Understanding "Unconscionability" to Understand Rory McIlroy's Claim

A Summary of Rory's Contract Dispute

At the end of November, 25-year-old Rory McIlroy, the No. 1 ranked golfer in the world, could become the third foreigner in history to earn back-to-back wins at the Australian Open after the greats Jack Nicklaus and Gary Player. That is not where his attention is focused, sadly. McIlroy is in the middle of a dispute with his former management company, Horizon Sports Management, over a representation contract that he alleges is "unconscionable" with "excessive commissions." Specifically, the sponsorship deal at issue in the representation contract involves mammoth sponsors like Nike and Bose and is worth up to $100 million for five years. McIlroy filed proceedings almost exactly one year ago and formed his own entity, Rory McIlroy Inc., a few days later. Horizon filed a counterclaim seeking lost commissions and future commissions on that contract that could be worth a considerable portion of those millions of dollars.

Due to the upcoming trial, which is not scheduled to begin until February of next year, the young star decided to drop out of at least two tournaments within the next couple weeks, the BMW Masters and the World Golf Championships-HSBC Champions tournament. He issued a statement earlier this month. "I am going to need time away from tournament golf to prepare for the trial over my legal dispute with Horizon Sports Management," he said. "The court-directed mediation process failed ... to resolve the issue."

Unconscionability & How It Applies to Rory's Claim

Unconscionability is a touchy subject, especially when it involves a high profile athlete claiming he was manipulated into agreeing to a multi-million dollar deal. An unconscionable contract is so grossly oppressive or one-sided that it lacks consideration (i.e., anything of value promised in making a contract), and, therefore, it would be unfair to enforce the contract against the disadvantaged party seeking to get out of the contract.  If a contract is unconscionable, a court will not enforce it in its entirety or will not enforce the portion of the contract ruled to be unconscionable. Courts do not find contracts unconscionable too often because the disadvantaged party needs to show a very high level of unfairness at the time the contract was formed. Moreover, there is no definitive criteria for what makes a contract unconscionable. Factors can include unequal bargaining power, superior knowledge, age, mental capacity, but usually we like to think that the parties were free to enter into a contract so as not to threaten that freedom.

Here, McIlroy's claim that he has to pay his agents too much money (compared to fellow golfer Graeme McDowell, who he claims is on "markedly superior" terms with his contract) will be challenging because he may have difficulty showing precisely how his contract is blatantly one-sided. He claims he was only an inexperienced 22-year-old when he signed the contract and that he had no independent legal advice. In contrast to McIlroy's contract signed in 2011, McDowell will be leaving Horizon at the end of the year after signing with the company in 2007. While on this contract with Horizon, McIlroy quickly rose to the top ranks and won the 2012 PGA Championship. On the other hand, he must believe the amount in controversy is worthwhile because withdrawing from tournaments to prepare for this litigation next year could affect his shot at The Masters in April as well as the general interest in the tournaments he winds up withdrawing from.

Source: Getty Images