Supporting Canadian Athletes

Impact of a Contract

In the world of sport, athletes are consistently subject to contracts. Two common examples are athlete agreements and sponsorship agreements. Sponsorship agreements in particular can vary widely from sport-to-sport or athlete-to-athlete. Before signing any sponsorship agreement, it is important to understand exactly what the athlete is agreeing to and consider what potential issues may occur down the road as a result. Failure to do so could lead to severe consequences because a sponsorship agreement is a legal contract, and like all contracts, athletes are legally bound to its contents after they have signed it.

Before signing any deal, every athlete should consider whether a proposed sponsorship agreement suits his or her particular needs. For example, consider:

Is the sponsorship deal exclusive? Most major corporations may prefer to have exclusive rights to you as your sponsor within their industry.  As a precaution, when building in an exclusivity clause to provide additional value to a sponsor in a given industry, be sure that the clause does not prohibit you from finding additional sponsors outside of that industry.  For example, if you are signing an exclusive agreement with a car company, make sure that the deal does not prohibit you from signing a sponsorship deal with a clothing company.  Keep in mind that signing exclusive deals will limit funding and prospects for future offers no matter what, ensuring those deals stay industry specific can limit this potential loss.

Does the deal support the athlete’s training schedule? Certain endorsement opportunities may impose notable time commitments on the athlete. It is the responsibility of the athlete to ensure that the sponsor is aware of training schedules and competition commitments prior to signing an agreement. If a sponsorship agreement greatly affects the athlete’s lifestyle including training, competing, recovery, repair, and any additional commitments outlined in the NSO athlete agreement, it may be wise to turn it down and wait for a better offer.

What is the agreement’s duration? Athletes must be aware of the contract’s duration. If the athlete’s career blossoms or a better opportunity comes along, it could be detrimental if the athlete is locked into an exclusive sponsorship for too long. If the sponsorship is for a specific appearance or promotional event, ensure that the contract has a clearly defined time limit. Contract duration is also important with respect to the obligations the sponsor owes the athlete. For example, is there a specific period of time in which the athlete must be paid? If not, the athlete may have to wait months before receiving money.

Additionally, if the athlete has existing endorsements or multiple new sponsorship offers, they must ensure that obligations to each of the sponsors do not conflict. If the athlete cannot fulfill obligations to multiple sponsors, this must be decided before signing a new agreement. Determining prior obligations in advance will help avoid potential issues later. Otherwise, there is the possibility of being held personally or financially liable for breach of contract.

NSOs or any major Games stakeholder may also restrict the types of sponsorships athletes can receive. For example, if an NSO has an exclusive sponsorship with a clothing brand, it could prevent an athlete from entering into sponsorship agreements with competing clothing companies. Also, the NSO may outright ban sponsorships from certain companies that could be detrimental to the NSOs image. Athletes must be mindful of these restrictions before agreeing to any deal.

 

Top Ten Things to Consider in an Athlete’s Sponsorship Contract

Courtesy of UK Sport – Get Sponsored http://www.oxfordshiresport.org/uploads/uk-sport-get-sponsored-guide.pdf

1) With whom am I contracting?

You should not only be interested in the ability of a sponsor to pay money and deliver other benefits under an agreement with you but also its reputation. You will want a sponsor with good financial standing and reputation that will benefit your own status by association and certainly not detract from it. A sponsor who cannot pay in full and on time or damages your image is not worth having.

2) Cash and benefits

Check the payments you are receiving and set out any other benefits you are to receive in sufficient detail to make the agreement clear. Ensure that payments are exclusive of VAT, particularly if you are registered for VAT or you have a personal service company, and that payment dates are recorded. Your sponsorship value will increase if you perform well so try and negotiate bonuses which are payable on key performances (e.g. winning medals at championships, personal bests etc.).

3) What do you have to do?

Check to see if you have to attend functions, sign memorabilia, go to dinners (and whether expenses are included or not) etc. Ensure that you are comfortable with your obligations in terms of how many of these activities you are expected to undertake, how long each one may take and that your approval of any kit you are to use or clothing you are to wear is obtained. Ensure that your obligations do not interfere with training and competitions. A good sponsor will always understand – your value to them is dependent on you being a good athlete.

4) How long is the agreement?

The length (term) of the contract cuts both ways. The longer it is the more secure your guaranteed benefits but you are then tied into a payment structure that may be low if you are doing well. If you are a young athlete it is advisable to keep the term relatively short as your value can dramatically increase with good performances. Remember also that public interest in a particular sport can change overnight and be ready to take advantage of increased sponsorship values. Take particular care if a sponsor has the right to renew its agreement with you. When renewing an agreement, ensure that terms of the contract are reviewed as appropriate.

5) Early exit

If a sponsor fails to comply with its obligations under an agreement make sure you can get out of the agreement.

6) Excessive restrictions

Check that you are only giving away the rights that you need to give to a sponsor. If a sponsor only needs you to represent it in one country then don’t give away your rights worldwide. Make sure that if your Sponsor is a kit company it does not prevent you representing a company in another business sector, for example a food company or an airline. You should also think about making it clear that if you are part of a representative team (for country, county or club) and are required to wear something or take part in an activity which would be in conflict with the provisions of your agreement with a sponsor, then you are entitled to do so.

7) Additional support

Understand the nature of your sponsor’s business. They know what you can do for them and will pay for your services accordingly, but consider whether they can help you in a way that enhances your relationship, helps you and does not cost them much. Obvious examples are a car company that can supply a car for you to drive, an airline that can provide flights to competition/training venues etc. A discussion with a sponsor so your needs are understood and you understand the full range of their services can often throw up interesting opportunities. Don’t always ask for the obvious – be creative in what you can get from a company.

8) Clear language

Obvious but often overlooked – if you do not understand the agreement then do not sign it!  Change it so that you do understand it.

9) Jurisdiction

All legal agreements are interpreted by reference to a country’s laws – make sure it is one that is convenient for you if there is a dispute and that you have an understanding of that country.

10) Legal advice

Last but not least, if in doubt get some advice from an expert. Not all lawyers understand sport but your National Governing Body should be able to put you in touch with one who does. An hour of advice can save you a fortune in time, money, lost opportunity and anxiety. It is your career, take care with it.

 


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