CENTER FOR CONTINUING EDUCATION
Self Study Article and Self Assessment Test
Sports Law
presented by Walter T. Champion, Jr. Houston, Texas
© West Group. Permission to reprint, Prof. Walter T. Champion, Jr.
Chapter 1: Contracts
A. Formation
A valid contract is formed only if both parties intend the act of signing to be the last act in the formation of a binding contract. In evaluating contract validity, first identify the offeror and the offeree and then ascertain whether there was a proper acceptance. If the player's response includes a variance, it is a counter-offer.
In earlier versions of the contract between players and management, the wording of the contract was such that the commissioner's signature in approving the agreement was a condition precedent to the formation of a binding contract. Without that approval the player's signature was merely a counter-offer. The failure to obtain the commissioner's signature was deemed a material breach of the agreement pursuant to the contractual language of the contract. Los Angeles Rams v. Cannon (1960). Without the commissioner's signature, the player's signing was merely a revocable offer. Detroit Football Co. v. Robinson (1960).
1. Offer
A player's contract is drafted by the team, and it is the team that seeks out the services of the player. The team makes the offer and the player expresses his acceptance by signing the contract. However, if the signing is not accompanied by consideration and a withdrawal is advanced to the team before an acceptance then the signing is an authentication of a revocable offer as opposed to the formation of a binding contract. It is the intent of the parties that will determine this conflict.
2. Acceptance
The problem that arises with an acceptance is the timeliness of the alleged acceptance. Acceptance is indicated by any showing that expresses the player's willingness to be bound by the offer's exact terms.
3. Interpretation
In determining the meaning of an indefinite or ambiguous term in a contract, the language should be read in light of all the surrounding circumstances. The interpretation that is placed on a contract by the parties prior to the time that it becomes a matter of controversy is entitled to great, if not controlling influence in ascertaining the intent and understanding of the parties.
In Pasquel v. Owen (1950), the ambiguous term in question was "player-manager." The defendant, Mickey Owen, a major league baseball player, abandoned his contract to play baseball in the Mexican League when he was relieved of his duties as manager but still continued as a player. The question is whether the removal of Owen as either a player or a manager constituted a breach of contract by one party that was of such a character as to warrant abandonment of the contract by the other party. But to permit abandonment, the failure to perform by the defaulting party must go to the substance of the contract. In this case, although the contract referred to defendant as a "player-manager," it did not indicate at what time he was to function as either a player or a manager or both. Therefore, the act of relieving Owen as a manager but continuing to pay his whole salary resulted in no financial loss to the player and thus did not constitute a breach of contract sufficient to warrant the player's abandonment of the contract
B. Standard Player's Contract
Contracts in sports define the rights and responsibilities of the various participants in the business of professional sports. The so-called Standard Player's Contract (SPK) (see Appendix), is an employment contract which specifies the player's rights. The SPK will state that the player has unique skills and that the team will control the activities of the player.
The average player has little job security. For him the SPK is a contract of adhesion. However, the SPK can be modified if that particular player has "juice". "Juice" is the ability to write your own ticket based on unique skills or rampant popularity (e.g., Nolan Ryan). Eric Dickerson or Warren Moon has juice; Bobby Nobody, a free agent from Slippery Rock, does not. The more juice a player possesses, the greater his ability to modify his SPK by attaching standard modifications such as no-cut, no-trade or attendance clauses. Management will usually not give their players anything.
The SPK can be modified through collateral agreements, e.g., the incorporation of the collective bargaining agreement (c.b.a.) and the League's ByLaws and Constitution into the contract.
The parol evidence rule is incorporated into the SPK. If the agreement is written and it is their final expression then the contract as it stands cannot be modified by other agreements or promises. In the interpretation of ambiguous terms, the contract will be interpreted against the writer of the contract. Handwritten provisions will prevail over printed provisions. Johnson v. Green Bay Packers, Inc. (1956).
The club's responsibility for liability for injuries is limited by the terms of the SPK.
There is no right by the team to demand performance of a player for a player's non-performance as exhibited by his jumping to another team, however, they can obtain equitable performance by way of injunctive relief through a contractual clause. Philadelphia Ball Club v. Lajoie (1902).
The SPK calls for annual physical examinations. In these examinations, the club can ascertain if the player suffered an off-season injury. If a player passes this examination, then the club cannot later claim that a current (under contract) injury is a result of a previous (non-contract) injury. Tilman v. New Orleans Saints (1972). The player further promises to be in "good physical condition" and to swear "loyalty" to the club.
The SPK includes a termination clause which gives the team the right to terminate the athlete's contract. The termination must be "for cause," but "for cause" could be simply that the employee no longer fits the team's needs. There is also a no-tampering clause which avers that one player cannot attempt to entice another employee to enter negotiations with another club while under contract to a different team. The SPK demands that a copy of the contract must be filed by the team with the office of the league's commissioner within 48 hours of the execution of the contract. The wording of current SPKs contain language such that the filing of a copy is merely a condition precedent to the execution of the contract.
