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Law School Case Brief

DeMasse v. ITT Corp. - 194 Ariz. 500, 984 P.2d 1138 (1999)

Rule:

A statement is contractual only if it discloses a promissory intent or is one that the employee could reasonably conclude constituted a commitment by the employer. If the statement is merely a description of the employer's present policies, it is neither a promise nor a statement that could reasonably be relied upon as a commitment. However, an implied-in-fact contract term is formed when a reasonable person could conclude that both parties intended that the employer's (or the employee's) right to terminate the employment relationship at-will had been limited.

Facts:

Roger Demasse, Maria A. Garcia, Billy W. Jones, Viola Munguia, Greg Palmer, and Socorro Soza (collectively "Demasse employees"), former employees of ITT Corp. (ITT), appealed from a federal district court summary judgment on their claim that ITT breached an implied-in-fact promise to conduct layoffs according to the seniority provisions of superseded employee handbooks, rather than the "merits" policy contained in a new handbook issued shortly before they were laid off. Because there was no controlling precedent under Arizona law, the circuit court certified the question to the Arizona Supreme Court. 

Issue:

Was the implied-in-fact promise of ITT considered as a commitment?

Answer:

No

Conclusion:

The Court held that ITT could not unilaterally modify and, thus, negate the effect of implied-in-fact contractual terms by subsequently publishing a handbook permitting unilateral modification or rescission. Modification of the terms of implied-in-fact contracts were governed by traditional contract law principles, which required assent and consideration to the offer of modification. Continued employment alone would not suffice. Because the question certified posited that Demasse employees had a contract term providing them layoff seniority rights, ITT could not unilaterally change the handbook policy to rescind or reserve the right to rescind those provisions.

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