Peyton Manning’s Contract

Today the Denver Broncos are set to make a move which has been called the “biggest move” since free agency began in the NFL.  In signing quarterback Peyton Manning to a five-year, $96 million contract, the Broncos have signaled their willingness to spend to win, and also their belief in Manning’s continuing capability as a quarterback, even in the shadows of age and injuries.

Last season, Manning did not take a single snap nor make a single pass for the Indianapolis Colts, after enduring a number of neck surgeries.  Recently, however, numerous teams’ physicians, including those of the Denver Broncos, cleared Manning to play.  Yet, given that injuries caused him to miss action all last season, along with his age, questions linger as to whether Manning will reemerge in Denver with the playing capability that has made him one of the most successful quarterbacks in NFL history.

The apparent concerns over Manning’s playing ability likely factored into contract negotiations between Manning’s camp and the Broncos.  Arguably, each side negotiated provisions of the five-year contract to ensure that its interests were protected should Manning not be able to play due to injury.

Fourteen-year NFL agent Mark Slough of Ascent Sports provided insight into what safety protections may be present in Manning’s contract with the Broncos.  Slough does  not represent Manning and was not present during the course of the negotiations between Manning and the Broncos.  However, his experience in representing NFL players over the course of the past two decades makes him a qualified source on the topic, as his negotiation of player contracts has granted him significant insight into what provisions may be present in Manning’s contract with the Broncos.

According to Slough, from the outset, players and teams begin negotiating from a standard contract.  However, most contracts entered into between players and teams stray from the terms of the standard contract.  For instance, provisions dealing with bonuses, escalators, incentives and injuries are negotiated outside of the terms of the standard contract.  As for the issues surrounding Manning, Slough noted that, “There will not be anything that is standard in this contract, with regard to how the Broncos are going to address the concerns that they probably have.”

One way in which players secure their rights in contracts with teams, is to negotiate guaranteed contracts.   In the NFL, three types of guaranteed contracts exist:

1.  Skill guarantees:  Contracts guaranteed for skill guarantee that a player will be paid even if he is cut because his skill is no longer up to NFL-par.

2.  Injury guarantees:  Contracts guaranteed for injury guarantee that a player will be paid even if he is cut due to injury.

3.  Salary cap guarantees:  Contracts guaranteed under a salary cap guarantee ensure that a player will be paid even if he is cut for salary cap purposes.

Given Manning’s talent and experience in the NFL, Slough believes that this is a fully guaranteed contract, meaning that Manning would be guaranteed to be paid under each of the theories above.

However, teams are protected in contract negotiations through the form of waivers.  Thus, while a contract may make certain guarantees, the existence of particular factors waives that guaranteed payment.

One such waiver is an injury waiver.  Generally, according to Slough, teams are “obligated to pay for medical care and to rehabilitate a player back to his full health, even if he sustains an injury while playing.”  However, by having players sign injury waivers in their contracts, teams can waive that obligation.

Given Manning’s recent medical issues surrounding his neck, Slough supposes that there is an injury waiver in Manning’s contract with the Broncos.  The waiver likely waives the Broncos’ obligations to Manning should he sustain additional neck injuries and be unable to play.  However, Slough points out that Manning’s agents likely narrowly defined what was being waived.  Thus, it is unlikely that the contract simply waives, “neck injuries.”  Rather, it would more than likely waive specific types of neck injuries causing certain types of outcomes.

Outside of the injury waiver, Slough believes that the Broncos further negotiated to protect their interest by requiring Manning to pass a future physical.  Reports indicate that Manning will be paid $18 million this season.  Yet, Slough believes that a physical examination is to take place in March 2013, and if Manning does not pass this physical, he will have no future guarantees under the contract.  However, if he passes the future physical, Manning will likely be fully guaranteed, save for the injury waiver.

Although both the Broncos and Manning’s camp indicated that contract negotiations ran smoothly in this instance, it is clear that significant negotiation was required to bring Manning $96 million and the Broncos one of the most decorated quarterbacks in history.

One thought on “Peyton Manning’s Contract

  1. Turns out Mark Slough was right. Manning is guaranteed $18M for next season and will have a physical next Spring to determine his health. If he passes the physical he’ll be guaranteed $20M each in 2013 and 2014. I believe the contracts in both 2015 and 2016 are pending physicals before each of those seasons.

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