Contracting Correctness: A Rubric for Analyzing Morality Clauses

By Abril, Patricia Sánchez; Greene, Nicholas | Washington and Lee Law Review, January 1, 2017 | Go to article overview

Contracting Correctness: A Rubric for Analyzing Morality Clauses


Abril, Patricia Sánchez, Greene, Nicholas, Washington and Lee Law Review


Table of Contents

I. Introduction ........................................................................ 5

II. Morality Clauses: Taxonomy and Evolution ...................... 9

A. Taxonomy .................................................................... 10

1. Bad Behavior Clauses ........................................... 10

2. Reputational Impact Clauses ............................... 11

B. The Logic and Evolution of Morality Clauses ............ 12

1. Political Correctness and Sensitivity ................... 19

2. The Role of the Internet and Social Media ........... 25

3. Businesses' Increased Political and Values-Based Engagement ................................... 29

III. Legal and Policy Challenges to Morality Clauses ............ 32

A. Mutual Assent and Definiteness ................................ 36

B. Subjective Enforcement and Bad Faith ..................... 40

C. Concerns of Free Speech and Expression .................. 43

D. Bargaining Power and Unilaterality .......................... 46

E. Privacy Rights ............................................................ 48

IV. A Model Test for Morality Clauses ................................... 50

A. Nexus Between Misconduct and Business Interest ....................................................................... 51

B. Degree of Meaning Transfer: What is the Likelihood of Association? .......................................... 55

C. The Scope and Definiteness of the Restrictive Clause ......................................................................... 58

1. Legal Behavior ...................................................... 59

2. Prohibiting Speech ................................................ 60

D. Impact of Offending Behavior .................................... 62

1. Actual Occurrence ................................................. 62

2. Known or Likely to be Known .............................. 62

3. Likely to Cause Damage to the Imposing Party ...................................................................... 63

E. Burden on the Restricted Party ................................. 64

1. Parties' Relative Bargaining Power ..................... 64

2. Employee's Reputation ......................................... 66

F. Application of the Model Test ..................................... 68

V. Conclusion ......................................................................... 74

I. Introduction

Since the beginning of time, people have sought to get out of deals because they no longer wanted to be associated with the other party in the public's view. Maybe the offending party broke the law, embarrassed himself, or stated an unpopular political opinion. Or perhaps the desired rupture had more to do with a soured relationship, bad faith, or even discrimination.

Morality clauses1 generally grant a contracting party the right to terminate if the other party behaves in an objectionable manner or attracts disrepute.2 These unilateral contract provisions are usually broadly drafted, allowing for expansive and often highly-subjective interpretations.3 A product of the twentieth century, morality clauses found their genesis with libertine actors in the Roaring Twenties4 and have grown to near-universality in the sports and entertainment industries today.5

To date, almost all of the legal scholarship on morality clauses focuses on high-profile personalities in endorsement-related agreements.6 However, these contract clauses have slowly and quietly found their way into contracts and enforceable employee handbooks at all levels.7 As one author put it, "any talented individual who is or may become associated with a company or organization in the minds of the public is likely to have a morals clause included in his or her contract."8 And given the ubiquity of social media and the ease and permanence of digital information, virtually anyone can become associated with a company or organization in the minds of the public. …

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