At Presidio Sports Management we believe that one of the ways that we can be of service to the endurance industry at large is by simply sharing good information. Over the next couple of months we will be posting brief articles that provide important considerations for athletes and brands in drafting and executing endorsement contracts. The first topic that we will address are termination clauses in pro deals.
Termination Clauses Generally
Most endorsement contracts have (or should have) a clause that details the circumstances when the brand can terminate an athlete's contract before the end of the contract term. These clauses list out grounds for termination like if an athlete dopes, violates governing athletic body (e.g., USAT or USATF) or specific terms of the agreement. Athletes should make sure to read these clauses carefully to ensure that they fully understand under what conditions they may be terminated. Now at this point you might be asking yourself why we should have such a keen sense for the obvious? Trust me, there are reasons why this post is not wasting your time.
One type of termination clause in particular warrants closer attention. Most termination clauses include language regarding when a contract may be terminated due to injury. These clauses usually state that if an athlete is unable to perform or race for a certain time period, usually 60 to 180 days, the sponsor is allowed to terminate the sponsorship.
The problem with this type of contract language is that it is usually very vague. What happens if the athlete is injured testing prototype equipment provided by the sponsor? What if the injury occurred while making an appearance for the sponsor? Without the protection of clear contract terms athletes may be left without a key sponsor. This is not to say that sponsors are evil and looking for ways to shed injured athletes off of their roster because they are not. The point is only that athletes are left unprotected by vague clauses. As they stand, if these clauses are acted upon the only recourse for an athlete to challenge the termination of the contract would be potentially costly litigation (or more likely, binding arbitration).
The best…most tried and true…guaranteed to never let you down…works every time way of dealing with vague contract language is to not let it happen in the first place. Clear language protects the athlete and the brand. Below is an example of a vague/bad clause followed by a more detailed/better clause.
EXAMPLE OF A BAD CLAUSE
“SPONSOR” shall have the right to terminate this Contract immediately upon written notice if “ATHLETE”: (i) fails any IAAF or NGB sanctioned drug test; (ii) breaches any term of this Contract; or (iii) any medical condition that prevents Athlete from competing or more than sixty (60) days.
EXAMPLE OF A BETTER CLAUSE
This Contract may only be terminated by “SPONSOR” upon written notice to “ATHLETE” if one of the following conditions occur: (i) athlete fails any IAAF or NGB sanctioned drug test; (ii) any material breach of a term of this Contract after there has been a failure to remedy the default within twenty (20) days; or (iii) any medical condition that prevents Athlete from competing or more than one hundred and eighty (180) days and medical condition was not caused due to equipment provided by SPONSOR or as a result of duties requested by SPONSOR as detailed in this Contract.
You will notice that while the two clauses are pretty similar there are some profound differences making the better clause, well, better. The main difference is that if the clause is acted upon, both sides will have a clear understanding as to why. The ultimate outcome hopefully being that litigation will be avoided and we can all live happily ever after.
Knowledge is power people!