The SPK further provides that the Commissioner possesses the ability to fine players for infractions of league rules. The Commissioner, in his sole discretion, can expel a player for gambling on a game's outcome if the player is a participant in that game. Molinas v. National Basketball Association (1961) and Molinas v. Podoloff (1954).
The SPK merges all the peculiarities of contract formation into one document that must be signed before an athlete can participate. The SPK, since it is drawn by the team, is drawn in their favor and, therefore, if ambiguities arise, they are interpreted against the team. However, since the particular wording of each SPK is essential, it must be carefully read and completely understood.
C. Specialty Clauses
The more juice a player possesses, the more specialty clauses he can add to his SPK so as to enhance it. This is where negotiation skills come in handy; negotiation-wise, the SPK is a dead issue.
The preeminent specialty clause is the signing bonus. To secure this bonus, a player at a minimum, must appear in training camp in good shape and ready to play. It is not considered salary. The employee may receive it for merely signing and not actually playing. If he is "cut" later on, he will still keep the signing bonus. To secure the bonus, the player must at least try to perform. Or, in the case of a team folding before camp, the signed player must show his willingness to perform by allowing the team to use his good name for public relations purposes. Alabama Football, Inc. v. Stabler (1975) and Alabama Football Inc., v. Greenwood (1978).
1. Option
Another part of the SPK is the so-called option clause which allows the team to unilaterally bind the player for another year at a stated per cent (usually ten per cent less) of the prior year's salary. Since this clause restrains trade, it often exhibits antitrust implications. However, the option year is usually softened through collective bargaining. As an agent, when an option clause is sent to a player, advise him not to sign it, since it may be interpreted as yet another signed contract and if so, will include another mandatory option year. Also, make sure that all the benefits of the original contract are carried over to the option year. See Hennigan v. Chargers Football Co. (1970).
2. Reserve
Baseball's former infamous reserve clause was truly unconscionable since it gave management a perpetual option year. Under baseball's old reserve system a player belonged to a team for life. The only alternatives left to a player was to either request a trade or retire from the sport. However, the team could at their whim, release a player or trade him without consent to another team. This hated version of the option clause was eradicated from baseball's lexicon in 1975 as a result of a bargained-for grievance procedure.
3. No-Cut
This type of clause assures the player that he will not be "cut" during the life of the contract. There are many ways and reasons that a player can be terminated: skill, physical condition, off-season injuries, suspension, death, etc. Because of this, a standard no-cut clause does not exist since each clause only protects the player from a certain type of termination.
The basic types of no-cut clauses are the Cunningham model, the standard NFL clause and the Hudson model. In Munchak Corp. v. Cunningham (1972), the parties agreed to a "no-cut contract" using that term and anticipating that this clause would protect the player from a cut based on a lack of skill. This clause would still not protect the player from "cuts" due to bad physical or mental condition, inability to perform as a result of off-field injuries and suspension without pay for disciplinary reasons. The standard NFL "no-cut" clause is comparable to the Cunningham model except that it is more specific concerning the necessity of the player to maintain a superior physical condition. The best for the player, is the Hudson Model (Minnesota Muskies, Inc. v. Hudson (1969), which employs the following language: "salary payable in any event." Even with this language, the club will still not waive its right to suspend a player; nor will it protect a player who fails to exhibit a good faith effort. Any no-cut clause, however, only guarantees that the player will continue to be paid; it does not correspondingly guarantee a player an automatic spot on the roster.
D. Collateral Agreements
A sports contract can also be modified through inclusion of collateral agreements by way of an incorporation clause. The standard collateral agreements are collective bargaining agreements and the league's constitution and by-laws; these additional documents will then be incorporated into the SPK as if they were a part of the contract. Less standard agreements can also be incorporated into the contract, for example, drug usage guidelines, player-agent standards, etc. When a player signs an SPK he not only agrees to abide by the ten pages in that contract but he also impliedly agrees to abide by the some 300 pages of responsibilities and obligations contained within the collateral documents.
E. Terminations
The termination of an athlete will be construed as a breach of contract if the termination is not justified. An employer can terminate an athlete if he is physically unable to perform. If a team terminates an employee on the basis of an injury there is usually a procedure that will cover this situation in the collective bargaining agreement.
A club must act within its rights when it terminates a contract. A player can be rightfully terminated for being out of shape, a lack of skill, defying club and league rules or a material breach of the SPK. In reality, a player with unique and proven skills will not be released, whereas, a marginal player will be released due to a lack of skills judged solely by the club.
F. Assignments
A necessary evil of a professional sports environment is the assignment of contracts, that is, trading players. SPK's contain a clause that allows the team to trade players at will. Players can, of course, negotiate "no trade" contracts; another alternative is that c.b.a.'s can also provide certain agreed-upon no-trade provisions.
