Darelle Revis signed a six-year contract with the New York Jets in 2007 that guaranteed him at least $11 million in base salary and bonuses. His base salary for the upcoming 2010 season is $550,000, which is relatively low for a player of his position, cornerback, given his performance to date. Last year Revis finished second in the balloting for NFL defensive player of the year, and he was selected to the NFL’s Pro Bowl in two of his first three seasons. Jets coach Rex Ryan, a noted defensive specialist, said Revis is the best cornerback in the NFL and one of the best defensive players he has ever worked with.
Revis, no doubt taking Ryan’s praise at face value, asked the team to renegotiate his contract, in effect replacing the remaining three years on his current deal with a new ten-year agreement. The Jets are reportedly amenable to that, but the two parties cannot agree on compensation terms for a new contract. The New York Daily News reported that Revis wants total compensation—salary and bonuses—of $160 million, while Jets ownership has offered $120 million. Revis has not reported to the Jets training camp pending resolution of this disagreement.
Listening to media reports, there seems to be a roughly even split between those who think the Jets should take a hard-line stance against Revis—who “refuses to man up and honor his contract,” as many commentators have put it—and those who think the Jets should just pay Revis what he wants and get him back on the field. The former group interests me more, because I wonder how far these “honor his contract” folks would follow their own logic.
First, let’s examine Revis’s actions according to a libertarian theory of contract—i.e., the title-transfer theory of contract expounded by Murray Rothbard, Stephan Kinsella, and others. This theory normally defines a contract as “one or more transfers of title to alienable property, usually titles exchange for each other.” Kinsella applies to this to employment agreements:
A contract in which a payment is to be made for the performance of a service, such as an employment arrangement, is not an exchange of titles because the employee does not transfer any title. Although it may be referred to as an exchange of title for services, such a contract is better viewed as a unilateral, but conditional, future transfer of title to the monetary payment, conditioned upon the specified services being performed. That is, if you mow my lawn, then title to this gold coin transfers to you. Again, the transfer of title in this case is both expressly conditional and future-oriented. Title to the coin transfers only if the lawn is mowed, and I still own the coin.
Revis’s contract with the Jets follows the model agreement required by the NFL’s Collective Bargaining Agreement with the NFL Players Association. The model agreement spells out the conditions for a player to receive his base salary:
Club employs Player as a skilled football player. Player accepts such employment. He agrees to give his best efforts and loyalty to the Club, and to conduct himself on and off the field with appropriate recognition of the fact that the success of professional football depends largely on public respect for and approval of those associated with the game. Player will report promptly for and participate fully in Club’s official mandatory minicamp(s), official pre-season training camp, all Club meetings and practice sessions, and all pre-season, regular season and postseason football games scheduled for or by Club. If invited, Player will practice for and play in any all-star football game sponsored by the League. Player will not participate in any football game not sponsored by the League unless the game is first approved by the League.
Base salary is paid “in equal weekly or biweekly installments over the course of the applicable regular season period, commencing with the first regular season game played by Club in each season.” Bonuses are paid as provided for in the individual player contract. For example, Revis received a signing bonus of $4.7 million in 2007 and a $5.7 million bonus for making the Jets’ opening-day roster in 2009.
The important thing to grasp here is that even though we refer to Revis’s contract as a single document, it is really a series of future, unilateral title-transfers from the Jets to Revis: The signing bonus was conditional only on Revis signing the contract, the roster bonus conditional only on Revis making the roster for that season, and so forth. These prior title-transfers were never conditional on Revis playing out the entire six-year length of the contract.
In the present situation, Revis failed to report to the Jets pre-season training camp, which violates the conditions set forth in the model contract. The Jets therefore do not have to pay his 2010 salary or future bonuses until he complies (the Jets can also fine Revis daily under the CBA). Revis has not obtained title to any property unjustly—i.e., committed fraud. Ultimately, this is not a case of Revis failing to “honor his contract,” but of a contract clearly spelling out the conditions of the underlying series of title-transfers.
