ContractsProf Blog

Squid Game, Contracts and Consent

I’ve been a bit negligent in my blogging duties as I’ve been busy with the start of classes (I’m teaching Torts this semester, hence my use of the word “negligent”).  So, when my daughter recommended that I watch Squid Game, I scoffed and self-importantly told her that I’m too busy to even post on the contractsprofblog let alone watch a scary Korean thriller (believe me, Koreans make some scary thrillers – it’s not all just Parasite and Train to Busan). For those of you who aren’t on Tik Tok (I know there are one or two of you out there), Squid Game is the insanely popular, meme-worthy, Korean thriller which is one of Netflix’s biggest hits ever.    But then she told me that Squid Game might be a scary-a** thriller but it’s also and more importantly for blogging purposes, a show about contracts and consent.  Contracts and consent?  My two favorite topics!  So, in the name of research, I pulled myself away from my course prep and forced myself to watch the first episode of Squid Game.  And lo and behold, my daughter was right.  It’s all about contracts and consent -- and also the role of money in bargaining power and “bodily integrity transactions” and a whole host of other things relevant to this blog.

(Some spoilers ahead)

The hapless protagonist is a loving father who is a mess of a human being (he steals money from his mother to bet on horse races and doesn’t seem to exhibit the traits of a rational actor – you know this will end in a bad contract for him as a result).  He loses then wins at the races, and then gets beaten up by thugs to whom he owes a lot of money who then force him under threat of physical injury to sign a waiver of his “physical rights,” meaning that they’ll take his kidney if he doesn’t pay up.  (Duress alert!  That contract is void).  He’s desperate for money and gets even more desperate when he learns that his daughter is going to move to the U.S. because her step-dad just got a job there and the only way to keep her in Korea is by making enough money to support her.  This is the “hard luck” bargaining situation that contracts scholars worry about – and one where I think it is hard to find robust consent.  He then meets a well-dressed stranger with whom he plays an even stranger game (it involves money for winning and getting slapped for losing), and then after a few twists and turns, he wakes up in a giant gym-like room in a jumpsuit with dozens of others dressed like him.  They are all made an “offer” to participate in a game, but they know nothing about what the game entails except that there is a very large prize for the winner.  The freakily masked game officials want to ensure that everyone plays the game of their own “free will” even though it is clear that the one thing they all have in common is that they are all suffering under the weight of crushing debt and being harassed by aggressive debt collectors. 

Before they can play the game, they must sign a ‘Player Consent Form” which is your standard adhesive contract offered on a take it or leave it basis.  But unlike the ubiquitous TOS, there are only 3 provisions on this form.  No hidden terms, so no problem, right?  WRONG -- Oh man, so wrong! The first clause says that the Player is not allowed to stop playing although the third clause says the Games may be terminated if the majority agrees.  The second clause says that the Player who refuses to play will be eliminated. But the terms are ambiguous, don’t you think?  Who is the “majority”?  Is it the majority of the participants or the freakily masked officials?  What happens if a Player stops playing?  Most importantly how will the Player be eliminated?  The protagonist hesitates but instead of listening to that voice of doubt (aka the voice of reason) and insisting on getting some clarity about what the terms actually mean (where’s the Definitions section?), he looks around, sees the folks around him sign the contract without a second thought, and then exhibits herd mentality when he signs on the dotted line  “Just because everyone else Clicks to Agree doesn’t mean you have to, does it?”  That scene demonstrates once again that the rational actor is a rare (non-existent) creature indeed, especially if you have money troubles, peer pressure, physical fatigue and optimism bias.  I won’t reveal what happens next, except to say that as with all contracts, the interpretation of the terms makes all the difference in the world and I think it’s fair to say, the contract did not meet the reasonable expectations of the parties.  Talk about unconscionable contracts.

My daughter tells me that Episode 2 has even more contract stuff in it.  But to be honest, I’m still recovering from the abuse of bargaining power and the rampant lack of robust consent in Episode 1. 

Weekend Frivolity: Deadheading Mums

Sorry all!  It's been a slow week on the blog because teaching, believe it or not, is hard work!  Also, I overcommitted on the writing front.

