the arbitrator selection procedures) in the American Arbitration Association’s*786 Rules for the Resolution of Employment Disputes in effect at the time the claim is filed
• To maintain the confidentiality of the existence, subject, and results of any arbitration with Bristol Care
Applying the principles set forth above, the exchange of promises in this bilateral contract supplies consideration to make all of the parties’ promises binding. Ms. Baker concedes that she signed the two agreements — and thus made each of the promises memorialized in those agreements — in order to receive the collection of promises Bristol Care was making to her (e.g., the promotion and related benefits). By the same token, Bristol Care made its collection of promises in exchange for the collection of promises Ms. Baker made. The amount of consideration is immaterial because any bargained-for exchange of benefits or detriments, no matter how small, supplies the consideration needed to make these promises binding.
A. No Separate Consideration Needed for Ms. Baker’s Arbitration Promise
Ms. Baker contends that her promise to arbitrate specified claims against Bristol is not enforceable because that promise was not supported by. separate consideration. As explained in Section B, below, this argument is contrary to this Court’s decision in Purcell Tire, 59 S.W.3d at 509, because it ignores the fact that Ms. Baker’s arbitration promise was just one of the many promises that Bristol Care bargained for— and she gave — in order to receive the promotion to facility administrator and accompanying benefits. But, even though Ms. Baker’s claim is based on a faulty premise, it is worth noting that her claim still cannot succeed.
1. Bristol Care Agreed to Arbitrate Ms. Baker’s Claims
Even if the Court were to treat Ms. Baker’s promise to arbitrate as though it was made after — and not as part of — the parties’ broader exchange of promises regarding her promotion to facility administrator (which she concedes it was), that promise was supported by consideration. In exchange for her promise to arbitrate any specified claims that she may have against Bristol Care, Ms. Baker received Bristol Care’s promise to arbitrate her claims as well.
As a result of this bargained-for exchange, therefore: (1) Ms. Baker received the benefit of access to a process that is (or that she reasonably could have expected it could be) quicker and less expensive than resorting to the administrative review and civil litigation procedures to which she otherwise was limited, and (2) Bristol Care incurred the detriment of agreeing prospectively to waive its right to a jury trial on whatever specified claims Ms. Baker may assert against it and, instead, submit to her arbitration process and abide by its results. Even viewed in isolation, therefore, this Court’s precedents and the basic principles of consideration require this Court to hold that Ms. Baker’s arbitration promise is supported by consideration.
To hold otherwise is to say that mutual promises are not valid consideration, a conclusion that is contrary to every case
2. Bristol Care Also Agreed to Arbitrate Its Specified Claims
Such a narrow focus cannot be justified, however. Even ignoring all of the parties’ promises regarding Ms. Baker’s promotion, there was a substantial exchange of promises between the parties in the “Mandatory Arbitration Agreement.” Bristol Care not only promised to arbitrate any specified claims that Ms. Baker may assert against it, but Bristol Care also promised to arbitrate any specified claims it may wish to assert against her. This Court already has held that arbitration promises need not be mutual in this way to make an exchange of promises to arbitrate only one party’s claims enforceable, see Schneider, 194 S.W.3d at 859, but the willingness of Bristol Care and Ms. Baker to exchange mutual arbitration promises surely supplies the consideration neéded to make those promises binding.
And those are not the only promises Ms. Baker and Bristol Care exchanged in the “Mandatory Arbitration Agreement.” Both agreed to keep the existence, subject matter, and results of any future arbitration between them confidential. Because neither party was required to pledge such confidentiality, the benefit and detriment to each party of the mutual promises to do so supplies the consideration needed to make those promises binding. And, if there is consideration for any one promise, that consideration extends to all of the contemporaneous promises by that party.
Similarly, both parties agreed to abide by the American Arbitration Association’s Rules for the Resolution of Employment Disputes (renamed by the AAA as the “Employment Arbitration Rules and Mediation Procedures”) in effect at the time a claim is filed. Because neither party was obligated to agree to these rules, the benefit and detriment to each party of their mutual promises to do so supplies the consideration needed to make those promises — and all other contemporaneous promises in the arbitration agreement— binding.
