STUDENT ATHLETES

Fine Print Foes: Reviewing NIL Contracts

Receiving offers for financial sponsorship can be an exciting time for your athletic career, especially with newer name, image and likeness (NIL) deal opportunities. Before finalizing your desired offer, a legitimate sponsor will most likely draft a written contract to solidify the terms and conditions of the NIL deal. However, like any legal contract, word choices and clauses can result in certain ambiguities and agreements that may pose exploitation risks. Currently, a national standard for NIL deals does not exist. Therefore, it’s important to thoroughly review each clause in a contract before signing. Most commonly, financial contracts exhibit vulnerabilities that may be split into three distinct categories: financial compensation, brand identity and contract modification. 

Financial Compensation

Most NIL deals with athletes will include being monetarily paid for using their name, image and likeness. However, if payment amounts, terms, frequency and methods are not specified within the NIL contract, you may become subject to your sponsor’s preferences rather than any legal obligation. This may result in delayed payments, unexpected deductions or fees, and ultimately, reduced overall earnings. Contracts may also include clauses that bind athletes to financially protect sponsors from legal action. These are typically termed “indemnification clauses” or “liability clauses,” and they may pose a risk to your financial security.

Brand Identity

Given the nature of NIL deals, there are sometimes contract clauses that attempt to control your rights over your own image and intellectual property. Depending on the verbiage, the contract may grant sponsors complete ownership of your brand identity for the duration of the contract; in some situations, it may grant them rights permanently. This would give the sponsoring organization freedom to use your name, image and likeness however they want, and without your permission.

There may also be terms within a contract restricting you from signing additional deals with other potential sponsors, which could severely limit your business opportunities for more financial support. Furthermore, some contracts may feature clauses that bind you to excessive time commitments for promotional events and activities. This may impact your athletic and academic careers, as you will be obliged to participate in these commitments if the contract is signed.

Contract Modification

Most agreements will include terms for the beginning, end, renewal and transfer of the contract. One of the most common traps within proposed NIL deals gives the sponsor permission to terminate the agreement without any clear cause or reason. Automatic renewal clauses may also be inserted, making it more difficult to end the contract and extending the terms past your initial agreement. Furthermore, there may be clauses included that relate specifically to transferring your contract elsewhere. These clauses may require you to pay back any previous income or bonuses received from your work with your sponsor. 

How to Protect Yourself

While many avenues of risk exist within NIL contracts, there are also many methods to protect yourself. You can advocate for clear definitions of contract terms and timelines. You may negotiate specific compensation amounts, frequencies and methods, requesting to include consequences for late or non-payments from your sponsor. Additionally, you could consider working with an intellectual property lawyer to trademark your NIL, which would protect you from people and companies seeking to use your intellectual property or image without your permission.

Finally, you may choose to consult experts in the NIL field. NIL attorneys may assist with reviewing your contract in its entirety and negotiating better terms for you. Your school’s financial aid office may also be able to assist you, as any NIL deal must receive approval from your school’s athletic department.

Sources:

https://elawfirm.org/blog/the-hidden-traps-in-nil-contracts-and-how-to-avoid-them/

https://www.californiasportslaw.com/blog/10-nil-contract-red-flags