Five Things To Know Before Negotiating An NIL Contract

Thanks to NIL, high school and college athletes are gaining relevant negotiation experience. Here are five things to know before negotiating an NIL contract:

Who, what, where, when, why and how? If you read a contract and cannot easily answer the who, what, where, when, why and how of the agreement, ambiguity exists. A key element of successful contract negotiation and drafting is to eliminate ambiguities. Thus, you must clarify these unknown or uncertain items before you sign the contract.

In the agreement, the following should be abundantly clear:

• Who has responsibilities under the agreement?
• What are the responsibilities?
• Where are the responsibilities performed?
• When must the responsibilities be performed?
• Why are the responsibilities being performed?
• How are the responsibilities to be performed?

One area in which an athlete must be especially sure to have clarity on the above is related to how they will be paid under the deal.

If the who, what, where, when, why and how of the contract cannot be easily answered, more work needs to be done in negotiating the deal and drafting the contract.

Does the contract have exclusivity? Athletes should understand if the contract they are entering into is an exclusive contract.

Examples of exclusivity include:

1. When the athlete is exclusively represented by an agent or marketing representative, meaning these individuals are the only ones who can secure deals for the athlete; and
2. When the athlete has an exclusive deal with a brand, for instance, when an athlete can only wear footwear from a particular apparel company

Athletes should think through the pros and cons of entering into exclusive contracts, which are fact specific. This means, that whether exclusivity is a pro or a con depends on the athlete and the given situation.

Here are some things to consider when weighing if exclusivity is a pro or a con:

1. What extra benefits will I gain by this contract being exclusive? Examples include a higher rate of pay, greater access to top professionals or the ability to align yourself with a leading brand.
2. What will I lose out on by this contract being exclusive? Examples include wearing competitors’ products, the inability to earn income elsewhere or being represented by professionals who can open doors beyond what the involved agent can.

Are there restrictive covenants in the contract? A restrictive covenant is something in the contract that prevents, prohibits, limits or restricts a party to the contract from doing something.

For instance, if an athlete enters into an exclusive contract with a shoe brand, a restrictive covenant in the contract may prevent them from wearing the brand’s competitors’ goods.

Another example would be a contract requiring an athlete to pay an agent or representative even after the contract expires.

Sometimes even after a contract terminates, restrictive covenants may require the athlete to uphold responsibilities to a brand or agent. Thus, it is important to always be aware of what current restrictions may be imposed on your under the deal and what future requirements you are accepting.

What is the length of time of the contract? The length of time that the contract period spans is referred to as the “term.”

It is vital to understand how long the contract lasts. You should also know if the contract includes any extensions or early termination clauses. Knowing whether these extensions or early termination clauses are automatic or optional is also critical.
Understanding the timeframes associated with the contract helps you understand the time commitment associated with the contract. An athlete might think a contract is only for six months, when in reality there are automatic extensions of the term triggering new sets of responsibilities. An athlete might believe they can terminate the contract before the end of the term, but there might be early termination penalties the athlete will be required to pay if ending the contract early.

Who produces and who owns the content? Many NIL deals require athletes to produce content for a brand or collective.

Producing high-quality content requires money and resources. Who will provide the money and resources necessary to produce the content? Is the athlete responsible for paying or will the brand cover the costs? Alternatively, has the brand already produced the content and just desires for the athlete to post it?

Once the content is produced and posted, who owns it? What licenses does each party have and grant to the content? How long can each side keep the content up and use it for commercial purposes?

Knowing who will produce the content, how it will be produced and who will pay for it are critical questions to answer before entering into an NIL deal. Remember, any good contract clears all ambiguities. Since content is a critical element of NIL deals, these questions must be answered.

As you can see, there are many questions that must be addressed when negotiating an NIL deal. The above doesn’t cover the entire universe of questions, but provides an important starting point for you to consider.

DISCLAIMER: The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only.