Contracts Professional Athlete Contracts, Athlete Agreements, Endorsement Contracts and Appearance Contracts Athletes may be required to sign contracts for a number of reasons and often this is a daunting task. With all the legal terminology it can be a confusing time. The main principle is that there must be an understanding. Ensure that you understand the contract and all the terms and conditions that are included. If there is a lack of understanding, ask questions and ultimately do not sign the agreement. Never enter into a contract that you have not read and understood. Basic Contract Principles A contract is a legally binding agreement, which requires a mutual agreement between two parties. Without clear, unambiguous terms there can be no contract. The employer will generally set the terms and conditions of the agreement. At which point the athlete can: Accept – creates binding contract Reject – terminates the offer Counteroffer – Athlete sets new terms and the employer is able to decide to accept. Legally binding contracts can be made via email or other forms of communication. In general, legal contracts can be either written or oral; however, almost all sports contracts are written, and written Athlete Agreements are required by Sport Canada in order to obtain financial assistance. Why Should A Contract Be In Writing? Contracts should be in writing primarily to create a certain relationship between the parties. The contract that is formed should be as certain as possible to avoid confusion of obligations and ambiguities. Again, referring to the general principle that there must be an understanding, written contracts enable this understanding. By avoiding confusion and giving each party a chance to explicitly read and digest the terms and conditions the contract creates a more fair and equal relationship between contracting parties. Finally, written contracts provide an avenue for redress and proof of the relationship if a dispute over obligations arises. Voidability Clauses Voidability clauses are important aspects of the contract and they will explain the conditions if one party no longer intends to carry out the terms of the contract. These can take effect with regards to incentives for goals reached or performance of certain tasks, which would allow the athlete to void the contract or certain other terms to come into affect. Minors (under 18) can void a contract at any time, with the caveat that the athlete will need to pay the other party back to the position they were in prior to forming the contract. If the employer or endorser decides to void the contract the terms should be clear in the contract to the conditions under which they can do so, which may include payments or opt-out fees. This issue will be addressed later in the salary section under guaranteed and non-guaranteed salaries. The main principle is there is in many cases a way out and you do not need to feel forced or obligated to do something you do not want to or feel comfortable with. Types of Contracts 1) Professional 2) Athlete Agreements 3) Endorsement 4) Appearance Professional Athlete Contracts These contracts between the team and the player are usually standard form contracts, meaning that all team members receive the same contract terms with differences only in salary, bonus and years of service. However, if you are faced with a standard form contract this does not mean these terms are not subject to negotiation according to circumstance, and you need not sign onto anything in the standard form contract that is not in your best interest. Read through the form to understand the conditions placed upon you with regards to conduct, performance, salary and other obligations You may have seen standard form contracts in other areas of life, for example, when signing a lease for an apartment, and may be familiar with the concept. These contracts are good in the sense they are clear and have been hammered out through negotiations in the past, for example as part of a Collective Bargaining Agreement (CBA). Athlete Agreement – For Amateur Athletes An Athlete Agreement formalizes the relationship between a National Sport Organization and its athletes. Their purpose is for amateur athletes to apply for funding from the Sport Canada Athlete Assistance Program. Athlete Agreements are required to be completed by both the NSO and the Athlete who applies for funding from the Sport Canada Athlete Assistance Program. It is essentially the equivalent of Professional Athlete Contracts above. An Athlete Agreement essentially outlines the dates and duration of the agreement; the obligations of the NSO; and the obligations of the athlete. It also contains a section on what happens in case one party defaults on the agreement by not completing the agreed to terms as set out in the contract. An important note in any default provision is triggering default requires a notification of the alleged default. In other words, if an athlete feels the NSO has not met its obligations within the agreement, the athlete must notify the NSO with the particulars of the default and allow reasonable opportunity to resolve the dispute. On the other side, an NSO cannot void the athlete agreement either without notification or without giving a reasonable opportunity to address the issue. An Athlete Agreement is not automatically void if one or more of the obligations is not met – rather, it must go through the default process. A very good sample Canadian Athlete agreement can be found on the Canadian Heritage Sport Canada website at the following URL: http://www.pch.gc.ca/pgm/sc/pol/athl/115-eng.cfm Endorsement Contracts Endorsement contracts set out the terms under which a sponsor pays a sponsorship fee or provides products, services or other facilities in exchange for rights of association with an athlete or team. This type of contract essentially gives the sponsor the right to use an athlete’s