chapter 5 Contract Law

Chapter Objectives After reading this chapter, you will know the following: The elements of a valid contract Common provisions within sport contracts The many types of contracts that are found in the sport industry The issues that arise when a sport contract is breached

Definition of “Contract” “A promise, or set of promises, for breach of which gives the law a remedy; or, performance of which the law in some way recognizes a duty” I make a promise…if I do not fulfill the promise, there can be legal consequences…depending on consequences my “promise-breaking” caused

There are 2 types of Contracts Bilateral Contract – “A contract that contains two promises: the offer and the acceptance” York college will pay Tim Lewis 1 million dollars to teach business this year. Tim Lewis accepts and must teach business in a professional manner Unilateral Contract – “A contract in which the offeree accepts by performance rather than by promise” – Tim Lewis pays a premium to State Farm Insurance, if something happens, State Farm will pay my claim.

Elements of a Contract Offer* Acceptance* Consideration* Legality^ Capacity^ *These 3 elements are required ^These can render the contract null and void

Offer Made by offeror – “a conditional promise to do or refrain from doing something in the future” Creates power of acceptance – “the act of agreeing to an offer by words or conduct. It must be clearly communicated.” May provide the way that another party can accept the offer – “Would you like to purchase my super bowl ticket? Sure. (Is this a contract?) Frank, will you purchase my Super Bowl ticket for $1000? Yes. (Is this valid?)

Acceptance Acceptance by the offeree or agent (not third party) Acceptance “Must be in positive manner through words or conduct” Not changing terms – Yes, but…. Communication to the offeror Not silence – Unless we hear from you…. Bilateral contracts (promise for a promise – the offer and the acceptance) Should have some kind of reproducible proof…a copy or a receipt IM’s and text messaging have become common forms of communication…so watch out!

Consideration Each party must provide consideration – “The exchange of value or benefit that each party agrees to give up as a result of the contractual agreement.” or What each party gets in return for accepting the offer Consideration cannot be: a gift – the giving party gets nothing in return For past performance – see example below For illegal acts – this is not enforceable by law Example: Chris receives a gold watch from the organization for 20 years of service. A few weeks later the watch breaks and Christ wants the organization to fix the watch.

Examples of Consideration Money for the promise to provide a meal Money for the promise to provide use of an arena Promise by a restaurant to host a Halloween party in exchange for having the restaurant decorated for Halloween (decorating products and services) An act or promise not to act (forbearance) Promise to pay a salary for the work (act) of an employee Promise to release a worker from an employment contract if she agrees to not open a business in the same geographic area for a certain time (forbearance)

Legality and Capacity Legality: Even with offer, acceptance and consideration will be a contract only if it covers something legal. Capacity: The ability to fully understand something. Mentally ill Mentally handicapped Minors People under duress (physical and psychological)

Typical Provisions of Contracts Party designations – Specific names (parties) Term: Length of time (specific dates) Warranties and representations: Promises in the contract Obligations and duties Termination Provisions – If this is not done, we reserve the right to terminate….

Let’s look at types of various sports related contracts Employment –Athlete (College) Employment – Athlete (Pro) Endorsement Employment - Agent Employment - Coaches Game and Event Contracts Waivers Lease Agreements Seat License

College Scholarship Contracts Student-athletes: Contracts with the university National letter of intent (start the expense of the acceptance process – must obtain a release from the school at that point) Scholarship (money received in exchange for “faithful” service and play

Employment Contracts: Pro Athletes League collective bargaining agreement Contract between players (union) and owners (league) Uniform Players Contract: Standard contract for all professional athletes in a league Endorsement contracts Athlete agent representation agreements

Employment Contracts: Coaches College and professional: Both incredibly high salaries Benefits and Bonuses Termination http://usatoday30.usatoday.com/sports/graphics/basketball_contracts/flash.htm

Game and Event Contracts Game contracts: For game or contest itself Event contracts: Hosting overall event that may surround a game

Waivers and Releases Form of contract Use Invalid if signed by minor Signed before event Participant absolves organization from liability for injuries suffered at the event Use Club sports Health and fitness Invalid if signed by minor

Facility Lease Agreement between facility owner and team or sport organization Offer: Promise to play at facility (team) Acceptance: Funding and maintenance of facility (city or district) Consideration: Rent or payments (team), maintenance and revenues from use (city or district)

Seat License Season ticket lease agreements Can include special fees and charges Can require pre-payment or donation Can be passed on in perpetuity, BoSox)

Unique Contract Law Issues “Parole Evidence Rule” – the final contract represents the full contract regardless of previous versions Statute of Frauds Considerations – 3 types of contracts that must be in writing Sale of land or property (need land specs) Sale of goods over $500 Contracts that cannot be performed within one year of making

Remedies for Breach of Contract 1) Damages Compensatory – make up monetary loss Consequential – indirect monetary loss Liquidated – agreed upon breech damages (opt out clauses) 2) Specific performance Court ordered to “carry out” contracted duty 3) Duty to mitigate Harmed party cannot sit around and do nothing while damages occur. The case of the “water sprinklers”

Alternative Dispute Resolution (ADR) Arbitration: This process is final and binding. A third party listens to both sides and both proposals. One proposal is selected. Mediation: A private, informal process where a 3rd party helps the two sides reach an agreement; this is sometimes called facilitation

Special Capacity Issues If a minor enters a contract, contract is “voidable”: Minor can ratify (make contract valid) Minor can disaffirm Adult under contract has no choice Exception is disaffirmance: Words or conduct to show intent not to be bound by the contract; restitution When age is misrepresented: “Shield, not a sword” Letters of intent are signed by both athlete and guardian Intoxication: Does this make contracts voidable? Mentally Incompetent: Void, voidable, or valid?

Management Perspective on Contracts Get it in writing. Read the contract thoroughly. Keep copies of all contract documents. Use good faith when negotiating contracts. Note deadlines for performance. Ensure the performance of third parties. Share contract information with those who need to know, and educate staff on the consequences of contract breach. Resolve ambiguities as quickly and fairly as possible.