Now as I said above, I wonder how many people who criticized Revis for failing to “honor his contract” would carry that logic through. Suppose Darelle Revis was just an anonymous middle-class worker who walked away from his mortgage. Karen DeCoster has written extensively on this subject:
[T]he mortgage is a business decision and a business contract is signed. The bank agreed upon the collateral (the house) and made the risk based on its own assessment of the collateral value. The mortgage contract is honored during a strategic default when the homeowner turns over the keys and walks away. Outside of any special contract spelling out additional obligations, there is no moral obligation to stay in the contract. There is not a moral question inherent in the contract. (emphasis in original)
This isn’t to suggest that Revis holding out for a new contract with the Jets is the equivalent of walking away from a mortgage. One important difference is the role of the state. Barack Obama is unlikely to order the Jets to renegotiate Revis’s contract, but his regime is happy to forcibly “renegotiate” thousands of mortgage contracts in an effort to “keep people in their homes” — that is, homes that are destroying individual balance sheets in an attempt to maintain the illusion of the government’s false credit bubble. Individuals who walk away from their mortgages are scorned for their “selfishness” in refusing to put the public image of the government-banking complex, as DeCoster called it, ahead of their own financial needs.
Darelle Revis’s contract situation is nowhere near as weighty as the collapse of the housing market. Revis is presumably not facing financial ruin, but he is in a position to assess his financial objectives for the short and long term. NFL players generally have short careers (the average is about four seasons) and smart players know they have to maximize their income while their talent is peaking. Revis is taking a risk by demanding a new contract — a risk that is not insured by the government or its bureaucrats — and it may blow up in his face. Such is the nature of risk.
{ 24 comments }
I am curious about two things here. The first involves the nature of Revis’s contract, and the second involves libertarian contract theory.
The Contract question:
Is Revis’s contract in fact a (1) unilateral contract as here characterized, or is it a (2) bilateral contract? In other words, does it boil down to (1) “If you play, we’ll pay you,” or to (2) “I, Revis, promise to play,” and “We, Jets, promise to pay”?
The Theory Question?
Is this unilateral vs. bilateral bit a valid distinction in libertarian contract theory, or does it view all executory contracts, that is, those to be performed in the future, as a unilateral contract (“I’ll pay if you do to the job” without a binding promise that you’ll actually do the job)?
Wouldn’t a bilateral contract for labor boil down to involuntary servitude? Albeit compensated.
It’s not involuntary if both parties agree. Involuntary and compensated servitude would be a military draft. You get paid for your efforts, but you didn’t have any say in whether you did it or not. The Jets don’t have the ability to roll out into New Jersey and force random people off the street into the front line.
ok,
but see Steve Gillman’s comment below. Could you comment? I’m interested in your comment cause I’ve been following other blog threads and you seem to be “not stupid”
I guess my point is: Even if you walk into it with eyes wide shut, if you MUST perform or suffer legal penalty, is that not involuntary servitude?
It would come down to the nature of the contract.
Mainly, if in this case Revis accepted no payment beyond the games he actually played in, the Jets would have no moral right to expect Revis to continue playing any further games even though the contract may state he would play for them through a specific date. The only way Revis would be morally and ethically obligated to continue is if he accepted payment for those games.
Still, it is not involuntary servitude even if there is a penalty attached, this is because the contract creates a specific requirement to cancel the contract prior to the agreed-upon end date. This is understood as a choice. He can chose to terminate his service to the team and take the penalty or he can chose to continue playing games.
The only point where involuntary servitude can be argued is if there is a method of force involved. If the contract does not specify any early termination and there are no outstanding requirements to perform for prior payment, either party should be able to pull out at any time without penalty. But, if a court becomes involved and dictates that the contract must be fulfilled to the end despite any requirement to the contrary and utilizes a police force or other coercive action to force the continued participation, then we have a clear case of involuntary servitude.
All contracts have a means of early termination. Even in the case of termination penalties, both parties involved agreed to the terms of early termination and neither parties are not stripped of the option to discontinue service. The only way there can be an element of involuntary servitude is if one or both parties are stripped of their capability of discontinuing contractual duties.
Well, it’s a unilateral contract by the libertarian definition because there is only a one-way transfer of title to property (the cash paid to Revis). By the definition you suggest, it’s bilateral, since there are mutual promises. I suggest you read the Kinsella article I linked to in the post for more information on this subject.
Will do. Sorry, I didn’t see the linked name until just now.
Actually, the link to Kinsella is broken.
Fixed.
