The first thing to be considered is the validity of the contract entered between Forrest Gum and Alabama Sports Marketing. For any right or duty that arises from the contract to be enforceable, the elements of a contract that determine the validity of the contract must be shown to exist. The most basic components of a legitimate contract are offer, acceptance, and consideration (Yee-Melichar, Boyle, & Flores, 2010). Other equally important elements are capacity, legality, and the intention to form a valid contract; there must also be consensus ad idem (Dransfield, 2004).
If the above conditions are satisfied, there shall be a binding contract between Forrest Gum and Alabama Sports Marketing. Each party must, therefore, play its part in the bargaining failure to which the aggrieved party shall have a remedy in law.
Forrest Gum must appear as the CGI game model to market a game owned by Alabama Sports Marketing.In exchange for his services, he is entitled to 20% of the net revenues from the game's sales. However, to protect Alabama Sports promotion's interests, a liquidated damages provision is included, which states that if Gump fails to engage in the promotion of the CGI model game or breaks the contract in any manner, he would owe $2 million. He nonetheless, refuses to perform his contractual obligations after an argument between him and the game developer.
Owing to the above events, a question arises if Gum can be compelled to perform his contractual obligations through specific performance. To address this question, it is relevant to highlight instances when a court can order for specific performance. Some factors ought to be made before a court order for specific performance. Some of the variables to consider are:
If the damages are adequate. Where the damages cannot be adequate to compensate the aggrieved party for the loss caused by the breach, the court will make an order for specific performance. One of the instances where the court considers damages as being inadequate is where the plaintiff is unable to secure a satisfactory substitute. Cohen v Roche [1927] 1 KB 169 reflects this stance as well. In the current circumstances, Gum Forrest is thought to be ideal for the task. In the present case scenario, Gum Forrest is said to be perfect for this job. It is disclosed that there are not many world-renowned ping-pong players who would match his skills. It may, therefore, be deduced that Alabama Sports Marketing may not be able to secure a satisfactory substitute for the job. Based on the above reason, it is practical for Alabama Sports Marketing to seek specific performance so that Gum Forrest can be compelled to perform his contractual obligations.
The existence of a liquidated damages clause in the contract between Alabama Sports Marketing and Gum Forrest necessitates examination of its legitimacy. The condition states that if Gump does not engage in the promotion, thereby failing to function as the CGI model, or violates the contract in any manner, he would repay Alabama Sports promotion $2 million. Although the court and contract law allow for contractual flexibility, there are protections in place to protect parties against unjust contract conditions. Thus, even in contracts including liquidated damages clauses, the court will consider whether the clause is appropriate for enforcement.
In KOLD, LLC v. Croman, No. N13C-05-249, the court determined that liquidated damages provisions are typically legal and enforceable. Nonetheless, the court noted that for the clause to be legal and enforceable, it must be compensating rather than punitive. To evaluate the legitimacy of the liquidated provision in the contract between Gum Forrest and Alabama Sports Marketing, the court must first determine whether it is punitive or compensating. The clause in question appears punitive for the following reasons.
At the contracting stage, there is no indication of any difficulties encountered in determining damages payable in the event of a breach. Additionally, there are no grounds for the stipulated amount of damages in the liquidated damages clause. Consequently, it's difficult to assess the reasonability of the estimated amount the damages that would be paid in case of a breach caused by Gum Forrest, or whether the specified amount of damages is sensibly equal to the losses that have been caused by the breach. In KOLD’s case above, the reason for the upholding of the liquidated damages clause by the Court was because the sum of $35,000 was justified as a reasonable estimate of damages. The $2 million indicated in the liquidated damages clause as seen in the contract between Gum Forrest and Alabama Sports Marketing seems exaggerated. It, therefore, appears to play a punitive rather than compensatory role.
In conclusion, it appears that in this contract Alabama Sports Marketing can seek specific performance to have Gum compelled to perform his obligation but the validity of the liquidated damages clause can possibly be contested with success.
References
Case law
- Nutbrown v Thornton (1804) 10 Ves 159
- Cohen v Roche [1927] 1 KB 169
- KOLD, LLC v. Croman, No. N13C-05-249
Books
Yee-Melichar, D., Boyle, A., & Flores, C. (2010). Assisted Living Administration and Management: Effective Practices and Model Programs in Elder Care (p. 256). New York: Springer Pub.
Dransfield, R. (2004). Business for Foundation Degrees and Higher Awards (p. 735). Robert Dransfield.