In the meantime, don't forget to deadhead your mums!  This video delights me.

 

 

Weekend Frivolity: Apple's ToS

I'm really pissed off at my sister, a retired nurse, who posted this meme on Facebook.  She's stealing my shtick -- and it's good shtick!

CORRECTION:  It's even worse!  My sister merely posted the meme after it was sent to her by my 90 year-old mother.  Everyone's a comedian!  O tempora, o mores!

Jaffe Transactional Law Invitational

Last year, not everyone who wanted to participate could participate.  There was a wait list. You've been warned!

Editorial Assistance Available for Law Professors in Need!

One of the great things about working at the Valparaiso University Law School was its talented and dedicated staff.  Among the most talented and dedicated was Karen Koelemeyer, who worked with the Law Review and with faculty on getting manuscripts in shape before final submission.  I rarely send out an article for publication without first sending it to Karen for above- and below-the-line edits.  Thanks to Karen, I have gotten by with my vintage 1999 knowledge of the Bluebook.  I make a good faith effort to get my footnotes into shape, and I leave it to her to tidy up my mess.  I have also relied on Karen to translate my footnotes in accordance with other citation styles.  She knows many on her own, but if you have something exotic, just send her a style manual and she will do the rest.

Karen also has an outstanding eye for line edits.  She has been editing legal manuscripts for decades.  If something doesn't make sense to her, it likely doesn't make sense. 

When Valparaiso University decided to close its law school, faculty and staff scattered to the four winds.  Most of us landed well, but Karen's talents are uniquely suited to editing legal scholarship, and there is not a lot of demand for that skill in Northwest Indiana these days.  Our loss can be your gain. 

If you have a manuscript that you would like edited, contact Karen at [email protected]   She can usually turn things around in a couple of weeks, but if she is backed up with other projects, she will certainly let you know.  The cost will depend on the length of the manuscript and the state of your footnotes ex ante, but Karen will provide a reliable estimate.

Tulsa's Juneteenth Commemoration!

As captured by ContractsProf Blog Intern, Sydney Scott:

 

Contracts and the Rhetoric of Dehumanization

It’s a fundamental tenet of contract law that contracts require consent.  Yet, the meaning of consent has been distorted beyond recognition in some cases.  In areas of the law other than contracts, consent means a knowing, voluntary act that is intended to manifest agreement (even if not always approval) of an act or activity.  In contracts, however, consent has been diminished to a mere construct where the so-called “manifestation of consent” has replaced efforts to assess the existence of consent.  In other words, the signfier (the manifestation) replaces what it signifies (consent).  There are economic justifications for doing this in most commercial contracting situations. 

But where the so-called contract involves services, the economic justifications are outweighed by fairness and policy concerns.  This is why courts do not require specific performance of employment contracts. Economic rationales are not the only reason to enforce contracts; there are social, moral and cultural reasons as well.  Similarly, there are reasons not to recognize something as a contract.  Perhaps the most important reason is if the so-called contract lacks consent.  This is precisely why the law makes a distinction between void and voidable contracts.  A contract entered into under a threat of imminent physical harm – a gun pointed to the head – is void, meaning that it never existed at all, despite the fact that the victim may have signed a piece of paper with a caption at the top that proclaims that THIS IS A LEGALLY BINDING CONTRACT.  The law ignores that piece of paper given the circumstances under which it was made. 

So I was puzzled when I heard about a paper written by a certain Harvard law professor, J. Mark Ramseyer, titled “Contracting for Sex in the Pacific War.“  I had heard the paper was about Korean women who had been forced to work in brothels during the 1930s and 1940s.  Surely the author of that paper understood that contract law distinguished contracts that parties entered into freely and voluntarily from those which a party was coerced into signing?  Not surprisingly, the paper generated controversy and many scholars refuted its dubious assertions.  There were several excellent commentaries, including this one from Harvard law professor Jeannie Suk Gersen here and this one by Professors Yong-Shik Lee, Natsu Taylor Saito, and Jonathan Todres here, which address many of the historical and factual inaccuracies in Ramseyer’s account.

