ELVIS DUMERVIL AND THE PRICE OF SIX MINUTES
Henry Lowenstein, PhD
Professor of Management and Law
March 30, 2013
Professors often hear the lament from students about being late to class, late with assignments. They ask why this should be such a big deal? What difference does it make if I am a few minutes or a day late? They quickly learn the importance of time in the legal environment of business and business law sections on contracts as well as it coming into play on the topic of agency.
In business, as is often the case, “time is of the essence.” In bidding on public contracts deadlines are explicit and unyielding. In the private sector with Just-In-Time production methods and financial markets that operate by the second 24/7, a late submission often costs millions of dollars, potential legal liability and the loss of careers.
The critical importance of timeliness is well demonstrated by the recent plight of NFL football’s Elvis Dumervil, formerly of the Denver Broncos, a tale that has well resonated with my students………………..
source of image: http://en.wikipedia.org/wiki/Elvis_Dumervil
Elvis Dumervil is an All-Star defensive end in the NFL’s Denver Broncos football team. An All American from
he was drafted in the 4th round of the NFL 2010 draft. University of Louisville
In July 2010, Dumervil signed a 6-Year player employment contract for $61.5 million which included a retention guarantee of $43.168 million through 2015. The contract specified that if Dumervil was on the roster at 2:00pm Central Time on March 15, 2013, he would receive a guaranteed salary of $12 million for the 2013 NFL season.
Subsequently, the Denver Broncos encountered problems with the $123 million salary cap established for each team by the National Football League (NFL). To meet its salary cap requirements, the Denver Broncos engaged in renegotiations with players to restructure contracts to meet the salary cap
Dumervil and his agent were offered an $8 million guaranteed for the 2013 season, which Dumervil intended to accept. Dumervil’ s offer, however, required signed paperwork agreeing to the terms and confirming his position on the roster by 2:00 p.m. Central Time on Friday, March 15, 2013 This duty was left to his agent, Marty Magid.
On Friday, March 15, 2013, Magid did not fax the completed paperwork to the Broncos until 2:06 p.m. Central time…..6 MINUTES LATE!
1. In accordance with the contract, missing the 2:00pm deadline automatically triggered a clause whereby the Denver Broncos released Dumervil as a free agent, thus, no contract with the Broncos. This immediately saved the team $4.869 million. (known as “Dead Money” under the NFL salary cap) which the team can now reallocate against the salary cap.
2. Dumervil may not recover the lost $4.869 million, even if the team agrees to take him back and re-sign him for another year.
3. Dumervil is out of work and has to seek another team as a free agent if one will hire him, or if the Broncos will re-sign him, both options likely to result in lower contract terms.
4. Dumervil has fired his agent. (He may have a negligence cause of action against the agent, yet to be determined.)
5. On March 26, 2013, the Baltimore Ravens announced signing now free agent Dumervil to a new 5 year, contract for $5 million per year. In
Today Mr. Dumervil expressed
satisfaction with the new team and contract. USA
Nevertheless, the SIX MINUTES cost him at least $3 million in salary a year ($15 million over 5 years) he would had received had his acceptance been received on time by the Denver Broncos. Or in other words that lateness equaled $2.5 million in salary per late minute!
LESSON: As students in contracts:
1. A written offer will be read to its plain meaning and its specific terms.
2. Terms of acceptance: In this case, the terms of the offer were specific that it must be RECEIVED by 2:00 PM CT. There is no exception to the plain reading of the contract terms.
3. Because the acceptance terms were specific, the general rule that an offer is accepted once dispatched (such as the “Mail Box Rule”) does not apply in this case.
And, as to be learned in Agency:
The principal (in this case Dumervil) is liable for the acts entered into (or failure to enter into) by the Agent when he gives the agent actual (express) authority to act on his behalf.
MOST IMPORTANTLY….REMEMBER THE COST OF 6 MINUTES. In contracts, time is of the essence.
(Sources: Mike Kilis, Broncos Release Elvis Dumervil because new contract too late,
Post, March 16, 2013 (updated) Denver
Jim Corbett, With A Wink and a nod, Elvis Dumervil was a Raven, USA Today, March 26 2013 at www.usatoday.com