Contract Law – The Basics
In order for a contract to be considered valid and enforceable, ALL of the following conditions must be met:
- There must be an offer.
- There must be an acceptance of the offer.
- The agreement must involve an exchange of something of value.
- Both parties must have the legal capacity to enter into the contract.
- The transaction may not involve illegal activity.
An example of a basic employment contract is a situation where a high school athletics director verbally offers a part-time coaching position of $5,000 to a high school teacher for one sport season. The high school teacher agrees to accept the offer. Essentially, in exchange for serving as a coach for a season, the school will be compensating the teacher $5,000. Both the athletics director and the coach are legal adults and the contract is consistent within laws and regulations. Under such conditions, this is considered a valid and enforceable employment contract. Both oral and written contracts can be used, but it can be very hard to prove who said what in oral contracts; therefore, it is strongly advisable to have all contracts be in written form.
Complex Employment Contracts
Instead of a handshake or simply a letter of agreement, employment contracts for coaches particularly at the college level have become increasingly complex as salary amounts and perks continue to escalate. Due to the “tenuous nature of a coach’s position, employment contracts have evolved into complex legal documents, often involving complicated negotiations” (Cotten and Wolohan, 2007, p. 375).
For coaching contracts involving significant dollar amounts, it may be helpful to review documents with an attorney before they are signed. Since most hiring organizations have the benefit of an attorney when drafting the contract, the use of an attorney will help to protect the coach and may avoid future lawsuits that contest unclear contract language.
Employment contracts are broken more frequently than other contracts, which is why it is important to make sure the details in complex employment contracts are specified so that ambiguity will be lessened. When one party fails to uphold their end of the bargain, then a “breach of contract” is considered to have occurred and depending upon the negotiated contract, one party may have to pay the other party monetary damages. For example, a college may want to buy out a contract of a coach if the coach is not winning. In other situations, a college coach may want to leave earlier for another job even though they have several years left on their contract; in such case, it may require the coach to pay some damages to the institution for breach of contract depending on the contract language.
What can you do to better prepare yourself for the contract negotiation process? Gaining a better understanding of the key elements of a complex employment contract is one step in the preparation process. Those key elements are included below.
Key Elements in Complex Employment Contracts
According to Cotten and Wolohan (2007), a typical employment contract will include the following terms or elements:
- Duties and Responsibilities. The contract typically includes a list of duties and responsibilities that the coach is required to do.
- Term of Employment. The length of the contract should be stated.
- Rollover Provisions. Rollover provisions let the sports organization extend a coach’s contract for a specified period of time. Rollover provisions typically benefit the coach rather than the sports organization. For example, in Cherry v. APA Sports Inc., (1983) Cherry’s contract stated that “if his contract was not renewed for an additional two years, he would automatically receive $35,000.” (p. 394)
- Reassignment Clause. A reassignment clause allows the sports organization to remove the coach from the coaching position and reassign them to another area within the sports organization, such as an administrative position. If a reassignment clause is included in the contract, the pay rate for the new position should be specified. Furthermore, if a coach is reassigned and chooses not to take the reassignment, the coach would be considered to have terminated the contract.
- Compensation Clause. “A compensation clause should include the guaranteed base salary, term of pay increases over the time of the contract, fringe benefits, moving and relocation expenses, bonuses, additional retirement benefits, and other compensation that the organization itself provides the coach” (p. 394).
- Fringe Benefits. Examples of fringe benefits include complementary automobiles, golf club memberships, game tickets, housing expenses, and loans. The type of fringe benefits, the dollar amounts for various expenses, and the timeframes for such benefits should be included in the contract.
- Bonuses and Incentives. “Bonuses and incentives are becoming more important to coaches. They may include signing bonuses, incentives based on team success, and in the case of college and university coaches, graduation rates of student-athletes” (p. 394). For example, it is common for a coach to receive a bonus for being named the conference or national coach of the year or for competitive success such as reaching the NCAA tournament.
- Outside/Supplemental Income. Examples of outside income and supplemental income include revenue from television contracts, equipment and apparel endorsements, summer camps and clinics, and income from speaking engagements. It is becoming increasingly common for coaches to receive income from their own coach’s television shows and the contract should specify if the coach has the right to independently negotiate outside income opportunities or if they remain under the purview of the institution.
- Termination Clause. Coaches need to pay particular attention to this area. “Termination for just cause” allows for the firing of the coach for reasons such as breaking the law, breaking rules of the sports organization, or for inappropriate behavior. In such cases, coaches will want to make sure the “just cause” reasons are clearly stated and that the contract includes sufficient due process procedures should the coach be terminated. For example, college coaches should expect contract language stating that major NCAA rules violations will result in termination. “Termination without cause” allows the sports organization to fire the coach for any reason, which obviously places authority in the hands of the sports organization rather than the coach.
- Buy-out Clause. A buy-out provision lets the coach or the sport organization pay a specified amount of money to end the contract. Some coaches have negotiated buy-out clauses that require the sports organization to pay them their full salary for the duration of their contract should they be terminated. Some sports organizations have negotiated to have college coaches pay back significant salary amounts should they break their contract.
- Arbitration Agreement. If a dispute regarding the conditions of a signed contract arises and there is an arbitration agreement included in the contract, then the dispute will be dealt with through arbitration which is generally less costly than through the courts.
For additional information, please refer to Cotten and Wolohan’s (2007) 4th Ed. book titled Law for Recreation and Sport Managers. |