To be honest, Ramseyer’s paper is so heartless, arrogant, and just plain distortive that it almost reads like satire. He refers to sex traffickers as “entrepreneurs,” and confuses “rape” for “sex.”  He makes claims about contracts even though those contracts don’t seem to have actually existed.  Moreover, Ramseyer appears to have invented a universe where there is no such thing as gender violence, racism, colonialism, poverty, war, kidnapping, or deceit.  He overlays a not-very good type of “game-theory” analysis on his assailable version of history, and his tone is bloodless and detached, as though he were discussing fungible goods rather than actual people.

Particularly offensive to readers of this blog is Ramseyer’s lazy and flippant use of the word “contract.” He uses the term “contracts” in an attempt to legitimize his outrageous claims, a rhetorical sleight of hand which attempts to transform a heinous international human rights violation into just another commercial exchange.  But context matters to contracts and Ramseyer ignores both the identity of the parties and their circumstances.  The women he is referring to as “prostitutes” were poverty-stricken Korean women during wartime who were living as colonial subjects stripped of rights by a militaristic, imperial Japan.  These young women were tricked into being transported, allegedly for work, miles away from their families, and then they were told that the work they thought they were signing up for – “sex” to Ramseyer, “rape” to most other people -  was something entirely different from what they expected.  There isn’t a lot of free will or choice involved in this situation.  No consent, no contract.  There is no bargained for exchange here.

His paper is especially jarring to read in the aftermath of the murders in Atlanta – a tragedy which sparked a nationwide discussion of the intersectional nature of the violence and discrimination faced by Asian and Asian-American women.  By ignoring the context, Ramseyer puts forth a particularly disturbing image of Korean women.  His paper feeds the sexualized racialized stereotype, the sad and dangerous one that dehumanizes and erases the actual women – women who were desperate, frightened, subjugated, and trapped.  To Ramseyer, who they are and what they were experiencing doesn’t matter.  But even the most ardent supporter of “freedom of contract” would not go so far as to recognize a bargain in this situation.

Institutions everywhere are talking about the value of diversity in hiring, which is important for reasons of fairness and equity, but also because the work produced by institutions itself will be better with different perspectives and experiences to inform it. Ramseyer’s article is not only tone-deaf and revisionist, it is a perversion of basic contract principles and demonstrates just how far we still have to go.

Weekend Frivolity: Sarah Dooley Explains Infancy Doctrine in "Stupid Things"

Readers of this blog are probably tired of me taking every possible opportunity to encourage people to download Sarah Dooley's new album, Is This Heartbreak?   I know.  It's tiresome.  But Sarah is the daughter of my fabulous former colleague, Laura Dooley, and I can honestly say that Sarah is to music what Laura is to Civil Procedure.  I can also honestly say that I don't know what that means.

I've decided to turn over a new leaf.  Today, I'm pushing people to buy Sarah's first album, Stupid Things. And the infancy doctrine has given me a reason to do so.  Readers of this blog are familiar with the infancy doctrine, which lets people under age 18 disaffirm their contracts, often without any adjustment for depreciation or damage (unless caused by the infant's tortious conduct).  Seems nuts, especially if the contracts are basically fair and the infant gets to enjoy whatever was bought without having to compensate the seller for depreciation.  Sarah's lyrics on the title track explain why this might make sense from a policy perspective:

You're allowed to do stupid things
When you're young
People look the other way
It's okay
At least that's what people say
You're allowed to try pot
You're allowed to get shot
You're allowed to do anything once
Cause you're young
Yeah you're young
Yeah you're young

Public policy analysis you can dance to.

Weekend Frivolity: Pandas Suck at Infrastructure

 

 

Parler's Lawsuit Against Amazon

Parler, the social media platform of choice for the alt-right, is suing Amazon for - among other things - breach of contract.  It claims that Amazon failed to give it thirty days' notice of termination.  I took a quick glance at AWS's Customer Agreement and the termination clause states the following:

7.2 Termination.

(a) Termination for Convenience. You may terminate this Agreement for any reason by providing us notice and closing your account for all Services for which we provide an account closing mechanism. We may terminate this Agreement for any reason by providing you at least 30 days’ advance notice.

(b) Termination for Cause.

