Thus far, this chapter has explored the nuts and bolts of various aspects of agency law, including an agent’s express and implied authority to negotiate legally binding contracts on behalf of a principal. Agency law may sound very technical, so here we will take a quick time out to see how the law of agency can be used strategically to create value, even in difficult and delicate circumstances.

To see the possible value-creating side of agency law, imagine two potential business partners who for whatever reason don’t trust each other. Maybe they dislike each other for purely personal reasons. Perhaps they had a misunderstanding in the past. If the parties could somehow put aside their differences, however, they could negotiate a mutually beneficial agreement, one in which both sides would be better off.

Specifically, let’s consider the case of NBA All-Star LeBron James and Dan Gilbert, the owner of the Cleveland Cavaliers pro-basketball franchise. LeBron began his pro-basketball career with the Cavs, but when he became a free agent in July of 2010, he decided on live TV to “take my talents to South Beach” by joining the Miami Heat. “The Decision,” as it became known, upset many Cleveland fans, who felt betrayed by their hometown hero. The owner of the Cavs, Dan Gilbert, even wrote an open letter publicly criticizing James’s decision to leave Cleveland.15 Among other things, Gilbert described the decision as a “shameful display of selfishness and betrayal by one of our very own” and a “shocking act of disloyalty from our home grown ‘chosen one.’”

Now, fast forward to the summer of 2014. LeBron James’s contract with the Miami Heat is about to expire. At this stage in his career, LeBron James is seriously considering the possibility of returning to Cleveland, and Dan Gilbert would probably like to have his franchise player back in order to win a championship— but in real life, how will James and Gilbert be able to put aside their past personal differences in order to make a new deal? Agency law, that’s how! Simply put, instead of negotiating directly with the owner of the Cavs, LeBron could ask his sports agent Rich Paul to negotiate a new deal with Dan Gilbert on his (LeBron’s) behalf.16 After all, an agent has the authority to enter into legally binding contracts on behalf of a principal. As a result, the Cavs’s owner has the legal assurance that whatever agreement he is able to negotiate with Rich Paul will be binding on LeBron James himself. The rest, as they say, is history.

CRITICAL THINKING QUESTIONS

1. In real life, LeBron James’s agent Rich Paul negotiated a new deal on LeBron’s behalf with the owner of the Cavs in July 2014. But what if a  later LeBron had a change of heart and decided to retire instead of honoring his new contract with the Cavaliers?

2. Given the scenario described in Question 1, what legal remedies would Dan Gilbert have against LeBron James? Would Rich Paul (LeBron’s agent) also be legally liable on the contract?