The most important contract to a sports agent is the contract between the player and agent, otherwise known as the Standard Representation Agreement. This contract establishes the terms of the agent's representation, including fees, scope of representation, term of representation, payment scheduling, and how disputes between the agent and player are to be handled.
Before diving in to the meat of the contract, it is important to establish at the very beginning who the parties to the contract are, namely, the player and the agent. It is also be worthwhile to include that the athlete will lose their "amateur" status and eligibility at the collegiate level by entering into this contract with the agent. This is particularly important to players who still have athletic eligibility in college.
NCAA Bylaw 220.127.116.11, known as the No-Agent Rule, declares that it is punishable offense for an athlete to allow an agent to conduct or attend the athlete's negotiations with a professional team. Violations of the rule could result in the loss of NCAA eligibility. By informing the player at the beginning of the contract that signing it would threaten his/her eligibility, the player is on notice of the potential penalties should they cancel the contract and attempt to play in college again.
Next, the contract should focus on the scope of the agent's representation, which delineates the services that the agent will provide. This is the most important clause of the agreement, as it not only establishes what the agent will be paid for, but any exclusive rights the agent may have. It is not uncommon for athletes to have multiple representatives in different earning spheres, such as an agent who works on the player-contract and an agent who handles marketing. These exclusivity rights must be established to avoid any confusion as to what responsibilities the agent has, and importantly what they should be paid for. Exclusivity should also be considered with respect to location. For instance, a baseball player from Japan may wish to have three agents: one to handle his player-contracts globally; one to handle his marketing in the US; and one to handle his marketing in Asia. A broad scope of representation clause that tightly defines the agent's exclusive rights is best for the agent.
Now that the agent's services are delineated, it is important to include how the agent is to be paid. Each of the major US professional sports has an industry standard or agent regulation delineating what the agent's fee can be for successfully negotiating a player-contract. This fee is a percentage of player-contract's value. Agent fees for secured sponsorships and endorsements are much higher, generally between 15% and 25%. In this clause, it is important to include that the agent will be paid on any contract that is substantially negotiated during the term of the agreement. This ensures that an agent is entitled to their fee even if they are fired prior to completion of the deal. Also, it is in the agent's best interest to define what constitutes income from sponsorships and how the agent is to receive a portion of this income as a fee. Athletes are increasingly paid in equity and other non-liquid measures, which creates a difficulty in determining an agent's fee if it is not specifically stated in the representation agreement.
The last large clause in the agreement relates to expenses. Specifically, whether the player, agent, or a combination of the two, are to pay for expenses such as equipment, service providers, and travel. Certain sports have agent regulations which cap the amount of money the agent is allowed to spend on equipment for a player in a year, such as in baseball, so the relevant agent regulations must be consulted when drafting this clause. The specifics of who is to pay for each expense type can be negotiated individually.
Lastly is a series of smaller, general clauses that apply to the entire representation agreement. Including:
Notably, I have not included any clauses that involve financial services such as loans and investments. Financial services is a broad enough topic that it warrants its own contract. Further, not all agents provide financial services as the risks faced by the agent are greater. Some leagues have separate requirements for financial advisors, such as the NFL. Due to the increased risk, special rules, and breadth of services that could comprise financial services, it is in the agent's best interest to draft a separate agreement regarding any financial services offered.
Many of the clauses I've described contain the ideal situations for agents, but players may wish to renegotiate specific terms. As in all contract negotiations, it is important to know the difference between the terms you need and the terms you would like to have. The relationship between a player and agent is built on trust, and no agent wants to start that relationship off poorly by engaging in a contentious negotiation over the terms of their representation agreement.
Effective negotiating is essential to the success of a business. Although there are several different negotiating styles, there are two key traits that effective negotiators share:
Preparing for a negotiation is simple, as you should examine all of your interests, determine your needs/wants, and try to identify the other party's needs/wants. This should be done until you are comfortable with all of the positions involved. Each negotiation will require a different amount of prep time based upon the complexity of the issues or positions involved.
Being creative throughout preparations is key to effective negotiating. This will allow the negotiator to determine multiple scenarios that will benefit his positions and perhaps even mutually beneficial scenarios.
Additionally, if you are refusing to budge from your predetermined position, being creative can allow you to present multiple offers that all reflect your immovable position, unbeknownst to the other party. For instance, if you are concerned solely about total cost, you can present multiple offers of varying subsidiary costs that all result in the same total cost. Presenting multiple offers gives the impression that you are flexible, despite not budging on your ultimate position. Further, one of these offers may satisfy a concern of the other party that was previously unknown to you. Simply put, you can never fully know what the other party's wants and needs are, so it pays to be creative and determine several functional solutions.
It is also important to be creative while negotiating. In times where all of your offers have been rejected by the other party, you have to think on your feet and reconsider both parties' wants/needs in the hopes of reaching an agreement. Certainly this is not a simple task, but you now have any added information learned from the other party during negotiations. This information may offer some clarity as to their wants/needs and help you formulate new offers.
For an in-depth read on becoming a more effective negotiator, I highly suggest reading Getting to Yes. The book is full of preparation and strategic advice that I, and many other negotiators, have found to be particularly effective.
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