Eckles v. Sharman

Brief Fact Summary. A basketball coach was sued after leaving the team he had been coaching to coach another team.  It was unclear whether there was a valid agreement between the coach and his original team.

Synopsis of Rule of Law. A severability clause "is but an aid to construction, and will not justify a court in declaring a clause as divisible when, considering the entire contract, it obviously is not."

Facts. The Defendant-appellant, Sharman (the "Defendant"), was the head coach of a N.B.A. basketball team in San Francisco, the Warriors.  In 1968, the Defendant was persuaded to leave the San Francisco team and coach an ABA team in Los Angeles, the Stars.  The Defendant entered into a contract under which he would be paid $55,000, with yearly increases of 5%.  Additionally, the Defendant was given the "option to purchase 5% ownership of the Club" and to participate in a "Pension Plan".  The contract also included a provision saving the rest of the agreement, if any of the other provisions were deemed invalid.  The Los Angeles basketball team was sold to the Plaintiff, Mountain States Sports, Inc. (the "Plaintiff").  At the time of this suit, the Plaintiff was bankrupt so R.T. Eckles was substituted in the lawsuit as the Plaintiff.  After the Plaintiff bought the Los Angeles team, it was moved to Utah, and the Defendant agreed to go with the team.  Although the parties discussed the Defendant's pension rights, no formal agreement was ever reached.  In 1971, the Defendant resigned and began coaching the Los Angeles Lakers, an N.B.A. team. The Plaintiff brought suit against the Defendant alleging breach of contract and a claim of tortuous inducement against the Los Angeles Lakers.  The lower court granted the Plaintiff a directed verdict as to the question of liability.

Issue. Were "the option and pension were so essential to the contract that failure to agree on the pertinent terms made the contract unenforceable?"

Held. Maybe.  In California, for a contract to be enforceable, "the parties must agree on the essential and material terms." However, "[i]f a contract has been agreed upon and all that remains is good faith negotiations or elaboration of non-essential terms, the contract will be held legally cognizable despite the uncertainties." As to the severability clause in the parties' agreement, the court observed that it "is but an aid to construction, and will not justify a court in declaring a clause as divisible when, considering the entire contract, it obviously is not." The questioned that must be asked is whether the clauses the parties intended to be severed "are essential to the contract."  The court observed that there was evidence pointing in both directions as to the parties' intent with regard to the option and pension clauses.  The court could not conclude as a matter of law that the option and pension clauses were unessential and thus severable.  Further, the tortuous inducement of breach claim against the Los Angeles Lakers had to be reversed because it is not clear whether the Defendant's contract was enforceable.

Discussion. The outcome of this case is not governed by the Uniform Commercial Code ("UCC"), because services, not goods are involved.  Prior to apply the UCC, be sure to always determine whether goods are involved.