name, image, or likeness in connection with advertising. These types of agreements can become far more complicated standard form athlete agreements, because they are much more open to creativity from both parties. There are very few set rules in endorsement contracts. Because you or your team/organization may have existing and enforceable endorsement contracts with other sponsors, be mindful of any conflicts of interest that may result in entering into new sponsorship agreements. In signing an endorsement contract you are selling the exclusivity to use your name and image and thus the sponsor is going to want your other contracts and actions not to conflict with their exclusivity. Potential conflicts arise between other classes of sponsors, or where product categories may overlap or conflict. For example, if you enter into an agreement to endorse a soft drink company, does this sponsorship category include mineral waters, or energy drinks? These terms need to be clearly defined before signing the contract. Consider your other legal commitments and those of the team to avoid these conflicts. The more expansive the exclusivity you are giving the sponsor, (in the previous example this would mean including mineral water and energy drinks under the soft drinks label), the more you should expect in return from the sponsor in negotiation. This is because the greater exclusivity limits your ability to sign further contracts to your benefit. Another example would be whether a watch is included in a clothing contract. Here are some further legal issues that should be addressed prior to signing to insure a proper mutual understanding of the terms in order to avoid conflicts: - The rights being granted Product and/or service category what category is the product defined under? Territorial Issues What locations does the contract require compliance with the contract - Duration and renewal rights How long is the contract for, and what rights does the athlete or sponsor have to renew. Financial terms and conditions How is the compensation defined. It could depend on appearances at events/tournaments, or could be based on performance, or usage among others. Obligations of the sponsor or organizer Product liability Insurance Injuries and other factors may prevent performance, insurance can be important to guarantee financial security of the benefits of the plan. Access to venue Event cancellation Compensation may still be required by the sponsor if the event is cancelled or the athlete cannot attend due to injury. Termination Dispute resolution procedures The first point in this list regards the ‘grant of rights’ clause. This is the most important provision as it sets out the scope of the rights granted. Avoid ambiguous or overly broad provisions that may encompass more rights than you may expect. For example, are the rights exclusive or non-exclusive? What is included in the rights package? What is excluded? Appearance Contracts This type of contract requires an athlete to appear at certain functions or events as either an individual or part of the team. Appearance contracts may be independent from the Athlete Agreements or Sponsorship contracts discussed above, or may be expressly included in the terms of those contracts, requiring attendance at events, training or games. If appearance requirements are included in previous contracts then appearances will generally not garner extra bonus payments as you would merely be fulfilling the terms of the contract; however, if these contracts are made independently, the sponsor often pays fees for the appearance and usually compensates for transportation, food and other expenses within reason. In these situations it is important that you keep a record of all your expenses arising from the appearance and submit receipts to the sponsor within a timely manor for reimbursement. Many athletes may choose to appear at events without a fee, on behalf of themselves or their team. Be aware of your contractual duties at these public events, but do not shy away as they can be important places to meet sponsors and team executives. Salary i. ii. iii. Guaranteed salary – set out in the terms of the contract as money that will be paid as long as the athlete completes the terms of the contract. Not guaranteed salary – This form of salary means that if the employer decides to terminate the contract by releasing the player they will not get paid the remainder of the salary. This is common in the NFL. As a player, guaranteed salary is preferable as it gives financial stability and shifts the burden of risk of non-performance from the athlete to the employer. If these obligations are broken, there may be a breach of contract. Breaches are complicated and the remedies to a breach depend highly on the circumstances surrounding the breach. For example, whether the parties acted in good faith and whether the breach can be reconciled. Potential remedies for breach of contract may include specific performance (ie the forced completion of the contractual terms), and financial damage awards. All of which are court ordered to enforce a contract if a breach has occurred. It is important to understand the terms of your contract to avoid an inadvertent breach, and to know when your employer or sponsor may be liable for breach of contract References: Adam Epstein, Sports Law, (Canada: Delmar Learning, 2003). Douglas Crump & David Pugsley, Contracts of Employment, 7th ed (London: Butterworths, 1997). Edward Grayson, Sport and the Law, 3d ed (London: Butterworths, 2000). S Gardiner, M James, J O’Leary, R Welch, I Blackshaw, S Boyes & A Caiger, Sports Law, 3d ed, (London: Cavendish Publishing Ltd, 2006). Online Resources: AthletesCAN, Resource material, Sports Solution. <http://www.athletescan.com/programs-services/thesports-solution/resources/>. Canadian Heritage Sport Canada, Athlete Agreement Sample: http://www.pch.gc.ca/pgm/sc/pol/athl/115-eng.cfm