Sunday, November 27, 2011

Express Conditions and the Doctrine of Prevention in The Muppets

In 1979 Kermit the Frog, on behalf of the Muppets, entered into a “standard rich and famous” contract with studio executive Lew Lord. The fine print of the contract included a clause which transferred the Los Angeles property of the Muppet Studios to energy magnate Tex Richman for the ostensible purpose of establishing a museum. An express condition of this contract, buried in the fine print, stipulated that the Muppets shall relinquish all rights to the property, and that these rights will transfer to Richman unless Mr. The Frog can raise $10 million by a certain date in 2011.

It is apparent that Lew Lord wrote this contract in bad faith. When Kermit the Frog signed the “standard rich and famous” contract in 1979, he apparently did not realize that Lew Lord’s standard form contract included any language regarding the Muppet Studios property. Most importantly, even though Kermit did sign away the rights to the property, the language suggested that the purpose of this transfer was to build a museum. Richman’s ulterior motive for purchasing the land was to extract valuable oil deposits which lay beneath the old Muppet Studios. Hence this disagreement constitutes a serious matter of non-disclosure. If the Muppets knew that there were oil deposits under the property and Richman’s true interest in purchasing the property was in their extraction, then it is unlikely that Kermit the Frog would have agreed to the sale on these terms or at all. Therefore, if Richman were to sue for specific performance, the Muppets can raise the matters of non-disclosure and general bad faith dealing for a rescission of the contract.

In addition, the Muppets attempted to raise the $10 million as stipulated as an express condition to void the transfer of the Muppet Studios complex to Richman – and they did substantially perform upon this condition by raising $9,999.99 in a Telethon. The Muppets unarguably failed to meet this express condition, despite the fact that they engaged in unlawful behavior and kidnapped Jack Black in attempting to do so. Fozzie Bear even posed the question, “What’s more illegal – minorly inconveniencing Jack Black or letting Tex Richman take over Muppet Studios?”; the rest of the Muppets replied, “Kidnapping Jack Black!” Whether or not a court might find that the Muppets committed the criminal act of kidnapping or merely the intentional tort of wrongful imprisonment appears to be a moot point because this act was merely incidental to the Muppets’ attempt to raise $10 million and fulfill the terms of the contract.

Indeed, the Muppets did not fulfill the express condition of the contract pertaining to the raising of $10 million in order to prevent the transfer of the Muppet Studios to Richman. However, Richman acted in bad faith by sabotaging the Muppet Theater’s electric and phone lines, plunging the theater in darkness and preventing the phone bankers from receiving monetary pledges. According to the Doctrine of Prevention, a condition of a contract is excused if one of the parties wrongfully hinders of prevents the condition from occurring. It is apparent that Richman’s sabotage of the electric and phone lines was intended to prevent the Muppets from fulfilling the condition pertaining to the raising of $10 million, and thus a court would most likely excuse the non-performance of this condition.

The Muppets did not fulfill one of the express conditions of the contract, and under normal circumstances a California court would most likely hold that the terms of the contract are binding and that Tex Richman is the rightful owner of the Muppet Studios property. However, it appears unlikely that a court would enforce the contract’s language regarding the transfer of the Muppet Studios to Richman due to the Lew Lord’s bad faith dealing and Richman's wrongful activity in attempt to prevent the Muppets from fulfilling the terms of the contract.


illuminatus said...

Lol excellent indeed.

Still counsel I must quibble on a few points. Mere non-disclosure does not rise to the level of misrepresentation in bargaining.

Good faith bargaining depends upon the parties and the facts. Is Kermit the Frog not a sophisticated businessman? Mr. Frog has negotiated complex entertainment deals with Orson Welles, among others. Is an experienced negotiator like him operating at arm's length not able to read a standard form contract? It seems he neglected to do so at his peril.

"Good faith" is not some magic word that sweeps aside binding legal agreements and the sacred policy of private ordering. Posner be saved.

Rebecca Mecomber said...

Wow. It's not easy being green.


Pily said...

I'm pretty sure that it turned out their counter/display had malfunctioned and they had really only raised $999.99..... but maybe one could blame at least some of that on the electrical malfunctions caused by said bad dude anyway.

... is it sad that the only movie I've seen in theaters since June 2009 is the Muppets movie?