Posted: November 15th, 2021
By: Jacob Parrott
The world of college athletics changed forever on July 1, 2021. That day, new rules went into effect allowing college athletes to monetize their name, image, and likeness (“NIL”). Many would agree this change was long overdue. Big deals made by athletes such as the Cavinder twins (Fresno State women’s basketball) and Bryce Jones (Alabama football), among others, made great headlines. However, those deals are the outliers, and when the deals and athletes involved are that high profile, there are more formalities involved. There are formal contracts to outline the finer points and, in such cases, licensed professionals are involved to help the athlete understand their legal obligations. That is not the case in the vast majority of deals that are happening, however.
Most deals are for payment in kind or dollar amounts under $500 like the Barstool Athlete Program. When the stakes are low, it does not make sense for the athlete to get professional help with the deal. Further, it is more likely to be a verbal agreement or one made over social media. Sometimes it is so informal that the athlete does not realize they have entered into a contract that creates legal obligations just as real as the big money deals listed above.
So how are college athletes, generally 18–22-year-olds with little to no experience with the intricacies of contract law, supposed to legally protect themselves when entering into NIL deals? It starts with education. Many schools around the country are planning or have already implemented entrepreneurship and financial literacy workshops for their student-athletes. These schools would be well advised to begin instructing their athletes on the fundamentals of contract law as well. Student-athletes need to understand that a legally binding contract can be formed, even in the absence of a formal, written document. To form a contract, three main ingredients are required. First, an offer, which is a promise to do or refrain from doing something. Second, acceptance, which is agreeing to the terms of the offer. And third, consideration, which is something bargained for and received. It does not matter if those elements arise during a phone conversation or in social media direct messages.
In addition to knowing basics of contract formation, student-athletes need to understand common contract clauses they could inadvertently breach. One such clause student-athletes could fall victim to is a morality clause which often prohibits “immoral, deceptive, scandalous, or obscene” behavior. Many college athletes across the country engage in such behavior every day. Worse, they publicize these activities on social media alerting the other party of the breach. And if they end up in court, “everybody does it” is not a solid defense. Another area where student-athletes could get into trouble is exclusivity clauses. These clauses essentially provide language to the effect of: if you do a deal with us, you cannot do a deal with our competitors. It gets more complicated when one tries to identify competitors. For example, Nike and the mom-and-pop sports store in town are technically competitors, but will Nike come after you for breach of contract? What if one deal was done your freshman year and the other your senior year? To answer these questions, one must understand the language of the exclusivity clause itself. Student-athletes need to know how to read and understand a contract to protect themselves.
Finally, student-athletes need to appreciate the potential severity of their actions if they do breach an agreement. In some cases, they may escape relatively unscathed and simply be required to pay back the money or return the merchandise they received in exchange for their performance. However, they may face much harsher penalties. If their breach causes harm to the reputation of the business their agreement was with—and a loss in profits comes as a result—they may have to compensate the business for those lost profits. If the student-athlete does not appreciate the significance of their obligations and breaches intentionally, punitive damages may also be awarded.
Taken together, the newfound ability of college athletes to monetize their name, image, and likeness is a great change. It has the potential to greatly improve the lives of student-athletes all around the country. If we ensure they have a basic foundation in contract law knowledge to evaluate their potential NIL deals, we can help them make prudent decisions while taking full advantage of their economic rights as college students.
Jacob Parrott is a second-year law student at Wake Forest University School of Law. He holds a Bachelor of Science in Criminal Justice from Texas State University and worked for Wake Forest University’s NCAA Compliance office after his 1L year. Jacob intends to pursue a career as a sports and entertainment attorney.