When is an offer a contract? The Ontario Superior Court rules on the consequence of using “offer letters” and “employment agreements”.

In September 2015, in Buaron v Acuity Ads Inc, 2015 ONSC 5774, the Ontario Superior Court of Justice ruled that if an employer and employee come to an initial agreement (in this case, the “Offer Letter”) that has all the elements of a contract, a subsequent agreement (in this case, a formal employment contract) won’t be valid unless there is additional consideration.

Prior to hiring, the employee signed an offer letter that contained all of the necessary terms of an employment contract but provided that he would be asked to sign a subsequent agreement. The subsequent agreement contained additional restrictive covenants. The Court held that once the employee received the Offer Letter, he had a valid employment contract and that the the subsequent contract he was required to sign was unenforceable as no new or additional consideration was provided in exchange for signing.

Bottom line? When negotiating with a prospective candidate, employers would be prudent to ensure that the only written offer that a candidate receives (and is requested to sign) is their formal employment agreement.

Written with the assistance of Nader Hasan, articling student.