From what little I remember from business contract law from college, I think the nature of a contract in this case is that neither party is under any requirement to continue it. A contract can be voided at any time unilaterally by either party and all that either party is responsible is for payments of labor already performed, payment of materials already received, or the delivery of materials or performance of labor for payments already received. No one is due any damages or penalty unless there is an explicit early cancellation penalty depending on which party pulls out of the agreement.
Basically, I don’t know the full nature of the contract that Revis signed with the Jets. We don’t know what clauses and agreements are within. But I do know that, in standard contracts, any party in the contract can pull out at anytime and only pay any agreed-upon early cancellation penalties and all that is obligated is performance for payment already provided or payment for performance already provided.
Based on the model contract in the collective bargaining agreement, the club can terminate the agreement at any time without penalty (unless the termination is related to an injury incurred on the job, in which case the player may receive an injury settlement). Individual player contracts differ on whether the player may terminate the agreement.
Contracts involving collateral on a fractional-reserve loan are an even more interesting case. Under standard contract law, the party in default must make the other whole. But on a FRB loan, after paying, say, 10% of the principal, the bank has already been made whole in terms of its original capital allocation. After the contractual relationship has been terminated, on what grounds can it also seize the house and sell it for additional profit? Because it made irresponsible promises to depositors that then become jeopardized?
Bless you.
That sounds to me like saying that if some guy lends me in several installments over time a large amount of money–totaling more than he ever had at any particular time–then I only need to pay him X amount, where X is the maximum amount of money he had at any particular time. After all, the guy is made whole, except for the rest of the money that I owed him, which apparently doesn’t matter. (Fractional-reserve banking is not the only way for people to owe you more money than you have ever had.) And who else do you suggest should own the house–the defaulting homeowner who, by assumption, hasn’t paid for it? I find your “and sell it for additional profit” phrasing suspicious as well; I don’t see how that’s relevant, unless you think making a profit is a bad thing. (“It is a bad thing when you do it unjustly.” Then the unjust thing that you do to make the profit is the bad thing; the fact that you make a profit is a side effect, and mentioning it is a distraction. What, would the unjust thing you do be any less bad if, instead of making a profit, you gave the money to help raise kids?)
If fractional-reserve banking is implemented so that “I have X amount of money in my account” means “I can walk up to the bank at any time [or perhaps with some delay, if it isn't an on-demand retrieval account] and demand up to X amount of money, and the contract binds them to either fork over that amount (and replace the number they have written for my account with the number X – [the amount withdrawn]) or subject themselves to the usual bankruptcy routine”, and loans to other people are implemented the way any loans are done, then I don’t see what’s wrong/inconsistent/illegal about it. Maybe potential customers, if they thought about it, would think, “Gee, this means that if the bank goes splat with only 10% as much in assets as it has in debts, then I could lose 90% of my money!” and invest in another bank, one that maintained full (or at least fuller) reserves. Fractional-reserve banks, like slot machines, might be a stupid thing to put your money into; but that doesn’t mean they should be illegal.
Those who criticize players (such as Revis) for not “upholding” their contracts often employ a double standard. Teams regularly sign players to multi-year deals only to cut them later in the year, despite the fact that the players are capable of, and willing to, continue playing.
In fact, in the NFL it is the teams who most often renege on contracts, not players. However, since players only rarely hold out for a new contract against the team’s wishes, they receive the most media attention.
Daniel —
I think your point is well taken, but to maintain my own consistency, I would note that teams do not “renege” on their contracts at all. The model contract contains express terms regarding termination of the agreement:
“Player understands that he is competing with other players for a position on Club’s roster within the applicable player limits. If at any time, in the sole judgment of Club, Player’s skill or performance has been unsatisfactory as compared with that of other players competing for positions on Club’s roster, or if Player has engaged in personal conduct reasonably judged by Club to adversely affect or reflect on Club, then Club may terminate this contract. In addition, during the period any salary cap is legally in effect, this contract may be terminated if, in Club’s opinion, Player is anticipated to make less of a contribution to Club’s ability to compete on the playing field than another player or players whom Club intends to sign or attempts to sign, or another player or players who is or are already on Club’s roster, and for whom Club needs room.”
