Six Necessary Elements of a Contract
A sports contract follows the basic legal requirements of any contract. Six elements comprise a valid contract in the United States: offer, acceptance, mutual assent, consideration, capacity, and legality. Let’s look at the basics of each one:
- Offer: This is what one party offers another party in exchange for services or goods rendered. It includes all terms and conditions for fulfilling the agreement.
- Acceptance: This occurs when the other party agrees to the offer and its terms and conditions.
- Mutual Assent: Also called “the meeting of the minds,” this generally means signing the written contract in the sense that oral contracts are basically nonexistent in the sports world.
- Consideration: This is what is offered in exchange for goods or services (usually cash), especially in the sports business.
- Capacity: This means that the person agreeing to the contract is of legal age (18 years old and above), of sound mind, and not under the influence of foreign substances while signing.
- Legality: A contract is bound by the laws within its signing jurisdiction. For instance, you cannot agree to open and operate a casino in a state or locality that prohibits gambling.
Sometimes these elements are combined into five or even three components. The five would be offer, acceptance, consideration, competency, and legal intent. The three would be offer, acceptance, and consideration. Regardless of how the contents of a valid contract are expressed, the six elements above must be present.
Types of Sports Contracts
The major professional sporting leagues, in association with their players’ associations (unions), develop boilerplate contracts for their athletes, which are known as standard player contracts. Players can negotiate additional components to these contracts, but as written, they incorporate stipulations governing relevant state laws, arbitration procedures, league rules, and liability terms, among other elements.
Another contract that some players, usually those with name or star power, are able to negotiate is the endorsement contract. Under this arrangement, the player offers his name, image, and often spoken or written endorsement for the promotion of a product or service. These contracts involve compensating the player as an independent contractor, not as an employee. The player gets cash considerations and must manage taxes and other obligations on their own.
An appearance contract is similar to an endorsement contract, but it involves the physical presence of the athlete at an event (or series of events) in consideration of cash remuneration. Again, it is an independent contractor arrangement.
Going Beyond the Standard Contract
As mentioned, players and their agents — especially players with clout in terms of importance and length of service — can negotiate components to their contracts beyond what’s in the boilerplate. Though salary and length of service are the top priorities, the player can also negotiate for a signing bonus. Signing bonuses are one way to avoid salary cap limitations imposed by the league on every team.
The player can also seek a restricted or no trade clause. This places limits on what the franchise can do with the player’s contract. No trade means they can’t assign the contract to another team via trade without the player’s consent. Restricted means the player names teams to which he would or would not agree to be traded.
Other provisions can involve injury liability and restricted free agent status, which usually means the player, the team, or either party, can renew or void the contract after a specified number of seasons. The player, in other words, can request a personal opt-out year, or the team can assign one and retain the right to unilaterally renew the deal, or not.
As with any contract, a dispute over a condition or offer in the contract can arise in the future. Players’ contracts often contain prohibitions against certain kinds of conduct that can be detrimental to the player’s ability to perform, harmful to the public image of the team, or both.
In the case of a conduct violation, depending on the league, the team may exercise the clause to modify or terminate the contract, and the player will usually object. Such disputes will often be ironed out between the player and his representative, the team, and the league and its players’ association. If the dispute ends up in court, the court will have to decide on what was the original intent of the contract.