G. Remedies
A breach of contract can usually be remedied by either money damages, restitution or specific performance. In the typical scenario, a party will seek the benefit of that bargain, that is, that which was promised in relation to what was received. If the legal remedy is inadequate then the aggrieved party may seek specific performance if the services are unique.
As regards specific performance, a court will not force an athlete to play against his will. But because an athlete's particular skills are unique and the addition of his participation to the chemistry of a team can never be successfully delineated, divided or understood, a court will allow the prevailing team to enjoin the athlete from playing for another team.
The use of injunctions as a remedy in professional sports was established in Philadelphia Ball Club v. Lajoie (1902) which allowed a ball club to enjoin a professional baseball player, a future Hall of Fame member, one Napoleon Lajoie, when he attempted to play for another team. The injunction was authorized to restrain Lajoie from rendering services to another team since his services were of a unique character which would render them of peculiar value to the baseball club. In short, it would be difficult to find a substitute for the services of Napoleon Lajoie.
Because of this uniqueness, the first team can enjoin the player from playing for another team during the continuation of the contract. The provisions in the contract which prohibited the athlete from jumping to another team were a part of the consideration for the employer's agreement to pay the athlete his salary. These promises were not lacking mutuality of remedy or were they so unreasonable as to prevent the issuance of an injunction. Another rationale was that the contract was already partially performed and the employer was desirous of its continuance.
H. Defenses
When there is an alleged breach of contract, there are several defenses that can be posited. Of course, when an employer terminates the contract due to an injury, the c.b.a. will spell out the appropriate procedures. Usually, the team doctor's diagnosis will be submitted to arbitration after a review by a neutral physician. Club's defenses that can be raised in arbitration are: failure to pass the preseason physical exam, failure to make complete disclosure of a physical or mental condition, injury occurring prior to exam, a non-sport injury, no new sports-related injury after exam and no aggravation of prior injury after exam.
1. Unclean Hands
It is axiomatic that one cannot request a remedy in equity if he comes to court with unclean hands. Players have successfully used the doctrine of unclean hands in defending against suits by management for negative injunctions. A court of equity will not grant injunctive relief to a plaintiff who has acted in bad faith as regards the problem to be litigated. See New York Football Giants, Inc. v. Los Angeles Chargers Football Club, Inc. (1961).
In Minnesota Muskies Inc. v. Hudson (1969), plaintiff was not entitled to enjoin defendant basketball player from joining another team during the life of his contract since plaintiff professional basketball team had already soiled its hands in negotiating a contract with the player while the player was still bound by contract to another professional basketball club in a different basketball association. Therefore, plaintiff club was not entitled to enjoin breach of that contract by the player, who after signing with plaintiff then signed a new contract with the original club and honored that contract by performing under it.
2. Unconscionability
Another defense could be that the contract was illegal or unfair. A court, for example, will not permit equitable enforcement if the terms of the contract are too harsh and one-sided. Connecticut Professional Sports Corp. v. Heyman (1967). Historically some form of the reserve clause might well have been unconscionable and thus unenforceable. At present, the once overly harsh player retention systems have all been, to a certain extent, ameliorated by collective bargaining; as a result, they are now more narrowly drawn and less likely to be viewed as unfair, illegal or unconscionable.
3. Mutuality
Another defense to a club's suit for a negative injunction is the lack of mutuality. That is, either inequality between the player's obligation of many years and the team's obligation for a minimal amount of time or the fact that the club can avail itself of an opportunity to obtain the specific performance of an athlete's negative promise, whereas, specific performance is unavailable to a player.
I. Negotiating the Contract
The art of negotiating a contract in sports is very similar to the art of negotiating in other more standard venues. Although the SPK is in many ways a contract of adhesion, there are ways to flesh out the contract in an attempt to get the best deal for your client. As an overview, the more money up front the better; the more money in the signing bonus the better. Also, management will usually not object to the addition of incentive clauses (e.g., bonus money for achieving "all-rookie" status, attendance clauses, etc.).
The unions have greatly improved an agent's ability to successfully negotiate by providing players and agents with a complete statistical file of the relative worth of each potential professional athlete. This way, the athlete and his agent will have a clear idea of the contracts that similarly-positioned athletes were able to obtain. This takes the guess work out of ascertaining the "bottom line" and shows the athlete his market place comparative worth figure.
As an aside, much of the athlete's would be negotiation strengths are defined and refined through collective bargaining. Therefore, it would behoove the good agent to immerse himself into the c.b.a. before attempting contract negotiation. Although the SPK and c.b.a. include rules and benefits that automatically accrue to a player there are still certain concerns that reside completely in the domain of the individual contract negotiator. For example, signing bonus amount, time of payment of the bonus, desirability of a loan, insurance, contract length, injury or skill guarantees, ascertaining the appropriate mix of initial year salary and annual installments, option clauses, salary adjustments, roster bonuses, individual and team incentives, etc.