(i) By Either Party. Either party may terminate this Agreement for cause if the other party is in material breach of this Agreement and the material breach remains uncured for a period of 30 days from receipt of notice by the other party. No later than the Termination Date, you will close your account.

(ii) By Us. We may also terminate this Agreement immediately upon notice to you (A) for cause if we have the right to suspend under Section 6, (B) if our relationship with a third-party partner who provides software or other technology we use to provide the Service Offerings expires, terminates or requires us to change the way we provide the software or other technology as part of the Services, or (C) in order to comply with the law or requests of governmental entities.

If the agreement I found is the same as what Parler signed, it seems that Amazon would be able to argue termination for cause under 7(b)(ii)(A) and  (C). 

Section 7(b)(ii)(A) references Section 6 which provides:

6. Temporary Suspension.

6.1 Generally. We may suspend your or any End User’s right to access or use any portion or all of the Service Offerings immediately upon notice to you if we determine:

(a) your or an End User’s use of the Service Offerings (i) poses a security risk to the Service Offerings or any third party, (ii) could adversely impact our systems, the Service Offerings or the systems or Content of any other AWS customer, (iii) could subject us, our affiliates, or any third party to liability, or (iv) could be fraudulent;

(b) you are, or any End User is, in breach of this Agreement

I think Amazon could very well argue that Parler's services did all of (a) and (b).  Regarding 6.1 (b), Amazon's Customer Agreement states

4.2 Your Content. You will ensure that Your Content and your and End Users’ use of Your Content or the Service Offerings will not violate any of the Policies or any applicable law. You are solely responsible for the development, content, operation, maintenance, and use of Your Content.

Inciting violence would be a violation of applicable law, IMHO. 

Finally, there is the limitation of liability clause:

11. Limitations of Liability.

WE AND OUR AFFILIATES AND LICENSORS WILL NOT BE LIABLE TO YOU FOR ANY INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES (INCLUDING DAMAGES FOR LOSS OF PROFITS, REVENUES, CUSTOMERS, OPPORTUNITIES, GOODWILL, USE, OR DATA), EVEN IF A PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. FURTHER, NEITHER WE NOR ANY OF OUR AFFILIATES OR LICENSORS WILL BE RESPONSIBLE FOR ANY COMPENSATION, REIMBURSEMENT, OR DAMAGES ARISING IN CONNECTION WITH: (A) YOUR INABILITY TO USE THE SERVICES, INCLUDING AS A RESULT OF ANY (I) TERMINATION OR SUSPENSION OF THIS AGREEMENT OR YOUR USE OF OR ACCESS TO THE SERVICE OFFERINGS, (emphasis added) (II) OUR DISCONTINUATION OF ANY OR ALL OF THE SERVICE OFFERINGS, OR, (III) WITHOUT LIMITING ANY OBLIGATIONS UNDER THE SERVICE LEVEL AGREEMENTS, ANY UNANTICIPATED OR UNSCHEDULED DOWNTIME OF ALL OR A PORTION OF THE SERVICES FOR ANY REASON; (B) THE COST OF PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES; (C) ANY INVESTMENTS, EXPENDITURES, OR COMMITMENTS BY YOU IN CONNECTION WITH THIS AGREEMENT OR YOUR USE OF OR ACCESS TO THE SERVICE OFFERINGS; OR (D) ANY UNAUTHORIZED ACCESS TO, ALTERATION OF, OR THE DELETION, DESTRUCTION, DAMAGE, LOSS OR FAILURE TO STORE ANY OF YOUR CONTENT OR OTHER DATA. IN ANY CASE, EXCEPT FOR PAYMENT OBLIGATIONS UNDER SECTION 9.2, OUR AND OUR AFFILIATES’ AND LICENSORS’ AGGREGATE LIABILITY UNDER THIS AGREEMENT WILL NOT EXCEED THE AMOUNT YOU ACTUALLY PAY US UNDER THIS AGREEMENT FOR THE SERVICE THAT GAVE RISE TO THE CLAIM DURING THE 12 MONTHS BEFORE THE LIABILITY AROSE. THE LIMITATIONS IN THIS SECTION 11 APPLY ONLY TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW.

