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.
3 thoughts on “A Reminder About “Shall Cause””
I wonder if the result would have been different if King had instead argued from the standpoint of the parties’ intent. As in, the parties must have intended that “shall cause” meant merely “shall use reasonable efforts to cause,” because to have intended an absolute obligation to cause a free-willed human being to do something would be nonsensical. By instead framing it as an impossibility defense, King’s counsel already conceded breach.
I know that’s more a question of litigation strategy, but I still find it interesting from a contract-drafting perspective. Reason being, I certainly don’t like “shall cause”, and I invariably push back when I see it pop up in an agreement. But I have to admit, in the context of a difficult contract negotiation, where it perhaps pertained to a less-significant obligation, I might have been convinced (before reading this case anyway) to concede “shall cause” on the rationale that, “No court would interpret it as imposing an obligation that’s patently impossible.” I suppose, if the contract were tested in this court at least, I would be wrong.
There is an interesting logical inconsistency to his argument The argument he makes is about a hypothetical situation that he could not have avoided except by imprisoning Jones for nearly 6 months. The problem is,that argument discusses a situation that MIGHT have happened. That even if he DID take extreme measures,Jones might have gotten drugs no matter what he did. But remember,we are not talking what ifs. Its not enough to just say “this COULD have happened. (Your honor,I could not have killed the man if I was on the international space station when he was murdered, could I have?! Were you actually on the international space station on last Thursday?… Well no,but that’s not the point,it would be a travesty of justice to convict me of a murder when I was not even on the planet!) His entire argument is simply irrelevant because the scenario he describes where Jones proved to be so clever at smuggling in drugs or having them smuggled to him simply never happened.
Persumably,if this guy had been a sort of modern day Hari Houdini, able to escape shackles in the basement and smuggle contraband in almost anywhere,and King HAD locked him up,AND literally no one had known of this skill until 30 minutes before the fight, there might be something there. King could explain how they had caught him buck naked greased up with old french fry cartons and burger wrappers horded over his last two weeks of captivity in KIngs basement. Both shoulders intentionally dislocated. Squeezing through an 8×10” air duct in an attempt to sneak back IN so no one would know he had just managed to score some of his favorite drugs. “I swear,Ive been doing this for over 40 years and Ive never seen anything like it.My hair was dark and curly before I saw that!! What more proof do you need! Its possible that might just make his case that it not only beyond his control but beyond anyone’s comprehension.