Important considerations for professional sports contracts

Most professional athletes are paid on a contractual basis. They sign to play for a specific team or club for a set amount of time. They are paid a specific rate that has been negotiated and is unique to their situation. In other words, not all quarterbacks on a football team make the same salary, nor do all shortstops on a baseball team. Every single contract is unique.

As such, the basis for a contract is going to be how much money will be paid to a specific athlete over that specific amount of time. There are, additionally, complicating factors that should be considered when drafting one of these contractual agreements as well.

When the money will be paid

First of all, exactly when the money will change hands has to be defined. Some of the money may be paid out as a signing bonus, for example, that is given directly to the athlete when they sign the contract. Beyond that, they could get a yearly pay rate. A portion of this is often paid out as a game check.

Escalations in the contract

Additionally, the contract may increase (or decrease) in annual value over time. For instance, an athlete could sign a deal to be paid $50 million over five years. But that doesn’t mean that they will just get $10 million every year. They may get $30 million in the first year and the remaining $20 million split over the next four years. In many cases, though, the annual value will go up.

Specific clauses

Finally, athletes need to think about any specific clauses that they want to include. They will dictate what rights they have and what the club can do on their behalf. An example of this is a no-trade clause. Most athletes can be traded within the league so that their rights will belong to a different club. But an athlete who has a no-trade clause has the power to veto or deny any proposed trades. This gives them the ability to decide where they will play, not anyone else.

These are only three areas to consider when drafting sports contracts. But you can see how complex they are and why it’s so important to seek legal guidance before signing on any dotted lines.