Finally, Bristol Care agreed to pay all of the costs of the arbitration, including the arbitrator’s fees and expenses. As a result, Ms. Baker would be obligated to pay only the initial filing fee for any arbitration she may initiate (plus the fees and expenses of any attorneys and/or witnesses she may choose to employ). As noted above, Bristol Care had no preexisting obligation to assume this uneven share of the
3. Bristol Care’s Arbitration Promises are Not Illusory
Ms. Baker argues that none of Bristol Care’s promises in the “Mandatory Arbitration Agreement,” nor the combined effect of all of those promises, supplies consideration for the promises she made in that agreement. Because Ms. Baker agreed to give Bristol Care the right to “amend, modify or revoke this agreement upon thirty (30) days’ prior written notice to the Employee,” she now insists that right renders all of Bristol Care’s promises illusory.
Bristol Care counters that, because it is bound to give written notice 30 days before any change, it agreed to be bound by the “Mandatory Arbitration Agreement” for at least 30 days. In addition, Bristol Care emphasizes that both parties agreed to be bound by the AAA rules in effect at the time a claim was filed and, therefore, Bristol Care had no right to alter the agreement as to any claim pending at the time of — or filed within 30 days after — any notice from Bristol Care that it was intending to change the agreement.
There is no question that the construction of this provision that Bristol Care offers is the one this Court would adopt if Bristol Care were trying to realize a retrospective advantage from some unilateral alteration to the agreement. Nor is there any question that the construction volunteered by Bristol Care now is the one that any court would adopt in the future should Bristol Care try to alter its obligations to Ms. Baker under this agreement with respect to the claims she has already asserted. Accordingly, there is no justification for refusing to adopt this construction here, especially when the consequences of that refusal is that none of the promises made by either party — not just in the “Mandatory Arbitration Agreement” but on any aspect of her promotion to facility administrator — will be enforceable. See Perbal v. Dazor Mfg. Corp., 436 S.W.2d 677, 689 (Mo.1968) (“Where an agreement is susceptible of two constructions, one of which renders the contract invalid and the other sustains its validity, the latter construction is preferred”); In re Binghamton Bridge, 70 U.S. 51, 74, 3 Wall. 51, 18 L.Ed. 137 (1865) (“It is not the duty of a court, by legal subtlety, to overthrow a contract, but rather to uphold it and give it effect”).
Even if the Court is unwilling to read the “Mandatory Arbitration Agreement” as both parties plainly intended it to be read from the outset, however, this does not mean that Bristol Care’s promises are illusory and Ms. Baker’s arbitration promise is not binding. Instead, in section 25 of the parties’ arbitration agreement, Ms. Baker and Bristol Care expressly agreed that this Court can — and should — “modify ... it to render it enforceable.” [Emphasis added.] Accordingly, the Court should simply modify the “Mandatory Arbitration Agreement” to provide that no change to the agreement by Bristol Care can alter Ms. Baker’s rights under the agreement with respect to any claim after she has asserted it. Both parties plainly desired the Court to make such a modification at the time they entered into this agreement, and this Court cannot now refuse to make the agreement enforceable with this modification merely because Ms. Baker no longer wants it to do so.
B. The Parties’ Broad Exchange of Promises Supplies Consideration
Finally, as noted above, Ms. Baker’s efforts to focus the Court’s consideration analysis solely on her arbitration promise
If Ms. Baker’s arbitration promise had been made after — and not as part of — the parties’ exchange of promises, it nevertheless would be enforceable because it was given in exchange for one or more of Bristol Care’s arbitration and arbitration-related promises under the analysis in the preceding section. Otherwise, her promise would not be enforceable under this Court’s decision in Noe, 475 S.W.2d at 21. But, as explained in Purcell Tire, such an analysis is not necessary when the promise is given as part of an original exchange of promises between the parties. Purcell Tire, 59 S.W.3d at 509. The Court is bound by Noe and Purcell Tire and cannot reach a different conclusion merely because the promise at issue involves arbitration rather than a liability cap or a covenant not to compete. Perry, Additional Information