## Facts

- Philadelphia insurance brokers (the Linn interests) offered in 1926 to place reinsurance business with Employers Reinsurance Corporation in exchange for a 5% commission on premiums collected on specified automobile liability risks.
- Linn negotiated in New York with Employers Reinsurance’s agent, who said he needed authorization from the home office and would respond after obtaining approval.
- The agent later telephoned Linn and accepted the offer; Employers Reinsurance entered into a reinsurance treaty with Selected Risks Insurance Company of New Jersey, which continued through renewals and modifications.
- Employers Reinsurance paid the 5% commission from 1926 until 1953.
- In 1953, Employers Reinsurance notified the brokers it would stop accounting for and paying commissions on premiums received from the reinsured business.
- The brokers sued in Pennsylvania (1954) seeking an accounting and payment of commissions due since 1953 under the oral agreement.
- The trial court initially entered a compulsory nonsuit based on the view that the contract was made in New York and was unenforceable under New York’s Statute of Frauds.
- On first appeal, the Pennsylvania Supreme Court reversed and remanded because the record lacked evidence showing where the agent spoke the telephone acceptance.
- On remand, a jury found for the brokers, and the trial court ordered Employers Reinsurance to account; Employers Reinsurance appealed again.

## Issues

1. For choice-of-law and Statute of Frauds purposes, where is a contract “made” when acceptance is communicated by telephone through an agent: where the acceptance is spoken or where it is heard?
2. If the contract was accepted outside New York, is the oral commission agreement enforceable despite its indefinite duration?
3. Is an indefinite-duration commission agreement terminable at will after a reasonable time when the promisee has fully performed and the promisor’s only remaining duty is continuing commission payments?

## Decision

- The court treated the jury’s verdict as a finding that acceptance was spoken outside New York and held the trial court properly ordered the defendant to account for commissions due under the oral agreement.
- The court affirmed enforcement of the agreement because the governing Statute of Frauds depended on the place where acceptance was spoken, and the factfinder determined it was not New York.
- The court rejected the argument that the indefinite-duration agreement was terminable at will after a reasonable time, because the brokers had already fully performed by procuring the reinsurance business and the defendant’s remaining obligation was continuing commission payments.
- Judgment for the brokers was affirmed.

## Legal Principles

- The formal validity of a contract, including Statute of Frauds questions, is governed by the law of the state where the contract is made.
- When acceptance is communicated by telephone, acceptance occurs where the words of acceptance are spoken, not where they are heard.
- When acceptance is made by an authorized agent, the place of contracting is where the agent accepts the offer.
- The rule that a contract with no stated time limit is terminable at will after a reasonable time does not apply where one party has fully performed and the other party has a continuing obligation to pay agreed commissions.

## Conclusion

The Pennsylvania Supreme Court enforced an oral, long-term commission agreement after a factfinder determined the telephone acceptance was spoken outside New York, and it held that an indefinite-duration contract is not terminable at will where the promisee’s performance is complete and the promisor’s remaining duty is ongoing commission payments.


Linn v. Employers Reinsurance Corp., 397 Pa. 153, 153 A.2d 483 (1959)