By Niovie Constantinou
Professional athletes enter into a variety of contracts, especially Playing and Sponsorship/Endorsement Agreements, during the course of their careers.
Ideally these should be reviewed by a legal advisor prior to their execution.
There are a few key points that athletes should look out for when signing such contracts including:
- Who are you contracting with? This is the party who will be bound by the contract. If you are entering into a contract with a legal entity, ensure that it is in good standing and that the person signing the contract on its behalf has the legal capacity to do so.
- Make sure that you understand the contract. Read and review each and every clause and if you do not understand something, ask what it means; perhaps the language may need to be simplified so that it is clear what obligations the contract places on you, before signing it, to avoid misunderstandings.
- Do the terms of the contract reflect what was orally agreed with the other party? If you are seeing new terms that were not previously discussed, you should revert to the other party and ensure that anything that has been agreed has actually been written down to avoid any disputes as to whether it is legally binding.
- The agreed obligations of both parties must be clearly stated. Payment and performance obligations must be clear (who does and who pays what, when and how). Your obligations should be realistic, avoiding provisions that make them difficult to meet or are too restrictive. For example, that you may not work for a competitor for a long period of time after the contract is terminated. Such a covenant in restraint of trade may be legally void if unreasonable in scope and time.
- So, look out for unreasonable terms. If you feel that the contract is one-sided and in favour of the other party, remember that you can negotiate the terms; the contract is only legally binding when you sign it.
- Are you happy with the duration of the contract? It may be for a specified or indefinite period of time; the key is for you to be comfortable with that duration. For example, the other party may want to lock you into a long-term contract, particularly if you are an emerging talent, and whilst this may be appealing, you need to check whether you can increase your fees later on. This will ensure that you are not locked into a long-term contract with a very low fee, as was the case, for example, with NBA Champion Scottie Pippen and the Chicago Bulls.
- How is the contract terminated? Parties may be able to terminate the contract when a breach of contract occurs, or for whatever reason. If you do not wish to be locked into the contract indefinitely, you should include a provision that you may terminate the contract for any reason whatsoever by providing reasonable notice. Ensure that the notice period you are to provide is not too long and, if the other party may also provide a notice to terminate the contract for whatever reason, the notice they are to give must be adequate for your needs.
- Negotiate the negotiable terms. Whilst, for example, the standard player’s contract (with the professional team) is usually offered to all team players with the same terms, you should negotiate the terms that are specific to you, such as: your salary; signing on bonus; and other benefits like insurance. For example, eight-time Major League All-Star Mike Trout, managed to negotiate a $20 million signing on bonus on top of his $426 million salary!
- Are your obligations lawful? When entering into an endorsement contract, for example, make sure that you are not prohibited from endorsing that specific product. For example, certain leagues prohibit individual players from endorsing alcoholic beverages or tobacco products, and the NFL has a policy that players may not endorse certain nutritional supplements.
- Are you a minor? You should check how your jurisdiction treats minors entering into a contract, to ensure that the contract will be legally valid and not void for lack of capacity. In some jurisdictions, for example, only contracts which provide necessities for the minor or which are for a purpose benefiting the minor’s employment or business may be legally valid. The contract may need to be signed as well by the athlete’s parent or legal guardian.
These are just a few points that an athlete, especially one beginning his/her sporting career, should look out for; they can make all the difference in your professional sports career.
As a rule of thumb, before you sign any contract, you should always make sure that you understand exactly what you are signing; and, most importantly, you should make sure that your legal advisor reviews it thoroughly and advises you accordingly.
The stakes are usually high in professional sports contracts and you want to avoid the risk of getting squeezed into any long-term uncomfortable situations, just because you did not give the matter the attention it merits at the outset.
Always remember: foresight is the name of the game!