So, the breach of contract claim is not looking too good in my view.  And I'm happy to finally write a blog post with TOS as the hero of the story....

 

 

Weekend Frivolity: Flash Fiction

On Losing My Wife to a Younger Man

 

At the beginning of the pandemic, my wife took up with a younger man. As is often the case, she met him through her sister who, innocently, I suppose, thought my wife would enjoy the New York Times’ Spelling Bee puzzle. So it was that my wife transferred her affections to Sam Ezersky.

 

“Oooh,” she exclaimed one morning, while taking a break from solving Sam Ezersky’s puzzle to read an article about Sam Ezersky, “he’s only 24!” I pretended not to know who she was talking about. “And I think he’s Jewish,” she continued, twisting the knife.

 

“What’s his name?” I lied. She told me. “Could be Polish,” I speculated. She was too engrossed in her article about Sam Ezersky to engage.

 

Months passed. We settled into our shelter-in-place routine. My wife’s routine was to spend some time every morning in her favorite chair, attended to by one or more cats, and to gather up the precious baubles that Sam had left for her. Making it to “genius” was her daily goal, but her sister had progressed and now aspired to the occasional Queen Bee. Thus my wife came to spend more and more time each day with Sam in the hopes of finding the last morsel of booty that he had hidden behind some unpropitious consonants or in the plain sight of an ungainly compound consisting of two familiar words.

 

I decided to join her, and she, at first reluctantly, accepted my assistance in exploring the depths of her new beloved. I would study the puzzle for hours before she woke up and then, when she was stumped on the pangram, I would glance over her shoulder and offer “would ‘uncommonly’ work”? She would wriggle with glee, embrace me and say encouragingly, “I never would have found that!”

 

And so we settled into jointly probing Sam’s consciousness. We work independently on the puzzle and then, when we are both exhausted from the effort, we combine words. We have become familiar with Sam’s quirks. He seems to like Mexican and Indian foods, and we have learned his preferred spellings of Yiddish words. He takes “boho” and “loco” but insists that “yoyo” is hyphenated and therefore out of bounds. He can be latitudinous about spelling, taking both “yech” and “yecch,” but sometimes his selection criteria completely baffle us. We forgive him when the last puzzle piece clicks into place. We share an appreciative smile and shrug, “Dunno.” Some days, it is enough if Sam’s puzzle considers us a “genius;” other days, we conclude that we are within reach of Queen Bee and redouble our efforts.

 

After a few months, I noticed that my wife sometimes gets angry at Sam. “I hate it when he puts an “i” in the middle,” she remarked one morning, quite bitterly. I clucked my tongue and agreed. More recently, it seems Sam can do nothing right by her. She hates it when there are too few words, when there are too many vowels, when there is a “k” without a “c” or a “g” without an “h.” One night as we were falling asleep, after a white-knuckled struggle to make it to “genius,” my wife practically hissed, “Would it kill him to give us an ‘s’?”

 

These days, I’m feeling pretty good about having Sam in our lives. Working on Spelling Bee is one or our common projects. We both have independent careers, and hers involves a lot of confidential information. Much of her work consists of interactions and experiences that she cannot tell me about, and my life as a professor is fulfilling for me but not exactly action-packed during COVID, since I don’t interact with my colleagues very often. Neither professional ethics nor rectitude would stop me from blabbing, but these days, I just don’t have any gossip to share with her.

 

On good days, Sam is a pal. We have the satisfaction of completing a project. We feel good about ourselves when we make it to genius and great about ourselves when we hit Queen Bee. Along the way, we can share a chuckle over our pal’s foibles. “Ratatat” again! On bad days, my wife despairs. “I think I’m going to take a break from this puzzle for a while,” she threatens.

 

Don’t worry, Sam. I’ve got your back.

Weekend Frivolity: New Year's Edition

A tribute to the other heroes who helped us make it through 2020: USPS, FedEx, UPS and other people who deliver our vital packages.  Happy New Year to all!

