Sportspeople v their sponsors – the contract termination stand-off

There are often times when sponsors will seek to terminate their contract with a specific sportsperson following a misconduct and a repudiatory action.

For example, there was recent punching incident involving Super League rugby player Ben Flower, the Lance Armstrong embargo and, of course, Luis Suarez’s biting incident.

Knowing your rights for such events is paramount. If common law rights can be excluded, parties will have to rely solely on the terms of their contracts, which may provide a far less advantageous remedy if the terms of the contract limit or exclude any amount of damages.

cycling bike race cycle
Disgraced cyclist Lance Armstrong

A ‘repudiatory breach’ is an actual breach of contract by conduct which is severe enough to go to the root of the contract. The legal test also takes into account the parties’ intention to remain bound – BskyB Ltd. & Another v HP Enterprise [2010].

A repudiatory breach will not automatically bring the contract to an end. The innocent party can choose to affirm the contract or accept the repudiation. This is a right at common law under Stocznia Gydnia SA v Gearbulk Holdings [2010]. Although many contracts allow for termination on the happening of a ‘material breach’, depending on how the parties have defined this term in the contract will not necessarily determine whether a breach of this term is repudiatory.

One problematic area in sports contracts is the inclusion of a ‘remedial period’. This is a term that restricts the right to terminate for any breaches of contract. This prevents a sportsperson from terminating until the end of the remedial period. The greater the period of time which a sponsor has to wait before terminating, the greater the adverse publicity from a negative association.

A Claimant may be able to recoup for the full losses caused by a repudiatory breach or instead be restricted to a much smaller figure, or even prevented from claiming at all. It may also, in certain circumstances, prevent a sponsor from taking swift action to end its relationship with a sportsperson, or severely limit any right to compensation.

In recent years the courts have allowed parties to contract freely on their own terms and only intervene when absolutely necessary. It appears that very clear, if not unequivocal, wording will be needed in order to exclude a party’s common law right to damages following a repudiatory breach.

For future negotiations or drafting of sports agreements, particular attention should be given to the following:

  • Ensure that contractual termination clauses are without prejudice to the parties’ rights and remedies at common law.
  • Identify situations which will ‘trigger’ the right to terminate and amount to a repudiatory breach – i.e if the sportsman/woman uses a rival product or expresses political opinion.
  • Avoid remedial periods for breaches of contract.
  • Ensure that the right to terminate is reserved. Make it clear that the existence of a specific remedy is not intended to exclude common law rights to terminate or the common law right to damages.

Daniel De Saulles is a recent LPC graduate, currently working at DAC Beachcroft in Birmingham. Read all his sports blogs for Lawyer 2B.