I. REVIEW

II. OPERATION I FINANCING STADIUM CONTRACTUAL ISSUES

III. WRAP-UP

AMERICAN LEGAL SYSTEM Checks & balances among three branches Unique function of each branch Dual court system What trial & appellate courts do Types of case Jurisdiction

ANATOMY OF LEGAL PROCEEDINGS

Complaint answer discovery settle or trial

How a trial ends Early dismissal Settlement Full trial

LEGAL ANALYSIS & REASONING

Interpretation of law Constitution Statute Agency regulations Common law (case law)

FINANCING STADIUM: GENERAL RULE

Municipalities may not incur debt to support a private business unless it clearly serves a public purpose

Use of public finds in sports MLB: 80% NFL: 70%

FINANCING STADIUM: HOW TO JUSTIFY USE OF PUBLIC FUNDS?

Q at issue: Whether building a stadium for a sport franchise serves a significant public purpose

What is public purpose? Is there any unique value involved with sport

franchises?

FINANCING STADIUM: EXAMPLE #1 (BENGALS)

Hamilton county used public fund (458 million) for a new stadium for Bengals (increased sales tax by 1%)

Bengals promised more $$$ coming in & better record

Bengals kept losing & the county sued for renegotiation

Parties settled by mediation

FINANCING STADIUM: EXAMPLE #2 (TWINS)

Twins leased the Metrodome for exceptionally favorable contract terms

Twins wanted to get out of the lease for “Act of God”

Act of God: If something uncontrollable happens, a party can get out of lease contract

First, Twins sells the team to MLB for $250 million Second, MLB terminate the franchise “Act of God”

Twins may go another city under the “Act of God” provision

FINANCING STADIUM: EXAMPLE #2 (TWINS)

Court rule: “Local professional sport franchises are an important community asset and should fulfill their contractual obligations at an utmost level”

“You have argued that you are so special” “Yes, you are special so here we make you special…”

FINANCING STADIUM: GENERAL RULE

Building stadia serves public purpose in general

Use of public funds OK Opponents may not have viable legal

challenges Political Q > legal Q

CONTRACTUAL ISSUES: INTRODUCTION

Contract: “legally enforceable agreement”

Elements for contract formation Offer Acceptance Consideration No defense

CONTRACTUAL ISSUES: OFFER Clear manifestation of desire to make a

contract Example 1

“I hope I can buy a BUICK right now” “I would pay if someone can mow my lawn”

Example 2 “I will give you my house for $10,000” “I will pay $500 for using this gym on

Monday next week from 9:00 a.m. to midnight”

CONTRACTUAL ISSUES: ACCEPTANCE Must accept without additional terms

A: “I will pay $500 for using this gym on Monday next week from 9:00 a.m. to midnight”

B: “OK. But only until 11:00 p.m.” (no contract for additional term “only until…”)

Additional term Counter offer A: “I will pay $500 for using this gym on

Monday next week from 9:00 a.m. to midnight” B: “OK. But only until 11:00 p.m.” A: “OK. Then I will use it by 11:00 p.m.”

(Contract OK)

CONTRACTUAL ISSUES: CONSIDERATION Must be a “bargained for” promise (not a gift) Example 1 (no contract)

“I will give you $500 tomorrow” “I will give you $100,000 when you turn to 30

years old” Example 2 (exchange of something

contract) “I will give you my BMW for $500” “I will give you $10,000 if you quit smoking”

CONTRACTUAL ISSUES: NO DEFENSE There must not be a defense to make it

null Examples: A contract is void if

A party lacks capacity (e.g., a minor, intoxicated)

Contract made under duress (e.g., gun on head)

Contract for performing an illegal conduct Statute of Fraud applies (e.g., if contract is

for goods which has value over $500 MUST BE WRITTEN)

CONTRACTUAL ISSUES: LEASE CONTRACT

A contract between a facility owner and tenant

A sport team & stadium owner A event host & city

Try to anticipate all (hopefully) foreseeable events

Detailed contract less chance of litigation

CONTRACTUAL ISSUES: LEASE CONTRACT (COMMON CLAUSES)

Rental & revenue sharing Non-assignment & choice of law Harmless: Owner not liable for 3rd party’s

injury Indemnification: Owner will get paid back if

sued

CONTRACTUAL ISSUES: LEASE CONTRACT (COMMON CLAUSES)

Insurance clause: Requiring tenant to get insured

Force Majeure: Relieving party for Act of God

Damage clause: Tenant must pay for damage

CONTRACTUAL ISSUES: GAME CONTRACT

Example: Contract between home & visiting team

Must include: Location, time, & place of game Financial arrangement Termination clause (e.g., liquidated

damage) Promotional rights (sponsor’s rights)

CONTRACTUAL ISSUES: SALES OF GOODS

Contract about transaction of goods Must include:

Description of goods Price and payment schedule Warranty & guarantee of satisfaction How & when contract may be cancelled

CONTRACTUAL ISSUES: SERVICE CONTRACTS

Contract about services Must include:

Independent contractor provisions (≠ Employee)

Requirement of insurance Indemnification provisions Guarantee of satisfaction

FINANCING STADIUM

Use of public fund for building stadia is OK because it is deemed to serve public interest

More political than legal issue now

But court may be against sport franchise when it tries to circumvent lease terms (i.e., public asset)

CONTRACTS: ELEMENTS

Offer Acceptance Consideration No defense

CONTRACTUAL ISSUES IN OPERATION

Lease agreement

Game contracts

Sales contracts: Goods & services