Contracts in the Sports Industry

The FIFA World Cup 2022 was hosted by Qatar. A thrilling world it was, with lots of upsets. Argentina has been crowned the new world champions after defeating France in a thrilling final. Now, Lionel Messi of Argentina and Kylian Mbappe of France will be back to play together for the Paris Saint-Germain F.C. (PSG) team in Ligue 1!

How is it possible that the two of them, being from two different countries, are able to play together for a team based in Paris?! How is it that Neymar Jr. also plays for the same team, even though he is from Brazil?! Did you know that if some team wants any of the above three players to play for their team, they have to pay a hefty amount to PSG? Why is it so?

The answer lies in the fact that all three of them are professional athletes who have signed contracts with PSG. Their contract involves representing the team at various competitions, endorsing the merchandise sold by the team, making appearances, etc. It is the law of contracts that plays a significant role and enables professional athletes from different countries to represent teams from foreign lands.

This phenomenon is not restricted to football alone. All the major sports in the world involve professional players signing contracts. Like Virat Kohli for the Royal Bangalore Challengers, MS Dhoni for the Chennai Super Kings, Moritz Fürste for the Kalinga Lancers, Stephen Curry for the Los Angeles Lakers, etc. There are various types and aspects of the contracts that these highly paid athletes sign with their respective teams or franchises. We will discuss them from hereon.

Occupation of an Athlete

One of the definitions in the Oxford Dictionary for an athlete is “a person who competes in sports”.

The job description of an athlete involves a lot more though. An athlete’s job includes:

  1. Represent the team he has signed up for;
  2. Attend training sessions, team meetings, etc.;
  3. Keep himself fit, physically and mentally;
  4. Participate in community outreach events, charity events, etc.
  5. Promote the team, league, sport, merchandises, etc. as and how his contract mandates him to;
  6. Give interviews and attend press conferences;
  7. Endorse products and merchandise of the sponsors of the team.

The above list is not exhaustive. A professional athlete is expected to live up to his commitments made while signing the contract. So, he has to perform all acts as has been agreed while signing the contract.

Contracts in the Sports Industry

Professional athletes are employees of the respective teams or franchises and are compensated for their services just like any other employee in other sectors. Thus, contracts in sports are no different from the contracts that we across in our everyday life. These contracts are mutual agreements among parties and are legally binding on each of them.

All the essential elements of a sports contract are the same as any other contract. If a minor wants to enter a sports contract, his legal guardian has to sign the sports contract.

Sports contracts are usually express contracts that are personal service in nature. Personal service in nature means that the person who has signed the contract can only perform the contract. The sports industry virtually has no implied contracts as implied intentions are very difficult to prove in the sports industry.

A few subject matters in which sports contracts are signed are[1]:

  1. Player transfers: Players while in contract with a franchisee or team, can move to a new franchisee or team. For such transfers, contracts are entered where the current employer agrees to let go of the athlete for a determined fee.
  2. Endorsement and merchandise: Corporates, organizations, etc. play a huge role in the sports industry. Sportsmen in contemporary times, due to their popularity, social media, etc. are attractive candidates to help market one’s products and services. Big brands sign sportsmen to endorse their products and services. Such a subject matter leads to contracts.
  3. Players and agents/agencies: Players are represented by agents. These agents handle the professional aspects of the athletes. Contracts between agents and athletes are signed regarding representation, commissions, obligations, etc.
  4. Image rights: The sportsmen can license their images to a third party and permit them to monetize their images. These image rights are usually sought after by video game companies, corporates, etc. for their products. Contracts are a must if a sportsman wants to license his image to a third party.
  5. Media rights: Media rights usually involve broadcasting rights. Media houses negotiate with the sports governing bodies for broadcasting the sporting events on their platform. This is a very lucrative deal for the sports bodies and leads to a bidding war between media houses.

These subject matters are not exhaustive. Sports as an industry is huge. Many aspects govern the industry. So, numerous subject matters are there for which contracts are entered by players, agents, sports anchors, sports bodies, etc.

Sports contracts in India are governed by the Indian Contract Act of 1872 and The Industrial Disputes Act of 1947.

Why are contracts required in the sports industry?

Contracts formalize new relationships and make them legally binding on the parties to fulfill their obligations. In the business arena, contracts are a record of the rights, obligations, and responsibilities of the parties involved. Contracts in the sports industry are necessary for the same reasons. A few more reasons are:

  1. Clarity: Sports contracts are usually express contracts. They will help explicitly describe the rights and obligations of the parties involved.
  2. Minimize Liability: Sports contracts, when well drafted, ensure the protection of rights if any of the parties breaches it.
  3. Financial Security: Contracts ensure that the athletes and other personnel involved in the sports industry get paid. Contracts ensure financial security.

