Georgia Contracts: “Meeting of the Minds”
The Georgia Court of Appeals recently released the decision of Kitchen v. Insuramerica Corp., case number A08A1986, in which it found that a former employee had an enforceable contract with the Georgia corporation that had employed him for the transfer of a 25% interest in stock in the corporation’s subsidiaries. This case illustrates the importance of both parties agreeing on all of the material terms of a contract, which is known as a “meeting of the minds.” In the Kitchen case, the Georgia Court of Appeals states that the enforceability of a contract is tested by “whether it is expressed in language sufficiently plain and explicit to convey what the parties agreed upon.” It is also important to keep in mind that courts decide contract cases based on the specific facts of each case.
In the Kitchen case, the parties had agreed that the employee would receive a 25% interest in the corporation’s subsidiaries as part of the compensation for his employment with the company. The material terms of the agreement were laid out in a letter that was signed by both parties, which further showed their agreement. The Georgia Court of Appeals in Kitchens found that the letter clearly described the material terms of the stock transfer by providing: (1) the employee would work for the corporation and its subsidiaries in a certain position; (2) that by a certain date, the employee would receive 25% of the corporation’s subsidiaries’ outstanding stock; and (3) a formula for calculating the employee’s “ownership equity.” Additionally, the Georgia Court of Appeals found that the rest of the letter provides enough additional detail on the agreement for it to be enforceable even though there may be some uncertainty as to other aspects of the agreement.
In the Kitchens case, it appears that the letter signed by both parties governed the relationship between the Georgia corporation and the employee. In the absence of this letter, there likely would have been a different result. This case illustrates that it is good practice for contracting parties to sign a contract which includes the basic terms of the agreement. This contract needs to include all of the important terms. The more detail the parties agree on and include in the contract, the less likely a dispute will arise later on.
