Question 1 (40%) (approximate time: 1 hour and 25 minutes)

Anna Maria Athlete (hereafter "Athlete") is one of the world's premiere female soccer players. She recently signed a five year endorsement contract with Free Kick International (hereafter "Free Kick"), a manufacturer and world wide distributor of soccer shoes and apparel. Free Kick is obligated under the contract to pay Athlete $1,000,000 per year, payable in four equal quarterly installments at the end of each quarter of the year. Athlete is obligated under the contract to participate in a specified number of promotional events and television commercials each year and to wear Free Kick shoes and apparel at any time when Athlete is wearing soccer shoes and apparel in public.

In addition to clauses imposing the foregoing obligations, the contract also includes the following clauses:

"48. Athlete shall refrain from engaging in any conduct which might impair the value of Athlete's association with and endorsement of Free Kick products.

49. Free Kick may terminate this contract in the event that Athlete expresses any political views to the media which might impair the value of Athlete's association with and endorsement of Free Kick products."

The signing of the contract took place in Free Kick's corporate headquarters, which were located one block from an abortion clinic. On the day of the signing ceremony, the abortion clinic was the site of a demonstration against abortion. At the time of signing, Athlete mentioned her sympathy with the demonstration. The president of Free Kick told Athlete that she disagreed with Athlete but acknowledged to Athlete that it was a difficult issue.

During the first month of the contract, Athlete had mentioned her views on abortion to one magazine reporter. When her views were reported in a magazine article, Free Kick's president called Athlete to remind her not to discuss such views with the media. Athlete apologized and said that she would refrain in the future.

Five months into the contract, Athlete had undertaken all public appearances scheduled for her by Free Kick and had filmed the one television commercial scheduled by Free Kick. Free Kick had paid Athlete $250,000 at the end of the first quarter of the year.

During the sixth month, Athlete was having dinner with a close friend, Annette Work (hereafter "Annette"). Early in the evening, Annette told Athlete about how Annette was writing and posting stories about famous athletes on Annette's new home page on the World Wide Web: www.sportshero.com. Annette told Athlete that this home page, like other home pages on the World Wide Web, could be read by anyone in the world with access to the Internet who chose this web site to read.

Much later the same evening, Annette pulled out a joint and offered to share with Athlete. Athlete declined, saying that she had smoked marijuana and even snorted some cocaine a few years earlier, as a teenager, but quit because of its adverse effects on her athletic performance. Athlete also said that she wasn't so sure that marijuana was all that bad for people generally.

The next day, Annette wrote and posted on her home page a story about Athlete which quoted Athlete's statements about use of marijuana and cocaine as a teenager and quoted Athlete's opinion about the effect of marijuana on people generally.

Within a few weeks, Free Kick had received hundreds of complaints from people who had read or heard about the story posted on Annette's home page. Many of those complaining threatened to boycott Free Kick's products unless Free Kick terminated its relationship with Athlete.