Types of Sports Contracts

There are various types of sports contracts. Some of the most common and important contracts are:

  1. Professional Service Contract/ Standard Player Contracts: This contract is usually in a boilerplate form. Regardless of their salaries and bonuses, athletes sign this contract.[2] Even though it is a boilerplate form, there can be amendments and addendums to this type of contract but the basic structure remains the same.[3]
  2. Endorsement Contracts: Endorsement contracts are the only type of contracts that are independent and establish relationships between private sponsors and the athlete. This contract does not call for an employee-employer relationship and instead the sponsors/brands get the right to use the athlete’s name, image, or likeness in advertisements.
  3. Appearance Contracts: Appearance contracts involve making appearances at public events. These events can be at any business, organization, sporting camp, institute, etc. Athletes are compensated for making an appearance at these events.
  4. Insurance Agreements: Insurance agreements are also referred to as indemnity agreements. Sportsmen are susceptible to injuries. These agreements are vital to ensure the safety and well-being of the athletes. These agreements cover events such as injury, accidents, etc.
  5. Agency Contracts: Professional aspects of an athlete are managed by agents. The principal and agent relationship is covered under this contract.

If in any contract, the covenants extend beyond the scope of the terms of the contract, it would be void and not enforceable. This is a “restraint of trade” and is in contravention of Section 27 of the Indian Contract Act of 1872.

Essential Clauses in a Sports Contract

  1. Title Clause: The title of the contract helps identify the nature of the contract.
  2. Parties to the Agreement: This clause clearly defines the parties to the contract and their work profile.
  3. Player Service Clause: This clause details the roles of the athlete.
  4. Remuneration: This clause sets out the remunerations that an athlete will receive for his services.
  5. Revenue Sharing and Bonus Clause: The athlete may be hired by any company, brand, or organization. This clause discloses the terms of sharing of revenue if any promised by the hiring body.
  6. Player Restrictions Clause: This is a significant clause that teams and franchisees ensure. This clause is to make sure that the asset/employee, in this case, the athlete, does not indulge directly in any activity that involves a substantial risk of injury or permanent disability. If any player breaches this clause, the team or the franchisee will not take any financial liability.
  7. Arbitration Clause: Disputes, controversies, etc. may arise regarding the interpretation of clauses, breach, non-performance, etc. This clause ensures that the parties can request arbitration for resolving the issues.
  8. Remedies Clause: This clause deals with damages and compensations in case of violations, non-performance, etc.
  9. Termination Clause: Termination of contracts can lead to controversy and legal actions, so this clause is included to list all the conditions under which the parties can terminate the contract.
  10. Confidentiality Clause: Even though most of the clauses in a sports contract are of public nature, a few clauses can be private. This clause remains valid even after the termination or expiry/completion of a contract.
  11. Jurisdictions and Law Clause: Athletes can play for a professional team based in a different nation. The laws governing the contract and the jurisdictions thereof must be decided upon and clearly defined to avoid any predicament.
  12. Force Majeure: Force Majeure is when a circumstance, natural or human occurrence, makes it impossible for any of the parties to fulfill its obligations.

The above list is not exhaustive. A detailed contract also has clauses such as: obligations of the parties, transfer, non-compete, bonus, loyalty, holidays, survival, morality, etc. Save some boilerplate clauses, a large number of the clauses will depend on the sports that the athlete pursues. For obvious reasons, a footballer’s contract cannot have all the same clauses that an ice-skater has. For a mutual agreement, all the clauses are to be agreed upon by the parties. Clauses that might sound strange are also included in contracts if there is consensus ad idem. For example, the “no biting” clause in the contract between FC Barcelona and Luis Suarez, and the “nightclub” clause when Ronaldinho signed for Flamengo.

Player-Agent Relationship

Players have agents. These agents handle the professional aspects in the life of an athlete. The relationship between an athlete and his agent is that of a principal-agent and is fiduciary in nature. The agent handles contract negotiations, public relations, incomes, signing with brands/sponsors, finding a new team to play for, etc. The agent is legally obligated to act and make decisions that are in the best interest of the athlete he represents.

Conclusion

Sports is a growing sector of the economy. In India, the sporting industry is huge and has the potential of becoming bigger. Owing to the love for sports and the huge population, the sky is the limit when it comes to sports. Unfortunately, though, India lacks behind in terms of legislation for sports. The Indian Contract Act of 1872 and the Industrial Disputes Act of 1947 are not enough to govern the contracts in the sporting industry. This is the reason behind unfair dismissals, scandals, unregulated betting, the National Sports federations imposing their will on the athletes, etc. It is time for India to have legislation governing the various aspects of the sports industry, contracts in sports being one of them. Legislations protecting the interests of the athletes, agents, sports bodies, etc. in place would ensure the growth of the sporting industry and promote fairness.


[1] Tanisha Yadav, “Contracts in the Sports Industry and the Clauses Covered Under It”, Enhelion Blogs, available at https://enhelion.com/blogs/2021/01/19/contracts-in-the-sports-industry-and-the-clauses-covered-under-it/, Last Visited December 25 2022

[2] S.S. Rana & Co. , “Contracts & Sports Law in India”, S.S. Rana & Co.,  available at https://ssrana.in/ufaqs/contracts-sports-la/, Last Visited On December 25 2022

[3]  Madhav Gawri, “Intricacies of a Sports Contract”, iPleaders, available at https://blog.ipleaders.in/intricacies-sports-contract/#Introduction, Last Visited On 25 December 2022


Author: Simanchal Swain


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