Sports Contracts

A Guide for Coaches and Sports Adminstrators

Contracts in sports are no different than contracts in everyday life. Athletes are compensated for their services with a paycheck just as anyone else. This section examines the nature of personal services contracts of professional athletes. However, even the amateur athlete deals with important contract-related issues. Amateur athletes often have to make tough choices about changing their status from amateur to professional given the dramatic increase in money that may be available to be earned in their sports. Some professional athletes are paid a lot more money in one year than most people ever earn in their lifetimes.

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Sports Agents and Contracts

Sports agents serve a valuable role in terms of securing and negotiating contracts for the professional athlete. Lawyers who represent athletes have generally been trained in the fundamentals of contracts and should be familiar with the current market value of their client relative to other athletes within the same sport. However, it should be noted that hiring a lawyer is not required (nor is an agent for that matter) to secure deals for the athlete. Some athletes do not wish to hire an agent for a variety of reasons, including having to pay commissions or other fees associated with the representation. Since the athlete has unique talents, abilities, and skills, their contracts are categorized as personal services contracts.

Technically, a personal service contract may not be assigned to someone else. An assignment is a transfer of rights that a party has under a contract to another person. Why can’t a personal service contract be assigned? The talents of an athlete are unique. For example, Peyton Manning could not assign his contract to another player. His talents are so unique. The team owner would not honor such an assignment.

No one can be legally forced to work for someone for whom they do not want to work. The Thirteenth Amendment to the U. S. Constitution provides: “Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States.” This provision of the Constitution has been interpreted as including a prohibition against requiring someone to work for an employer for whom they do not wish to work.

How then do team owners get away with trading players from one team to another, since this in effect is assigning a personal service contract. Any contract may be assigned with permission of the parties. The right to assign is part of a player’s contract. However, some players have enough bargaining power to put in a do not trade clause. This keeps a team from assigning the player to a team for whom he does not want to play.

Public Nature of Sports Contracts

Though general contract principles apply in sports contracts, often such contracts are so important to the particular league or community. Communities have a vested financial and emotional interest in seeing their team perform well. Of course some sports do not receive the same sort of public exposure and generate the same widespread fan support.

The Occupation of "Athlete"

The occupation of professional athlete has become recognized as one of the most financially rewarding profession. Sports sponsors often pay thousands of dollars to an athlete to promote its product. A sports contract can have an impact on the lives of thousands of people.

Today’s amateurs must face crucial issues such as whether to continue to compete as an amateur or be lured away by money to professional teams during their sophomore or junior year of college. College sports such as football, basketball, baseball, and hockey are often regarded as proving grounds for the major professional leagues. Many athletes are urged to abandon amateur status to be compensated for their services as a professional.

Contracts for the employment of athletes should always be in writing and should contain covenants by the athlete like promising to refrain from certain acts, such as participating in dangerous activities.

Categories of Sports Contracts

Sports contracts can be divided into three general categories:

  • professional services contracts (sometimes called standard player contracts)
  • endorsement contracts, and
  • appearance contracts.

Team Contracts versus Individual Contracts The Professional Services (Standard Player) Contract

The standard player contract (SPK) is usually in a “boilerplate” form. Boilerplate is standard wording that can be reused over and over without change. Whether the athlete is involved in a league with a players association or not, the contract usually offered to the athlete and other athletes are all the same other than the salary and bonus. There can be addendums to the SPK.

Newly formed leagues often model their own contracts after one of the Big Four (NFL, MLB, NBA and NHL) in order to recognize issues relevant to team owners and athletes. Some start-up leagues, however, have taken a newer approach to professional services contracts by establishing minimal salaries for the athletes in that sport and rewarding the team and athlete on a per game basis with incentives. The now defunct Xtreme Football League (XFL), for example, offered modest salaries to its players. Such wages were comparable to wages of the average U.S. worker. This is primarily due to the fact that the league owned all of the teams rather than each team serving as a franchise for the league. None of the Big Four sports leagues are run by a single entity, Each team is a franchise and competes for players. That is a primary reason for the escalation of player salaries.

Endorsement Contracts

Unlike the professional services contract, the endorsement contract does not involve an employer-employee relationship. Rather, it is one of contractor- independent contractor.

An endorsement contract is one that grants the sponsor the right to use (i.e., license) the athlete’s name, image, or likeness in connection with advertising the sponsor’s products or services. In most professional sports, the leagues prohibit individual players from endorsing alcoholic beverages or tobacco products. Also, the NFL recently established a policy that players may not endorse certain nutritional supplements. There are no set rules for an endorsement agreement other than that they be legal. The more an sponsor feels that the athlete can assist in the sales of the particular product, the greater the likelihood of more money.

Appearance Contracts

An appearance contract compensates the athlete for appearing at a public function, sports camp, golf tournament, etc.

Drafting the Sports Contract

All professional services contracts have important common clauses. According to the standard players contract of the NFLPA, MLBPA NBPA, and NHLPA, all contract provisions have been established. except for salary and bonuses. Additionally, the players associations have group licensing arrangements in which players are compensated by licensing their names and likenesses in group package deals to trading card companies and video games.

It is important to remember that when drafting a contract, it is often a good policy to be a pessimist: Think of what can go wrong. Though most contracts begin as a beneficial relationship between the parties, it is well known that over time attitudes can change. Therefore, the contract drafter should use exceptional care to ensure that policies and procedures are provided to address situations and legal issues that might arise when something goes wrong. Good contract drafters protect their client in the event such a situation might occur.

This material was excerpted from William H. Glover's The Sports Law Handbook which can be purchased online (with forms). Mr Glover received his J.D. from the University of Mississippi School of Law in 1976, was a partner at Wells Marble & Hurst, was Assistant Professor of Business Administration at Belhaven College where he taught Sports Law among other subjects, and is currently General Counsel of US Legal Forms Inc.

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