South-Western Legal Studies in Business

Employee Had Reason to Rely on Statements of Supervisor in Forming Employment
Description Appeals court held that while the paperwork for a position of employment was never completed, a person hired by a supervisor, who worked for seven months, had reason to believe that a contract had been formed and so could sue the employer for fraud despite the formalities of the contract not being completed.
Topic Contracts
Key Words Fraud; Employment; Justifiable Reliance
C A S E   S U M M A R Y
Facts In March 1999, Davis, the athletic director at Malcolm X Community College, contacted Hefferman to offer him the job of head basketball coach and to teach physical education. The hiring was reported in the newspapers. Hefferman began his coaching duties immediately. Paperwork for the position was not completed until August. Hefferman was never paid and complained numerous times to Davis, who said there was a delay in the paperwork. Finally, in October 1999, Hefferman quit and sued for fraud. The jury found for Hefferman but the judge vacated the verdict, ruling that fraud has not been shown under Illinois law. Hefferman appealed.
Decision

Reversed. To establish fraud in Illinois, a plaintiff must prove: 1) a false statement of material fact; 2) known or believed to be false by the party making it; 3) intent to induce the other party to act; 4) action by the other party in justifiable reliance on the truth of the statement; and 5) damage to the other party resulting from such reliance. Here the evidence was sufficient to show that Davis made false statements of material fact about the job offer and that Hefferman reasonably relied on those statements. The fact that the job application stated that hiring was contingent on final approval by the board of trustees did not preclude the fraud claim given that the college acted as if Hefferman had been hired and allowed him to work.

Citation Hefferman v. Board of Trustees of Illinois Community College Dist. 508, 310 F.3d 522 (7th Cir., 2002)

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