SPORTS LAW OUTLINE
CHAPTER 2 – CONTRACTS
WHY SPORTS CONTRACTS ARE DIFFERENT
Sports Contracts are different because the money is typically staggering, the terms are unusual and are often offered on a take-it-or-leave-it basis, the length of time is usually relatively short, the maintenance of excellent physical condition is emphasized and the participants are being paid as entertainers who are playing a game.
In sports employment contracts, another unique feature is the concept of “juice.” Juice is the ability to write your own ticket based on unique skills or rampant popularity. The more juice a player possesses, the greater his ability to modify his employment contract by attaching standard and non-standard modifications.
A clear example of an athlete with “juice” was Napolean Lajoie, America’s premier baseball player during the early 1900’s.
Philadelphia Ball Club v. Lajoie, 51 A. 973 (Pa. 1902)
The player, Nap Lajoie, had contracted to serve the Philadelphia Baseball Club as a baseball player for a stipulated time. During that period he was not to play for any other club. He violated his agreement, however, during the term of his engagement when, in disregard of his contract, he arranged to play for another rival organization. The baseball club, by means of the bill, sought to restrain him. The trial court refused an injunction, holding that to warrant interference, the player’s services had to be unique, extraordinary, and of such a character as to render it impossible to replace him, such that his breach would have resulted in irreparable loss to the baseball club.
The Supreme Court of PA reversed, reinstated the bill, and held that where one person agrees to render personal services to another that require and presuppose a special knowledge, skill, and ability in the employee, so that in case of a default the same service could not easily be obtained from others, the damages for breach of such contract could not be estimated with any certainty, and the employer could not, by means of any damages, purchase the same service in the labor market.
The contract of Nap Lajoie, a future Hall of Famer, prohibited him from playing pro baseball with any team other than his current one. This was part of the consideration for the employer’s agreement to pay Lajoie’s salary. The injunction was issued since his services were unique character, which rendered them of peculiar value to the baseball team. It would be difficult to fid a substitute. (However, it did not matter, because he was traded to another team in another state, and the courts there refused to enforce the contract.)
Contract formation in sports is determined by the same principals as in standard contracts. In evaluating the validity of a contract, there must be an offer and offeree, consideration, and a proper acceptance.
The major contractual vehicle is the standard player’s contract (“SPK”), which is the employment agreement between team and player in the major team sports. The SPK has evolved through the years and is close to bullet-proof now. However, in earlier versions, the league commissioner’s signature was required to approve the contract. Without commissioner’s signed approval, it was merely a counter offer. The lack of signature was a material breach; therefore player’s signing was merely a revocable offer.
The Cannon and Robinson cases are early examples of how contracts were interpreted before the NFL changed its SPK to reflect a lessened importance of the commissioner’s signature approving the contract.
Los Angeles Rams v. Cannon, 185 F. Supp. 717 (S.D. Cal. 1960)
The Los Angeles Rams football club brought a diversity action seeking injunctive relief and a declaration of right against the football player, Billy Cannon, who was a resident of another state. Specifically, the football club prayed for an injunction to restrain the player from playing football or engaging in related activities for anyone other than it, without its consent, during the term of a contract or contracts allegedly entered into by the parties, and an order declaring the existence of a valid written contract or contracts. The football player denied he ever entered into a contract or contracts as alleged and further claimed fourteen affirmative defenses.
The court denied relief because the contract language required approval by the football commissioner before the contract became valid or binding. Also, in the case at bar, the approval of the commissioner was not a matter resting entirely with the commissioner. Therefore, the court concluded that until approved, these instruments were, at most, only offers. Thus, there was no basis for granting injunctive relief to the football club.
Detroit Football Co. v. Robinson, 186 F. Supp. 993 (E.D. La. 1960)
On December 29, 1959, Robinson signed contract with Detroit Lions, but because he was still in college and playing in the upcoming Sugar Bowl, it was not going to be announced until after the New Year. Later in December, Robinson agreed to sign with the Dallas Texans, and sent the bonus back he had received from the Lions. Lions then sent the contract to the commissioner on January 6, and it was signed on January 12.
The court held that because the football SPK required the commissioner’s signature to make it binding, and until such point, the instruments were only offers. So, the Lions were denied injunctive relief.
The initial contract comes from the team. The team prepares the original offer, seeks out the services of the athlete, and writes the employment contract. The player accepts by signing. But, if the signing is not accompanied by consideration and a withdrawal is forwarded to the team before an acceptance, then the player’s signature is merely an authentication of a revocable offer as opposed to the formation of a binding contract. Validity of offer is solely determined by the intent of the parties.
Timeliness is the initial question to be determined when considering if there was a valid acceptance. Did the athlete accept the contract in a timely manner? Acceptance is indicated by any showing that expresses the athlete’s willingness to be bound by the exact terms of the offer.
Many contract terms in sports are ambiguous. These terms should be pre-defined, or they may be misunderstood by people who do not understand the dynamics of the sport. To determine the meaning of a term, the language must be read in light of all surrounding circumstances. Pre-controversy interpretation of a contract term is given great weight when trying to figure the intent and understanding of the now conflicting parties.
