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Tuesday, March 19, 2013

The Mystery of the Elvis Dumervil Contract Mix-up

Elvis Kool Dumervil, the star defensive end for the Denver Broncos, has been in the news recently based on an alleged mix-up involving a contract renegotiation with the team. I have read multiple reports and still cannot figure out exactly what happened from a contractual formation standpoint. But here's my current understanding and analysis...

Dumervil's contract with the Broncos, like most NFL player contracts, had an "opt out" of sorts for the Broncos.  Under the contract, the Broncos could either pay Dumervil $12 million to play next season--and have that entire amount count against the team's salary cap--or cut him ("cut" being the sports term for "fire") and only have a portion of his salary count against the team's cap.  Without getting into too much detail, each team has a maximum amount of money it is allowed to pay in player salaries per year, subject to various adjustments.  If the Broncos were able to reduce how much Dumervil's salary would count against their team's cap, they conceivably would have been able to spend more money to sign other players and improve their team; hence their interest in keeping the cap number down.

To avoid a bad salary cap consequence and still keep Dumervil, the Broncos sought to renegotiate a middle ground.  They offered to keep versus cut Dumervil but for a reduced salary amount of $8 million.  According to various reports, that offer was only open until 1pm MDT on Friday, March 15th.  The Broncos set that deadline because they faced a deadline of their own set by the NFL.  Specifically, the only way the Broncos could avoid the full salary cap hit of $12 million under NFL rules was to cut Dumervil by 2pm MDT (or show that they had re-signed him to a different deal).  If they cut him prior to 2pm MDT, they'd only take a $5 million hit; if they cut him anytime after 2pm MDT, they'd take a $12 million hit.

In the early afternoon of March 15th, Dumervil reportedly rejected the Broncos' $8 million offer over the phone (thereby terminating the Broncos' offer, most likely).  However, Dumervil  later told the Broncos that he had changed his mind. The Broncos then renewed their $8 million offer but specified that Dumervil could accept only by faxing his acceptance to them prior to the NFL's 2pm deadline.  When the Broncos did not receive a fax from Dumervil by that time, they cut him.  Dumervil's agent has said that the fax was sent to the Broncos at 2:06pm due to some delay in getting a fax from Dumervil.

When the story first broke, some media outlets were reporting that a fax machine malfunction was to blame. Thus, many commentators initially expressed frustration that a bungled or late transmission via fax, a now-outdated device, could have such a significant impact. When I heard those reports, it seemed that the media outlets, like some first-year law students, were overemphasizing the need for a writing and deemphasizing the parties' actual intent.  As we teach our students, a signed writing often is not required; contracts are formed all the time without that formality. Subject to the statute of frauds and other exceptions, a contract can be formed without a writing, faxed or otherwise.  And, unless the offeror limits the form of acceptance to a signed and faxed writing, the acceptance may be communicated in any reasonable manner.  In sum, it is intent of the parties that controls. Thus, if the Broncos really wanted to sign Dumervil to a new $8 million deal (that could be completed within 1 year of its making) based on his verbal agreement, no rule of contract law would have prevented it. In other words, if Dumervil truly had communicated his acceptance to the Broncos, the absence of a faxed signature from Dumervil would not prevent contractual formation unless: (i) the Broncos had stated that acceptance could only be via fax or similar writing; or (ii) the contract was one that could not be performed within a year or otherwise subject to the statute of frauds. We would need more facts to analyze both of those issues.

Of course, another possibility outside of traditional contract law (and the proverbial elephant in the locker room) is that the NFL likely has its own rules regarding contractual formation under its collective bargaining agreement or through some other mechanism. That's the part of the mystery about which I have no information at this point. Some reports seem to indicate that the NFL's rules somehow prevented contractual formation and that the Broncos are seeking a change of heart from the NFL. Perhaps someone more familiar with the NFL's rules can comment on that.  In the meantime, I think Bronco fans can stop blaming general contract law and continue blaming the Broncos and the NFL.  At least for now.

[Heidi R. Anderson]

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