Leonard founded Xnel, a small life sciences research company, five years ago. His friend, Allan, has both medical research and business expertise. Last year Leonard was assured by a private equity investor that an influx of cash would be forthcoming, so he began conversations to hire his friend Allan to become CEO of Xnel. Instead, employment arrangements are generally discussed. In this instance, Leonard and Allan discussed a salary of $450,000 and a 10% ownership stake in Xnel. During their negotiations Leonard sent Allan an email saying, "Let's talk seriously about all of these details before you make a decision regarding other offers." Allan eventually took the job as CEO of Xnel, but soon thereafter the private equity investor backed-out, and Xnel's cash flow could not sustain Allan's salary. Allan left Xnel after six months, and he went to work elsewhere. Two months ago Leonard sold Xnel for $1,000,000, and now Allan is demanding 10% of those proceeds.
1. If you were Leonard, how would you argue that legally you do not owe Allan any of the proceeds from the sale of Xnel?
2. Assuming you were a court analyzing this dispute, what other components of this alleged bargain are missing, and how would you decide the controversy?