Money Smart Athlete Blog

What should an athlete look for when signing a contract?

Dec 16, 2020 | Economic Environment

By Niovie Constantinou, Contributor

Professional athletes will enter into different types of contracts within the course of their career and ideally these should be reviewed by a legal advisor prior to their execution. Of course, there are a few key points that athletes should look out for when signing a contract:

  • 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 it is in good standing and that the person signing the contract on its behalf has the 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.
  • 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, perhaps 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: Both payment and performance obligations must be clear (who does and who pays what, when and how). Your obligations should be realistic, avoiding provisions that are making them difficult to meet or are too restrictive, an example being that you may not work for a competitor for a long period of time after the contract is terminated.
  • Look out for unreasonable terms: If you feel like the contract is one-sided and in favor of the other party, remember that you can negotiate the terms; the contract is not legally binding until 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 while 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 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 you.
  • Negotiate the negotiable terms: While the standard player’s contract (with their 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 bonus and other benefits like insurance. For example, eight-time Major League All-Star Mike Trout, managed to negotiate a $20 million signing bonus on top of his $426 million salary.
  • Are your obligations lawful? When entering into an endorsement contract, 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 valid. Some jurisdictions may consider that only contracts which provide necessities for the minor or which are for a purpose benefiting the minor’s employment or business may be valid.

The above are just a few points you should look out for, which however, can make all the difference in your professional sports career.  As a rule of thumb, before you sign any document you should always make sure that you understand exactly what you are signing and, needless to say, you should make sure that your legal advisor reviews it thoroughly.  The stakes are usually high in professional sports contracts and you don’t want to risk getting squeezed into long-term uncomfortable situations, just because you did not give the matter the attention it merits!