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Yes, I’ve seen this every year that I've simmed. And in many cases, it's not just decent players who get released in this fashion, but star players as well. Your example of Edmonds being released is not unique, unfortunately, and it has nothing to do with the number of years that they have left on their contracts. I've seen quite a few players get released the same year they were inked to expensive, multi-year contracts after suffering season-ending injuries.
As far as your FA question is concerned, I haven't noticed this at all. If anything, big-name free agents are usually the subject of drawn-out bidding wars in my league. I think this might be contingent on how you've set up your league's finances. It's been my experience that if you give the AI the means to accumulate a lot of money, it will spend generously on FA's....almost to the point of absurdity. But that's a personal preference, and that's just how I like it.
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