In contract interpretation, earlier contracts between the two parties may be useful. Or, as in Pasquel v. Owen, where the breach occurs after partial performance of the contract, it is useful to look at how the parties actually functioned under the contract.
Pasquel v. Owen, 186 F.2d 263 (8th Cir. 1950)
Plaintiff, Jorge Pasquel, President of the Mexican Baseball League, sued the defendant, Arnold (“Mickey”) Malcolm Owen, for breach of contract to play baseball in Mexico. Owen played baseball for a month and then was promoted to manager. Owen was then discharged as manger in breach of the contract, but continued to play baseball for the plaintiff for approximately one month. Owen then departed Mexico unexpectedly giving no notice of his departure to the plaintiff.
The trial court instructed the jury that the removal of the Owen as manager constituted a breach of contract entitling the defendant to damages. The jury found for the defendant awarding him damages.
On appeal, the court held the jury instructions were improper, defendant waived any breach of contract by plaintiff by continuing to play baseball, and defendant owed a duty to minimize damages by continuing as a ball player under the contract.
C. STANDARD PLAYER’S CONTRACT (“SPK”)
The SPK is the standardized agreement between athlete and team. It is an employment contract that specifies the player’s rights. The SPK states that the player has unique skills and that the team controls the activities of the player. The SPK is used in the major team sports and is usually part of a collective bargaining agreement. There is little flexibility in its terms, and its signing is a prerequisite to compliance.
Each Player Is Unique
No athlete is the same as another player, sports has a synergistic element in which all players make subtle contributions to the chemistry of the team. (e.g. “good locker room presence” or “winning attitude”)
The Johnson case involved a very early version of the NFL’s SPK. The court found for player Clyde Johnson, interpreting the term “season contract” by looking to the sports customs and its typical business usage of the term to supply a meaning.
Johnson v. Green Bay Packers, 74 N.W.2d 784 (Wis. 1956)
When the employee, Johnson, a football player, received a copy of his contract, he noted that a certain page had not been deleted as agreed to between the parties. He called the employer, Green Bay Packers, and was informed that the league commissioner did not like contracts with parts crossed-off but that the original agreement for a “season” contract would be lived-up to. Provisions written on the back of the contract, which directly contradicted the provisions on the printed page, were to the effect that a season contract was entered into.
Under Wisconsin law, a contract for a fixed term, as was a season contract, required that discharge be only for cause. After Johnson was discharged, he sought to recover his pay from the employer. The court held that the written provisions on the back of the contr
a knee injury in the 1966 season. Hennigan brought suit to recover compensation for the 1967 season under the no-cut contract.
The district court granted summary judgment for Charger Football Co. The court held that in this diversity action, Texas law applied. The court reversed the judgment from the district court and granted summary judgment for appellant. The court held that when appellant exercised its option to renew the contract, a new contract was established. Since Hennigan was not physically able to play, Charger Football Co. was not obligated to pay because Hennigan was not injured in the performance of service under the new contract.
The reserve clause is primarily a historical interest these days, but there certainly could be vestiges of it in some contracts. It is infamous and undoubtedly the most extreme example of baseball management’s attempt to control the careers of their players. It was essentially a perpetual option year, in which each year had an option, which in turn had another option year. In baseball’s old reserve system, a player belonged to a team for life. If the team did not want to request a trade, the player’s only option was to retire or die. However, the team could release a player or trade him to another team without his consent. In baseball, this most-hated clause was eliminated in 1976, through a bargained-for grievance procedure.
A no-cut clause assures the player that he will not be cut during the life of the contract. This is very desirable for the player. Management can terminate a player for many reasons. (e.g. skill, physical condition, off-season injuries, suspension, etc.) There are a variety of no-cut clause that protect a player from certain types of termination.
The contract for basketball player Billy Cunningham used the following language: “Anything hereinto the contrary notwithstanding Club and Player agree that this shall be deemed a ‘no-cu’ contract and Player shall not be traded to any other Club without Player’s consent.
Munchak Corp. v. Cunningham, 457 F.2d 721 (4th Cir. 1972)
The basketball club owners, d/b/a Carolina Cougars, sought to enjoin the basketball player, Billy Cunningham, from performing for any other basketball team in violation of a contract between the parties.
The district court denied injunctive relief because the club owners had unclean hands and breached the contract with the player. On appeal, the court concluded that the club owners did not have unclean hands and that any breach of contract on the part of the club owners was too insubstantial to justify the denial of injunctive relief. The court found nothing wrong with the club owners negotiating with the player and agreeing to pay him $ 80,000 if he did not play for his current team during his option year because the player was under no obligation with respect to the other team after October 1, 1971, and the club owners had a lawful right to bid and contract for his services to be rendered after that date.
The court rejected the player’s argument that the assignment of the contract voided his obligation because it was inconceivable that the rendition of services by a professional basketball player to a professional basketball club could be affected by the personalities of successive corporate owners.
Each contract contains an incorporation clause that incorporates into the contract agreements such as the union-management collective bargaining agreement and the league’s bylaws and constitution. In essence, the SPK is modified or extended by these collateral agreements. They are added as if they are part of the contract. Less standard addendums can also be incorporated; once again only the imagination of the parties limits the list of additives. Examples of less standard collateral agreements are drug usage guidelines and players-agents standards.