Charlie Sheen’s Partying, Capacity
It’s wonderful when real world events dovetail with classroom lessons and nowhere is that more evident today than with Charlie Sheen versus Warner Brothers in Contracts classes.
The case, now in arbitration, involves Warner’s show on CBS “Two and a Half Men,” in which Sheen has starred for eight seasons. Warner and CBS terminated it last month, calling Sheen’s objectionable conduct a breach of contract. Sheen denies his conduct was a breach of contract, making Warner’s termination the breach of contract in the case.
The dispute, which Sheen should settle but appears unwilling to, will require resolving the familiar problem of “who breached first,” which hinges on many sub-issues, concerning interpretation, conditions, repudiation, and assurance of performance.
At most steps, the facts trigger a classic case that has been widely taught in Contracts classrooms for a century. One issue, addressing Sheen’s sobriety, evokes the 1908 case of Clark v. West, where a law professor’s publishing contract contemplated his abstention from drink.
The Sheen-Warner contract does not expressly prohibit the party boy from excessive drinking—or taking illegal drugs or other widely-publicized objectionable behavior. But it does contemplate that he will command the capacity to perform his role in producing episodes of the show.
Warner cites that capacity clause—among others—to justify its decision to terminate the contract as of March 7. It says Sheen’s wild behavior, fueled by alcohol and drug abuse, impairs his capacity to perform and that this failure justifies termination of the contract without pay.
Sheen’s ideal response would assert that he has not abused alcohol or drugs, but that may be difficult to sustain as a factual matter, based on public comments he has made. Instead, he asserts that Warner acquiesced in his partying behavior throughout the life of their contract.
They renewed the current version in May 2010, not long after Sheen’s widely-publicized drug and alcohol induced melee with his former wife in Aspen, Colorado. Sheen says Warner thus waived any conditions it might otherwise have enjoyed governing Sheen’s bad-boy behavior.
Warner, however, rebuts that response by stressing that the capacity clause is not one it could simply waive without getting something in return. It asserts that capacity to perform is something Sheen promised as a material part of their exchange and changing it would require a bargain.
Enter Clark v. West to frame this round of the Sheen-Warner bout: Sheen is saying clean-and-sober capacity is merely a condition that Warner can and did waive; Warner is saying that the capacity clause amounts to a promise which cannot be waived unilaterally but would require a new bargain of some kind to modify (some sort of “consideration“).
Professor Clark, then affiliated with Washington & Lee University Law School, was a prolific writer of law books. He signed a multi-year contract with West Publishing Co., a powerhouse in publishing law books, then and now. The contract stated that Clark would abstain from drinking alcohol during its term and that payment was $2 per page plus $4 per page if Clark so abstained.
Clark drank, which may explain why the book sold well, and he wanted his $4 per page payment anyway. He asserted that West knew he had been drinking while writing and acquiesced in that. West did not exactly dispute good sales or knowing that Clark had been drinking.
But West urged that Clark’s claim of waiver was invalid because it had not gotten anything in exchange for any such acquiescence. This move portrayed the abstinence provision as a promise Clark made, so any modification to it required a bargain, the usual requirement applicable to most promises (the consideration requirement). West stressed that no bargain accompanied its acquiescence.
Clark responded that the abstinence provision was not a promise he made as part of the agreed exchange, but a mere condition to obtaining premium pricing per page. Under long-settled law, anyone can waive a condition without getting anything in exchange.
The court thus faced an interpretive question: was the clause a promise, which could not be waived, or a condition, which could? It found that the clause was merely a condition, not a promise. The contract was to get an author to write a book, not a contract to keep Clark sober. The abstinence term was not a material part of the agreed exchange, requiring consideration to alter, but an administrative matter that could be altered at will, much as terms about manuscript delivery, proofreading, and citation style.
Which, then, is the clause in Charlie Sheen’s contract? To hear Sheen tell it, it is merely a condition, a nominal, quotidian matter of personal habits that Warner could readily acquiesce in—and did so. In Warner’s telling, it is the central promise of the agreed exchange, Sheen’s vital capacity to perform the role, not something it could waive by acquiescing.
Arbitrators hired to resolve this battle should find that the capacity clause is a material part of the agreed exchange, a promise, not a condition. It does not matter whether Warner at any point acquiesced in Sheen’s licentious behavior. This round thus goes to Warner–as others seem likely to do too.