Skip, I didn’t take you to be among the critics my comment was generally aimed toward. Ultimately I agree with you when you write that Revis
Just as I don’t fault a player necessarily when he holds out on his contract, neither do I blame the team if in the end they let him walk rather than give in to his demands. Certainly there are risks involved on both sides. For those who like to take the moral high ground and talk about “honoring” an agreement, these nuances are often not mentioned.
It seems that whatever one’s feelings about what Revis “should” do, he is free to refuse to work, and request renegotiation. In most theories of rights, one cannot negotiate away fundamental rights – you cannot sell yourself into slavery – therefore Revis cannot be forced to do the job – even if he previously agreed to do so. There may be some legal reasoning then for suing Revis, but that is not a practical course compared to simply renegotiating (This also suggests an advantage the party with less money always has in these matters: suing only gets you what’s there to be taken).
Are you sure Revis is not honoring the contract? Are you sure there isn’t another clause that says if Revis doesn’t report to practice and play, he doesn’t get paid. If so, Revis is just exercising that option in his contract.
Would it be illegal for him to sign a contract with another team before his contract is finished in 2013? Competitor’s advantage then, is only if he does not play. The question becomes: Is the player asking for compensation worth more than the advantage he offers over a substitute player?
If he doesn’t play according to the contract, the main result (other than not getting paid, of course) is that he is barred from being hired by any other NFL team.
He could, in theory, go to any other league and be employed, if such a thing existed. There is no competitor to the NFL in America, and like all monopolies, it only exists because it is promoted and created by government, in the form of (a) media outlets, which are federally sponsored and licensed, and which make the NFL what it is, that give the NFL special favor in terms of air time, especially by the networks, and (b) local governments granting special privileges to NFL teams, in the form of taxpayer-funded stadiums, etc.
So, this laborer, Mr Revis, is negotiating his contract with a corporation that has Big Brother standing behind it.
Assuming that he is allowed to renegotiate his terms for future compensation based on past performance, then the Jets should also be able to renegotiate the future terms downward after a particularly poor season.
I think there are other factors, as being an NFL, fan I have seen this played out often.
One, if Mr. Revis was to report to camp in unsatisfactory shape, fail to pass a physical, or something else that made him unfit to play, the Jets would be free to sever the contract. Or at least I presume.
Two, he could simply not perform as well as another player and be cut from the squad or be traded. The Jets are not compelled to employ his services. I do not know the extent to which the Jets are obligated to pay him. But, his services would not be rendered.
If he was injured during the course of his playing and further unable to play anymore, as sadly does happen, he would be unable to render services. But, as that would have occurred under contractual service, then I believe the Jets would pay him at least the remainder, or some portion thereof. Though it doesn’t count the same against the salary cap. (I’m not knowledgeable on the NFLPA agreement though) That is usually the reason players want their contracts longer, so if they are injured (and even if they could return, are still damaged goods) they still get paid. Those that opt for a short contract obviously are playing a risky game, in that they can parlay success (for instance see Matt Kassell/Tom Brady) but sadly can also lose (too many to mention).
But it is clear(er) that service contracts are not the same as property contracts, at least in the sense that the Jets don’t “lose” anything per se, as Mr. Revis has nothing of the Jets’ property.
Which begs a question: can, under libertarian contractual theory, any service ever be contractually compulsory?
Rob —
1. Your first presumption is correct. The standard NFL contract allows for termination if the player does not maintain “physical condition.”
2. As I noted above, the standard contract is very clear that the club may terminate a contract for poor performance. Trades (or assignments) may be restricted depending on the individual terms of a contract; I don’t have Revis’s agreement, only the model.
3. Also as I said above, a player terminated due to football-related injury is entitled to a severance payment that is determined in accordance with the collective bargaining agreement.
4. Although the salary cap does not apply for the 2010 season, in years where the cap existed, terminating a player accelerated the pro-ration of any bonuses. It is often the teams that want longer deals so they can prorate any signing bonus over the full term. And in the Revis case, both sides apparently want a 10-year deal; the disagreement is over compensation only. Also keep in mind, players often sign short-term deals because of restrictions in the collective bargaining agreement, such as the “franchise” tag.
5. On your final question, I don’t think service can ever be compulsory under libertarian contract theory. However, there can be “liquidated damages” provisions for non-performance, i.e. “I owe you $5,000 if I fail to paint your fence.”
Comments on this entry are closed.