It is common place these days to read a number of stories about sports players entering into so-called pre-contract agreements.
By way of example, the French rugby club Bayonne announced that they had signed, then withdrawn from, a pre-contract agreement with Byron Kelleher. Looking back a few years, Chelsea and Manchester United were locked in a fierce battle arguing over the enforceability of a pre-contract agreement that United had signed with John Obi Mikel.
Under the laws of England and Wales, pre-contract agreements are usually marked as ’subject to contract’ or worded similarly. Such an agreement is usually held to be no more than a mere “agreement to agree” something further in the future. As such, the agreement usually has no binding effect under normal established contractual principles.
Therefore, what benefit is there in entering into a pre-contract agreement?
Obviously each club will try to gain whatever advantage they can over their rivals and seek to protect their interests in new players. Players soon to be out of contract may also benefit from some certainty that they will gain a new contract.
If the club and the players are happy to honour the pre-contract agreement, then a dispute is unlikely to arise.
What about the situation where the player or the club tries to get out of the agreement? Or where a third party challenges the pre contract agreement?
Whilst the courts may be reluctant to intervene in relation to mere “agreements to agree”, some governing bodies take a different stance in terms of the governance of their own game. FIFA is a prime example.
The stance taken by FIFA
There has been a substantial volume of case law from FIFA’s Dispute Resolution Chamber in recent years on the enforceability of pre-contract agreements. From considering these cases, it is possible to extract the general principle that FIFA will find that a pre-contract agreement is binding if it contains all the essential terms that one would normally find in a contract of employment, such as
- the term of the contract;
- additional benefits;
- intellectual property / image rights; and
- termination rights etc.
It seems that if the above terms are not included, then the logical conclusion is that the agreement is not binding.
The general attitude of FIFA is that the innocent party may be entitled to payment of compensation if one party breaches the agreement.
In summary, it seems likely that the use of pre-contract agreements is here to stay, certainly when it comes to clubs securing the top sports talent in the market. But clubs will continue to face challenges from their rivals for these players, and it is this important factor that will ensure that we have not heard the last of disputes like these.
Christian Edwards provides advice to well known sporting facilities, players and athletes across Wales and beyond. He is a Partner and Sports Law specialist at JCP Solicitors, one of Wales’ leading law firms. For more information or for an informal discussion with the Sports Law team at JCP Solicitors telephone 01792 773 773 or email firstname.lastname@example.org