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.