“My employment contract was replaced by a second one I didn’t sign. Is the second one binding on me?”

Question: I am a professor of medicine and practice clinical medicine. I have been employed by the university and the physician practice plan for over thirty years.

Five years ago, we entered into a contract for our physician services with an outside, fourth party, a physician group from a large city. (The four parties were (1) the university, (2) the physician practice plan, (3) the physicians, and (4) the physician group from a large city.)

The terms that I agreed to were set forth in what was called a Memorandum of Understanding, which was signed by all four parties.

Subsequently, a contract was created which included an “integration clause.” That new contract was signed by both of my employers (that is, parties (1) and (2), above) and the fourth party physician group (that is, party (4), above). However, I did not sign it.

The Memorandum of Understanding was terminated two years prematurely, and I feel betrayed by the three other parties. I have lost considerable income as a result.

What recourse do I have? Thank you.

         Athen, Ohio

Answer: Paul, it sounds like you have, indeed, been betrayed, or at least not treated fairly. Let me do my best to provide some insight. Bear in mind, though, that without having the Memorandum of Understanding and subsequent Contract in front of me to read, is something like diagnosing a patient’s illness over the telephone. In analyzing contracts and agreements, every little word and punctuation mark can make a difference, and often does. Still, I will do my best with the data you’ve provided.

A. First, The Memorandum of Understanding is Probably a Binding Contract: The name given to a document makes no difference in analyzing what that document represents. If the Memorandum of Understanding (let’s use M.O.U., for short) contained a reasonably clear description of who the parties are, what each of the parties’ obligations were to the other parties, and clearly shows that each of the parties intended to be bound by the document, it is in all probability a binding and enforceable “contract.”

B. Second, The Subsequent Contract was Probably Intended to Replace the M.O.U.: It seems pretty definite that the subsequent Contract was intended to replace the original M.O.U. What you wrote suggests that. Moreover, an “integration clause” says, in effect, the following: “This contract expresses the entire understanding between the parties on its subject matter, and replaces all earlier agreements, representations and other understandings.” In that way, an “integration clause” makes the M.O.U. no longer operative or enforceable.  

C. Third, To Be Bound by the M.O.U., or the Subsequent Contract, You Would Have Had to Express Your Own Intent to Be Bound: This is your “million dollar question”: Are you named as a party to the M.O.U., or the subsequent Contract? Did you personally sign the M.O.U.? Is it possible that, instead, you were a partner in a partnership which was the named party, or you were a shareholder in a corporation which was the named party?

In your letter to me, above, you wrote “Five years later, ‘WE entered into a Contract . . .’”  I really would need to know if “we” in that sentence means (i) each individual physician was a named party to the Contract, and you signed on your own behalf, or (ii) some person signed on your behalf, or (iii) some entity (such as a partnership or a corporation) signed on behalf of all the physicians, including you. 

Scenario One: You signed the M.O.U. personally: If you were an individual, personal signer of the M.O.U., but you did not sign the subsequent Contract, then more than likely you would not be bound by the subsequent Contract. Sometimes, although rarely, an error is made, and people forget to get all necessary people to sign a Contract; that could have happened here.

Bottom Line: If you were a signer of the M.O.U., but not a signer of the subsequent Contract, that would likely mean the other three parties to the subsequent M.O.U. are likely obligated to  pay you retroactively, and prospectively, as if you were still under the M.O.U.

Scenario Two: You were “represented” in the M.O.U. and Contract by an entity: If you were not an individual party to the M.O.U., but were instead “represented” by some entity (such as a Partnership in which you were a Partner, or a Corporation in which you were a Shareholder), then the entity probably signed both the M.O.U. and the Contract for you, on your behalf.

Bottom Line: If an entity (partnership or corporation) did not get your prior authority to “represent” you in signing on your behalf the subsequent Contract, you may well have legal recourse against that entity. And, too, if the entity did not tell you what it was doing before it was agreeing to replace the M.O.U. by the subsequent Contract, you also likely have redress against that entity for what you may have lost.

If, though, Paul, you were represented by an entity (Partnership or Corporation), and the entity had both (a) your authority to sign the subsequent Contract on your behalf, and (b) the entity advised you it was about to do so, you probably have no recourse whatsoever, even though you did not place your actual personal signature on the subsequent Contract. 

As you can see, Paul, like the results of medical tests, the facts determine the diagnosis, and prognosis. It is for you to “plug in” what actually took place here to determine if you have recourse, and if so, against who. If possible recourse is present, you should locate an experienced employment attorney in your local area, perhaps through your local bar association, and move quickly. Deadlines for seeking redress may be approaching. 

I hope this has been helpful.

         My Best to You,
         Al Sklover

 © 2010 Alan L. Sklover, All Rights Reserved.

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