Here at I Want to be a Sports Agent, we try and provide you with key issues that impact the industry. Whether it be current or future agents, this issue will no doubt pop up sometime.
Indian cricketer Yuvraj Singh has recently signed with new representation, leaving Percept Management. However, under his previous management contract, Percept inserted a “Right of first Refusal’ (RofR) clause which stipulates that if Percept want to keep him as a client after the current management contract expires, they can do so. Basically, Percept has first right to match any offer set forth by a rival management company. [Impact of Yuvraj case on sports talent market]
Percept Management has taken Yuvraj to court, seeking a breach of contract, but has been unable to enforce the clause, thus losing their case. An appeal will be heard in the future.
Many questions are raised by this clause. Generally this clause is found in many commercial contracts, such as sponsorship or TV. Channel 7 did this with the Australian Football League rights by paying an extra $20 million for this clause when the current contract for TV Rights was up.
First of all, how can you predict what the other agent will bring to the table? Is this quantified by them taking a smaller slice of commission? Or does the management company go out on a whim and approach sponsors/clubs with the assumption they have the client? There are too many variables that can not be accurately measured.
Secondly, is it a restraint of trade? When a playing contract expires in many professional sports, you are allowed to freely move to another club. The restraint of trade argument was used in the judgment of the case.
The argument for the RofR is that it operates in many other sectors of sport (Sponsorship, TV Rights) so why can’t it be enforced for another ‘property’ – the athlete?
Also, one could argue that the clause is merely insurance on the investment made by the agent. For example, a player is signed to a rookie contract, with minimal bonuses. The agent may have found the player a couple of local sponsors. The player does well and then becomes the next big thing. Shouldn’t the the company that set him up be able to enjoy the success too?
So if this appeal is not successful, what implications will it have for the industry? As the article suggests, a trend may be towards longer management contracts. Additional Clauses may be introduced to allow the management company to cut ties prior to the end of the contract (this may occur already, I am not too sure).
Either way, this case will set a precedent that will affect management contracts across the world.
One reply on “An Offer Refused”
If there was a right of first refusal clause in Singh’s contract, then he would be obligated to give Percept Management first crack at continuing to represent him after his current contract expired. I agree with Chris that it would be hard to quantify what other agents could bring to the table, but contractually speaking, he should have simply presented offers that he received by other management groups to Percept before severing his ties. If he was set on leaving, he could simply say that the terms of another management group are better than Percept’s matched offer and he is leaving. Representation is a very subjective matter and he (or his attorneys) could easily formulate an argument as to why Percept Management was unable to match the terms of another management group (i.e. the other group has better contacts and the ability to secure better endorsement deals). With that being said, Percept Management is going to have a hard time enforcing this contract in court as it is very hard to determine what the remedy is here unless the contract designates some sort of damages for breach of the right of first refusal clause (even so, the damages would be hard to calculate). Additionally, Percept Management cannot specifically enforce the terms of the representation agreement and force Singh to stay with them under most systems of jurisprudence.