Dyer v. Nat'l By-Products, Inc.

380 N.W.2d 732 (Iowa 1986)

 

RULE:

Some Iowa caselaw supports the view that forbearance to press a claim, or a promise of such forbearance, may be a sufficient consideration even though the claim is wholly ill-founded. It may be ill-founded because the facts are not what he supposes them to be, or because the existing facts do not have the legal operation that he supposes them to have. In either case, his forbearance may be a sufficient consideration, although under certain circumstances it is not. The fact that the claim is ill-founded is not in itself enough to prevent forbearance from being a sufficient consideration for a promise. Other Iowa cases require that that the claim forborne must have some merit in fact or at law before it can provide consideration. The Supreme Court of Iowa concludes that the requirement that the forbearing party assert the claim in good faith sufficiently protects the policy of law that favors the settlement of controversies and overrules its holdings that are to the contrary to this view.

FACTS:

On October 29, 1981, Dale Dyer, an employee of National By-Products, lost his right foot in a job-related accident. Thereafter, the employer placed Dyer on a leave of absence at full pay from the date of his injury until August 16, 1982. At that time he returned to work as a foreman, the job he held prior to his injury. On March 11, 1983, the employer indefinitely laid off Dyer.

Dyer then filed the present lawsuit against his employer claiming that his discharge was a breach of an oral contract. He alleged that he in good faith believed that he had a valid claim against his employer for his personal injury. Further, Dyer claimed that his forbearance from litigating his claim was made in exchange for a promise from his employer that he would have lifetime employment. The employer specifically denied that it had offered a lifetime job to Dyer after his injury.

ISSUE:

Is good faith forbearance to litigate a claim, which proves to be invalid and unfounded, sufficient consideration to uphold a contract of settlement?

ANSWER:

Yes.

CONCLUSION:

On appeal, the court reversed the decision and held that forbearance of a claim that proved to be invalid was sufficient consideration if the forbearing party believed in good faith that the claim was valid. The court held that summary judgment was improper because a question of material fact existed as to whether the employee's forbearance was made in good faith. The court remanded the case for determination of that issue.

In the present case, the invalidity of Dyer's claim against the employer does not foreclose him, as a matter of law, from asserting that his forbearance was consideration for the alleged contract of settlement. However, the issue of Dyer's good faith must still be examined. In so doing, the issue of the validity of Dyer's claim should not be entirely overlooked:

Although the courts will not inquire into the validity of a claim which was compromised in good faith, there must generally be reasonable grounds for a belief in order for the court to be convinced that the belief was honestly entertained by the person who asserted it. Sufficient consideration requires more than the bald ascertion by a claimant who has a claim, and to the extent that the validity or invalidity of a claim has a bearing upon whether there were reasonable grounds for believing in its possible validity, evidence of the validity or invalidity of a claim may be relevant to the issue of good faith.

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