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April 30, 1985


The opinion of the court was delivered by: Nordberg, District Judge.


Hall's objection centers around paragraph 2 of an employment contract between plaintiff Donald McCann and defendant Hall. Paragraph 2 provides:

  2. Unless you or the Company give written notice
  of termination, this agreement will be
  automatically extended on December 31 of each year
  to the December 31 two years from the date of the
  extension. For example, if no notice of
  termination is given in 1980, the agreement will
  be automatically extended on December 31, 1980 to
  a term to end December 31, 1982. A written notice
  of termination shall be effective on the date to
  which the agreement had last been extended. For
  example, a notice of termination delivered in 1981
  shall be effective on December 31, 1982.

The Magistrate found, and this court agrees, that pursuant to paragraph 2, the employment contract automatically extends itself on December 31 of each year for two years, unless written notice of termination is given by either party. If written notice of termination is given, such termination becomes effective on the date to which the agreement had last been extended.

The issue before the Magistrate was whether the plaintiff's oral notice of November 9, 1982 effectively invoked the termination provision of paragraph 2. Since the contract automatically extended itself at the end of each year for an additional two years, at the time the oral notice of termination was given on November 9, 1982, the contract had been automatically extended to December 31, 1983. If that oral notice was effective, then the contract terminated on that date, December 31, 1983. However, if the oral notice was not effective and written notice was required as McCann maintains, then the termination provision was not effectively involved until April 29, 1983 when written notice of McCann's termination was given. Under these circumstances, the contract would have automatically renewed itself on December 31, 1982 for two years, until December 31, 1984. Thus, if written notice was required, McCann is entitled to an additional year's salary and benefits in accordance with the contract. After examining the pertinent cases, the court finds that the cases relied upon by Hall cannot be applied to the instant case.

Hall essentially relies on cases which support the proposition that an employment contract, which by its terms may be terminated by giving a specified period of notice prior to termination, may also be terminated without notice, on the condition that compensation is paid for the specified period of notice. 35 A.L.R. 889, 896 (1925) (citing cases). Thus, for example, where an employment contract provided that employment could be terminated upon ten days notice in writing, an employee, who received oral actual notice of termination and later written notice of termination, was entitled to ten days compensation from the date of oral actual notice. E.g., Malby v. J.F. Images, Inc., 632 P.2d 646 (Colo.Ct.App. 1981). The reason for this rule is simple; the usual purpose of a notice provision in an employment contract is to give the employee the bargained for time to seek other employment. 35 A.L.R. 889, 896 supra. If the employer chooses to discharge the employee and pay the agreed salary for the time of the notice, it is difficult to see how the employee has been injured since he has received the benefit of his bargain. Id.

However, this general rule as exemplified by Malby, is inapplicable to the facts of the instant case. The notice provision in the instant case does not set a specified notice period, such as ten days, for termination of the contract. Rather, the giving of notice, in and of itself, operates to create the length of the employment contract. An extension of the contract, amounting to a two year employment contract, is created each December 31 provided no written notice of termination has been given during the year. Thus each December 31, McCann became entitled to two years of employment. Because the notice provision created the duration of the employment contract itself, proper invokation of that notice provision, i.e., written notice, was required. E.g., Bour v. Kimball, 46 Ill. App. 327 (1892). This principle, as exemplified by McCormick Harvesting Machine Co. v. Cordsiemon, 101 Ill. App. 140 (1902) is not an aberration as Hall contends. Rather, it is a general rule of contract construction which specifies that the requirements of a contract as to notice, as to the time of giving, the form, and the manner of service thereof, must be observed in canceling the contract. There must be exact compliance with the terms of the provision for notice. Bour v. Kimball, supra; see Criterion Advertising Co. v. Clemensen's Florists & Decorators, Inc., 314 Ill. App.? 383, 41 N.E.2d 232 (1942); Butterick Publishing Co. v. Frederick Loeser & Co., 232 N.Y. 86, 133 N.E. 361 (C.A.N Y 1921); see generally 12 Am.Jur.2d Contracts § 498 (1964 & Supp. 1984) (citing cases). To find otherwise would not give McCann the benefit of his bargain and would disregard the plain and unambiguous meaning of the words of paragraph 2. Paragraph 2 did not merely entitle McCann to two years notice of termination as Hall contends. Paragraph 2 gave McCann more: the right to written notice as a mechanism for setting the duration of any extension of his employment contract.

In view of the fact that the Magistrate found, as a matter of law, that McCann's contract was extended through December 31, 1984, Hall's further claims of error regarding the Report are without merit. Hall claims that the Magistrate made factual determinations unfavorable to it and that he did not prepare proposed findings of fact nor specify non-disputed facts as required by the Federal Rules. These claims of error ignore the fact that the Magistrate properly interpreted the unambiguous language of Paragraph 2 as a matter of law. It is well settled that in cases of contract construction, resolution of disputes involving the interpretation of unambiguous agreements is for the court to determine as a matter of law. Sunstream Jet Express Inc. v. International Air Service Co., 734 F.2d 1258 (7th Cir. 1984). Thus, resolution of disputed factual issues was unnecessary in properly determining the meaning and effect of paragraph 2. Moreover, Hall does not dispute that McCann was fired on November 9, 1982. Hall attempts to create issues of fact by claiming that McCann waived his right to written notice since he understood he was fired and since he "virtually disappeared" from Chicago for about four months after his firing. (Hall's Objections to March 19, 1985 Report & Recommendation). Even accepting these facts as true, they cannot, as a matter of law, amount to any waiver by McCann of his rights under paragraph 2. Hall does not dispute that the locks on McCann's office were changed immediately after his firing "for security reasons." (Id. at 5.) Nor does Hall claim that McCann should have forced himself into Hall's office and attempted to work, despite his firing. Hall thus recognizes that McCann's firing was immediate and that it owes some measure of damages to McCann. It merely seeks, by the above-mentioned facts, to shorten its liability under paragraph 2 by one year. This uncontested factual situation affords no basis for such relief. Moreover, the mere fact that McCann recognized and understood the effects of his meeting with McCaffrey on November 9, 1982, provides no basis for waiver. If McCann's understanding and recognition that he was fired could constitute waiver in such circumstances, paragraph 2 would be deprived of its meaning by the unilateral act of Hall. McCann's conduct, as described by Hall, amounts to no more than a recognition by McCann that Hall was firing him. The mere fact that he understood what was happening does not amount to waiver in such circumstances.


In accordance with the Report and Recommendation of the Magistrate, this court enters partial summary adjudication for plaintiff on Count I of the Amended Complaint and finds the defendant is obligated to pay plaintiff employment benefits specified in the employment contract through December 31, 1984.



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