Termination agreements in sport

If there is one thing that makes the hearts of football fans beat faster, it is the contracts that govern the destiny of their favourite players and teams. However, there are times when it is necessary to know certain legal terms and concepts to decipher the motivation behind these moves.

Specialised programmes, such as the International Master in Sports Law, LLM at Escuela Universitaria Real Madrid - Universidad Europea, delve into the complex legal terms associated with the sporting framework.

For now, we invite you to read this article if you want to know what a termination agreement is, how it is constructed and what its impact is in the competitive world of the beautiful game.

What is a termination clause?

A termination clause (or release clause) is a fundamental element in the employment contracts of footballers and other professional sportsmen. It is a contractual stipulation that allows a player to leave their club before the end of their contract. However, in order to do so, certain pre-agreed conditions must be met.

The main function of this legal provision is to establish a specific economic value. This "termination price" is the amount that the club interested in signing the player must pay to the current club if it wishes to take the player before the end of his contract.

As you can see, the buy-out clause is a powerful tool for both the player and the club. It gives certain security and stability to the contract, avoiding situations of uncertainty.

How to draft a termination clause?

Drafting a termination clause is a delicate task that requires legal knowledge and experience in the sports field. Some aspects to consider include:

• Amount of the clause: specific financial value that the interested club must pay to release the player before the end of his contract. This amount should be fair and in line with the player's value and potential.
• Negotiation between the parties: both the player and the club should be actively involved in the negotiation. This ensures that both parties are happy with the terms, avoiding future conflicts.
• Duration of the contract: it is crucial to define the period of validity of the clause.
• Player performance and potential: the value of the clause should reflect the player's current performance as well as his future potential. Factors such as the player's age, sporting achievements, skills and development prospects should be considered.
• Financial impact: it is necessary to assess how the clause will affect the club's budget in terms of both income and expenditure.
• Market competitiveness: the value set should be competitive, attracting interest from other clubs without disadvantaging the current club.
• Payment terms: it is essential to establish the terms of payment in case the termination clause is enforced: will it be paid in one instalment or in several? What will be the deadline for payment?
• Changes in the value of the clause: Consideration should be given to reviewing and adjusting the value during the life of the contract as the player's performance may change significantly.
• Confidentiality: Some players may prefer to keep the agreed figure secret to prevent other clubs from using it against them in future negotiations.

Who can draw up a termination agreement?

Clubs can see the termination clause as a protective measure to maintain the value of their players. This ensures that, if the player receives an attractive offer from another team, they will get a fair financial compensation.

Players can also benefit from this clause, as it gives them the possibility to change clubs when an opportunity arises that aligns with their professional and personal goals.

Both parties have the right to propose the inclusion of this clause in contracts. However, it is common for the provision to be drafted by lawyers specialised in sports law. These professionals should ensure that all parties involved are protected and that the terms are fair and clear.

Are there termination clauses in all countries?

Termination clauses are more common in countries with a long-established football tradition and highly competitive leagues.  Termination clauses are essential elements in the contracts of football players and other professional athletes. Although they are more common in countries with a football tradition, they are also used in professional football elsewhere. Thus, the termination clause stands as an equitable and strategic mechanism. It defines the game on and off the pitch, ensuring a fair and transparent dynamic in the exciting world of professional football.

If you are interested in this sector, the Universidad Europea has a wide range of master's degrees in law that will train you to face all the professional challenges derived from this field.