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

Elements of a Contract Offer Acceptance Consideration Legality Capacity

Offer Made by offeror Creates power of acceptance May provide the way that another party can accept the offer

Acceptance Acceptance by the offeree or agent (not third party) Must be in positive manner through words or conduct –Not changing terms –Recall counteroffer Communication to the offeror –Not silence –Bilateral contracts (promise for a promise)

Consideration Each party must provide consideration Must be some value or benefit given or given up by each party Cannot be a gift, past performance, or illegal acts

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 (acts) 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: Those mentally incompetent, minors cannot enter into valid contracts.

Typical Provisions Party designations Term: Length Warranties and representations: Promises in the contract Obligations and duties Termination

College Contracts Student-athletes: Contracts with the university –National letter of intent –Scholarship

Employment Contracts: 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 contract Athlete agent representation agreement

Employment Contracts: Coaches College and professional: Both incredibly high salaries Benefits Termination

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 –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

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)

Contract Law Issues Parole evidence rule Statute of frauds

Remedies Damages –Compensatory –Consequential –Liquidated Specific performance Duty to mitigate

Alternative Dispute Resolution (ADR) Arbitration: Final and binding Mediation: Up to the parties to agree

Capacity 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” Intoxication: Voidable? Mentally incompetent: Void, voidable, or valid?

Remedies Suit for specific performance –Force defendant to perform specific contract terms (e.g., franchise agreement) –Refrain from engaging in activity prohibited by contract Liquidated damages –Liquidate means to pay a debt –Monetary penalty stated in the contract Economic loss –Loss of reputation (good will) –Actual costs due to breach of contract

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.