#1

#2

#3

Ticketmaster and Hidden Notice

A notice is supposed to be, well, noticeable.  A hidden notice is an oxymoron.  Unfortunately, the law of digital contracts seems to be a law of oxymorons.  Another such oxymoronic case, Hansen v. Ticketmaster Entertainment, Inc., was decided this week by a federal court that allowed Ticketmaster to use its Terms of Use (TOU) to shunt a pandemic-related contract dispute to arbitration. The plaintiff, Derek Hansen, purchased two Rage Against the Machine concert tickets in February 2020 and filed a class action against Ticketmaster and Live Entertainment, claiming that it retroactively changed its refund policy in response to the coronavirus pandemic. Ticketmaster filed a motion to compel arbitration claiming that Hansen agreed to its TOU at three distinct points:  account creation, account sign-in, and at ticket purchase.  The court considered only the sign-in page for the purposes of the motion. 

In order to purchase his tickets, Hansen had to sign in to his account.  Hansen argued that he did not have actual knowledge of the arbitration agreement and that constructive knowledge could not be reasonably inferred.  Judge Edward Chen of the Northern District of California, disagreed, referencing an earlier case, Lee v. Ticketmaster L.L.C., No. 18-cv-05987 (N.D. Cal.), which was subsequently affirmed by the Ninth Circuit.

The first page of the TOU contained two bolded headers.  The second bolded header stated the following:

NOTICE REGARDING ARBITRATION AND CLASS ACTION WAIVER:

These terms contain an arbitration agreement and class action waiver, whereby you agree that any dispute or claim relating in any way to your use of the Site, or to products or services sold, distributed, issued, or serviced by us or through us will be resolved by binding, individual arbitration, rather than in court, and you waive your right to participate in a class action lawsuit or class-wide arbitration. We explain this agreement and waiver, along with some limited exceptions, in Section 17, below.

In concluding that there was “sufficient notice for constructive assent,” Judge Chen cited the following factors:

-a “relatively uncluttered” sign-in page

- express language of agreement right above the “Sign in” button

- phrase “Terms of Use” in contrasting blue font

This is yet another case involving digital contract formation decided by a federal judge applying state law.  IMHO it may send the wrong message to businesses regarding best practices when it comes to drafting and presenting TOU. As I noted in this year’s annual survey of digital contracts for the ABA’s Business Lawyer, courts have become increasingly more attuned to the realities of online contracting and are examining the specific layout of websites from the standpoint of the user in assessing contractual assent, including website flow, notice of specific terms, and whether notice is presented multiple times. Although Hansen may have had notice that terms of use exist, he did not have notice of the specific terms requiring mandatory arbitration at the time he clicked “Accept.”  Although the arbitration clause was conspicuous on the TOU page, it was only conspicuous if he clicked on the hyperlink to the TOU.  That, as blog readers know, was unlikely to happen. It would have been far better for Ticketmaster to put notice of the mandatory arbitration and class action waiver immediately adjacent to the “Sign in” button, and not hidden on a different page accessible only by clicking.

Weekend Frivolity: Addressing the Concerns of Anti-Vaccers

Some analogy to this pediatrician's techniques must be available.

 

Weekend Frivolity: Germany's Celebration of Heroic Couch Potatoes

Despite the humor, there is great wisdom in this: "Our weapon was patience."

 

Weekend Frivolity: Exposing Liberal Media Bias

This SNL skit is terribly misleading.  It is the biggest scandal since the last scandal that was the biggest scandal.  The idea that Kellyanne Conway escapes from the stresses of her job by spending time with her loving family could only be the perverse concoction of a liberal media fever dream.  

 

Weekend Frivolity: Sarah Dooley Album Release Party

One of the best things about teaching at Valparaiso University Law School was getting to work with Laura Dooley, a fantastic, teacher, scholar, and colleague.  In addition, Laura comes with two lovely daughters, one of whom is the supremely talented Sarah Dooley.  Below is a video highlighting Sarah's talents as a singer, songwriter, musician, actor, and comedian.  If you like what you see, please support Sarah's art and Laura's retirement by watching Sarah' album release show tonight!

