A Reminder About “Shall Cause”

Reed Smith has published an inaugural issue of Contract-Drafting Bulletin. One item was of particular interest to me. It’s about an October 2014 opinion from the U.S. District Court for the Southern District of New York, World of Boxing LLC v. King (PDF copy here).

Here’s the gist of it: In May 2013, boxers Guillermo Jones and Denis Lebedev fought, with Jones winning. But after the bout Jones failed a drug test and was stripped of the win. In January 2014, boxing promoters Don King and WOB entered into an “agreement in principle” in which King promised to “cause Jones [ ] to participate” in a rematch. But before the rematch, Jones failed another drug test, so Lebedev withdrew.

In the resulting litigation, WOB claimed that King breached their contract by failing to cause Jones to participate in the match. The court agreed (footnotes omitted):

If Jones could not participate in the bout, it follows a fortiori that King could not have caused Jones to participate in the bout. Therefore, King breached the Agreement.

King protests that this interpretation of the Agreement yields “unreasonable and illogical” results. It would require of King “nothing less than … personal supervision of Jones’s every action between the execution of [the Agreement] and the scheduled date of the [bout against Lebedev].” Indeed, in order to avoid liability, King avers that he would have had “to imprison Jones to prevent him from having any access to a banned substance”—clearly an untenable outcome.

While these arguments might have force, they are addressed to the wrong issue. King could be right: under the circumstances, it is possible that his contractual obligations were too onerous to be enforceable. But that question goes to whether King’s failure to perform may be excused, not to whether King in fact failed to perform. As to the latter, Jones’s disqualification plainly put King in breach.

The court then went on to hold that King’s impossibility defense didn’t excuse his breach.

So, what does this case have to say to contract drafters?

I say in MSCD, and I said in this 2010 post, that shall cause should be used only to impose on a contract party an obligation to cause a controlled entity to do or not do something. It doesn’t make sense to impose an obligation in a context where the party under the obligation doesn’t have control. You can’t cause an employee to do something, as employees can say “I quit.” You can’t cause an subcontractor to do something, as subcontractors can simply walk off the job. In those contexts, using shall cause is in effect an indirect risk-allocation mechanism. I’d rather make that explicit, using a structure other than shall cause.

But proponents of “passive drafting” might point to World of Boxing LLC v. King and say that I’m wrong—King couldn’t control Jones in the way he controls his companies, but the court found him liable for breach anyway!

My response? Sure, the court found him liable, and WOB won their courtroom boxing match with King. That might be fine for them, but I’m not in the business of winning fights—I’m in the business of avoiding fights. Whenever you impose an obligation on someone to control something they can’t really control, you’re spoiling for a fight.

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.