A contract that an executive quickly scrawled on two pieces of notebook paper was not only binding, but was the basis for a $10.5 million jury verdict. This case goes to show that just because a business agreement isn’t contained in a formal document doesn’t mean you can’t be held to it.
The chairman of a telecom company met at his office with a former employee who was considering starting a new venture. Unexpectedly, the chairman suggested that he start the venture within the company. He took out two pieces of notebook paper and sketched out an employment agreement that would pay the employee $200,000 a year for five years plus a hefty cash bonus and shares of stock.
The pages were photocopied on a single sheet, and both parties signed. The handwritten agreement said, “The parties will complete formal contracts as soon as possible but this is binding.” No formal contract followed, however.
Six months later, the employee was fired, and he sued. A jury found that the handwritten contract was binding, and awarded him the value of the contract, which it found to be $10.5 million based on the current value of the stock.