 

Weekend Frivolity: Answering a Student's Question

One of my students asked me why so many of my hypotheticals involve cats, rather than dogs.  We ran out of time before I could complete my answer, so here's the full version:

 

UCLA, Under Armour and contract defenses

In yet another pandemic-induced contract dispute, UCLA is suing Under Armour to enforce a sponsorship agreement.  Pursuant to their contract, Under Armour was supposed to provide at least $280 million in monetary payments and products over a fifteen-year term.  In return, UCLA promised to have its student-athletes and personnel wear exclusively Under Armour’s products.  Now Under Armour wants out and UCLA is calling foul. And here we are – another pandemic-related lawsuit to discuss on this blog.

Under the sponsorship agreement, Under Armour could terminate if UCLA breached any material term of the Agreement,  failed to participate in a complete regular season, or a head coach or senior administrator pleaded guilty or no contest to a “severe felony” and UCLA failed to take “reasonably appropriate actions.” There was a force majeure clause that required the party seeking excuse to promptly notify and take “all reasonable steps” to mitigate the effects of the force majeure.  It further stated that delays from force majeure would not change Under Armour’s obligation to supply the delayed items.  Force majeure was defined as an event that was (1) “beyond the commercially reasonable control” of the parties and (2) “render the performance…impossible or impracticable.”  Examples included “acts of any regulatory, governmental body and/or agency.”

(IMO I think at this point, we should all agree that this pandemic was an unforeseen circumstance and qualifies as a force majeure event, unless it was expressly excluded.  Everyone refers to it as “unprecedented” and whether it’s the governmental order that prevented the performance or the pandemic itself, i.e. someone fell ill from COVID-19, it qualifies.  Of course, if the contract was entered into after say December that would be a different story since by that time, the pandemic was arguably foreseeable).

Under Armour gave several grounds for its termination but I want to focus on its force majeure argument.  Under Armour claimed the pause of athletic events was force majeure, excusing its performance.  UCLA disputed this, claiming that the clause applies only when an event “renders the performance….by the affected Party either impossible or impracticable.” UCLA argued that “(n)othing about COVID-19 made it ‘impossible or impracticable’ for Under Armour to meet its obligations…Nor did COVID-19 make it impossible or impracticable for UCLA to meet its material obligations under the Agreement.”

I think UCLA is right to a certain extent – the pandemic related fallout didn’t make it impossible or impracticable for Under Armour to perform.  (Although I find it hard to believe that UCLA performed as expected given the circumstances).  Rather, Under Armour’s purpose in entering into the contract was frustrated.  This brings me to the all-too-common confusion between impracticability/impossibility and frustration of purpose.  Under Armour’s purpose in entering into the contract with UCLA was to have its brand associated with UCLA’s athletes and to generate publicity for its brand by having its products viewed by the huge crowds that gather to watch UCLA games. And while UCLA claims that it met its obligations, I think an argument could be made that it did not and that its performance was made impracticable/impossible by the pandemic and related government ordered shut-down.  In other words, it seems that Under Armour could claim UCLA's performance was a constructive condition to its performance but that UCLA breached - which then excuses Under Armour's performance.  

Although I do think Under Armour has a frustration of purpose defense to UCLA's complaint, I don’t think that will work to excuse it from performance entirely. If the performance of the parties can be deferred or delayed, rather than entirely excused, that seems to be the right approach to minimize damage for both parties. My guess is that courts will be doing a lot of allocating risks/fairness assessment with an eye to how it will affect third parties and future transactions.

UCLA claims that the real reason Under Armour wants out of the contract is because it is struggling financially and has been for some time even pre-pandemic.  This seems to me all the more reason that it's reasonable for Under Armour to want to escape its obligations under this contract given that it's not really getting what it bargained for given the cancellation of UCLA athletic events.

Clauses and Controversies

Mitu Gulati of Duke Law School and Mark Weidemaier of University of North Carolina Law School have a new podcast on contract clauses and controversies called...Clauses & Controversies!  The first episode is on governing law clauses and a controversy involving Venezuelan bonds.  As Mitu Gulati notes at the beginning of the episode, too often 1L contracts courses neglect to show students actual contract clauses (a problem which inspired me to write a book that uses contract clauses to illustrate doctrinal concepts).  I look forward to hearing more Clauses & Controversies podcasts - they promise to help spice up the online delivery of contract law this fall.