Non-legal professionals often complain to lawyers about the “fine print” and the “boilerplate” provisions. A force majeure provision is one of those “boilerplate” provisions that appears at the very end of an agreement. If an agreement is twenty (20) pages long, the force majeure provision will undoubtedly be on page nineteen (19) or twenty (20). The common force majeure provision addresses Acts of God (i.e., a hurricane), war, terrorism, and riots, but some such provisions address governmental orders and provide rights of termination. The COVID-19 pandemic has allowed legal counsel to raise and fight about the application of the force majeure provision and associated termination rights. The contract language of the force majeure provision is extremely important. Most thorough contracts also have a provision that states the headings and captions in the agreement are not controlling, thus the language in the force majeure provision is operative.
In 2016, UCLA and Under Armour announced a record-breaking apparel and sponsorship agreement that outfitted UCLA student-athletes in Under Armour apparel in exchange for $280 million in monetary payments and apparel. In June 2020, Under Armour announced that it would terminate its relationship with UCLA by asserting the COVID-19 pandemic as a trigger to the agreement’s force majeure clause and associated termination rights. As a result, on August 26, 2020, UCLA filed suit against Under Armour asserting that Under Armour breached the agreement between the parties, breached the implied covenant of good faith and fair dealing., and promissory estoppel for failing to provide the apparel ordered by UCLA on June 22, 2020.
Under the terms of the agreement between the parties, Under Armour agreed to provide UCLA with athletic and athleisure apparel, footwear, accessories, equipment, and fitness products, as well as other financial support over a fifteen-year period running from July 1, 2017 through June 30, 2032. The agreement called for Under Armour to pay UCLA $280 million, which included (1) a signing bonus of $15 million; (2) rights fees in the total amount of $135 million; (3) a minimum total spend of $15 million on marketing; (4) $150,000.00 to upgrade and re-brand UCLA’s bookstore; (5) a creative services fee of $2 million to re-brand UCLA’s athletic facilities; (6) a total product allowance of $112.85 million; and (7) bonuses based on the meeting of certain additional criteria. Additionally, UCLA was permitted an annual product allowance of $6.85 million. There are additional obligations set forth under the terms of the agreement between the parties.
On June 22, 2020, Under Armour informed UCLA that it intended to terminate the agreement and asserted three grounds for doing so: 1) the force majeure provision as a basis for immediate termination by arguing that the NCAA and PAC-12 cancelled athletic events for more than one hundred (100) days; 2) termination of the agreement in accordance with Section VIII(C)(2)(c), which permits termination when “UCLA ceases for any reason to field a NCAA Division I Core Team or one of those Core Teams does not participate for any reason (other than for a Force Majeure Event) in a complete regular season, missing at least fifty percent (50%) of the scheduled games during the regular season.” Under Armour argued that UCLA’s baseball team failed to complete its regular season; and 3) termination of the agreement in accordance with Section VIII(C)(2)(f), because UCLA had failed “to take reasonably appropriate action(s)” following the arrest and indictment of a former UCLA soccer coach in connection with “Operation Varsity Blues” college admissions scandal. UCLA refuted each and every basis for termination. The court, and possibly a jury, will be challenged with reviewing the language of the agreement closely to determine the plain meaning of the words used therein.
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