Written by Pat Brown, MBA
As NIL (Name, Image, and Likeness) deals have become a significant part of college athletics, student-athletes have new opportunities to profit from their personal brand. However, just as with any contract, NIL agreements can be complex and contain clauses that significantly impact the athlete’s financial future. It’s essential for both athletes and parents to understand these contracts fully to ensure that the terms are fair, transparent, and beneficial.
Here are key clauses to look for when reviewing NIL contracts:
1. Compensation Clause
The compensation clause outlines how much the athlete will be paid for their participation in the NIL deal. This clause is one of the most important, and it should clearly state:
- The payment amount: Whether it’s a lump sum or ongoing payments.
- Payment schedule: When and how the athlete will receive payment (e.g., upon signing, monthly, or after the completion of deliverables).
- Bonuses or performance-based incentives: Some contracts may offer additional compensation based on the athlete’s performance or engagement (e.g., social media metrics, sales driven by the athlete’s endorsement).
Make sure the payment terms are fair and reflect the value of the athlete’s name, image, and likeness.
2. Exclusivity Clause
The exclusivity clause restricts the athlete from entering into similar agreements with competing brands or products for the duration of the contract. While exclusivity can offer higher compensation, it can also limit the athlete’s ability to sign other lucrative deals.
When reviewing an exclusivity clause, consider:
- Scope of exclusivity: Does it apply to a specific product category (e.g., sports drinks) or across broader industries?
- Duration of exclusivity: How long will the athlete be restricted from working with competitors? Is it limited to a specific time frame or tied to the length of the contract?
- Geographic restrictions: Does the exclusivity apply only within certain regions or countries?
It’s essential to balance exclusivity with the athlete’s broader career opportunities to avoid limiting future income streams.
3. Term and Renewal Clause
The term clause specifies the length of the agreement, while the renewal clause outlines how and if the contract can be extended. Understanding these clauses is crucial for ensuring the athlete is not tied to an agreement for longer than necessary.
- Term length: Is it a short-term partnership, or does it extend over multiple seasons or years?
- Renewal terms: Can the contract be renewed automatically, or does the athlete have the option to renegotiate or opt-out?
Be mindful of long-term commitments that could tie the athlete up for a prolonged period without the opportunity to explore other partnerships.
4. Performance Expectations and Deliverables Clause
Many NIL deals require athletes to fulfill specific obligations, such as promoting the brand on social media, attending events, or creating content. The performance expectations clause outlines these responsibilities.
- Clear deliverables: The contract should specify the exact deliverables expected from the athlete, such as a certain number of social media posts, video appearances, or promotional events.
- Timeline: What is the deadline for these deliverables? Does the contract set clear expectations for when content must be created and posted?
- Content guidelines: Are there specific requirements for how the athlete must present the brand (e.g., tone of voice, key messaging, or hashtag use)?
This clause should be realistic and not overwhelm the athlete’s time or other commitments, like academics and sports.
5. Morality Clause
A morality clause allows the brand to terminate the contract if the athlete engages in certain behaviors that could harm the brand’s image or reputation. This clause is often used to protect the brand from negative publicity.
- Specific behavior restrictions: Does the clause define the behaviors that could lead to termination (e.g., criminal activity, public scandals)?
- Termination rights: Does the brand have the right to terminate the deal if these behaviors occur? And, if so, under what conditions?
While these clauses are standard in many contracts, it’s essential for athletes to ensure that the terms are reasonable and don’t infringe on their personal life beyond the public eye.
6. Exclusivity and Non-Compete Clauses
In some cases, a non-compete clause may limit the athlete’s ability to sign with brands or companies that are direct competitors to the sponsor, even after the contract ends.
- Duration of non-compete: How long does the non-compete clause last? Does it extend beyond the contract’s term?
- Industry restrictions: What industries or products does it apply to? Is the athlete prevented from signing with any company in the same industry?
Non-compete clauses can significantly limit future opportunities, so it’s crucial to negotiate terms that don’t restrict an athlete’s ability to capitalize on their name, image, and likeness long-term.
7. Intellectual Property Clause
This clause defines who owns the rights to the athlete’s name, image, and likeness during the term of the contract. It’s essential to understand the following:
- Ownership of content: Does the athlete retain full ownership of any photos, videos, or content created under the NIL deal, or does the brand have ownership rights?
- Usage rights: How can the brand use the athlete’s image, name, or likeness? Are there any limitations on how long the brand can continue to use these materials once the contract ends?
Ensuring that the athlete retains rights to their personal brand and likeness will prevent exploitation beyond the contract’s duration.
8. Termination Clause
The termination clause outlines the conditions under which either party can end the contract before its agreed-upon term. It’s essential to know:
- Termination for cause: What are the specific grounds for termination? Is the athlete allowed to terminate the contract if the brand fails to meet their obligations (e.g., payment delays or failure to provide agreed-upon resources)?
- Termination for convenience: Does either party have the right to terminate the deal without cause? If so, what notice must be given?
A well-defined termination clause ensures that the athlete isn’t locked into an unfair agreement and has options if the deal no longer benefits them.
9. Indemnification and Liability Clause
This clause protects the athlete from legal claims or liabilities resulting from their participation in the NIL deal.
- Who is responsible for damages: If there is a legal issue related to the promotion or product, will the athlete or the brand bear the cost?
- Protecting the athlete’s reputation: Does the clause offer protection if the brand’s actions damage the athlete’s reputation or if the athlete is falsely accused of wrongdoing?
An indemnification clause helps shield the athlete from unnecessary financial and legal risk.
10. Payment for Legal and Administrative Fees Clause
It’s also important to ensure that the contract covers any administrative or legal costs associated with managing the NIL deal.
- Legal support: Who pays for legal fees if any disputes arise during the contract?
- Travel and expenses: Does the contract include reimbursement for travel expenses if required for events or promotions?
Clarifying payment responsibilities upfront ensures that the athlete is not burdened with unexpected costs.
Final Thoughts
NIL contracts offer significant opportunities for student-athletes, but they can be complex and filled with clauses that can have a long-lasting impact on their financial and personal future. Parents should guide their children in understanding each section of the agreement, negotiate favorable terms, and seek professional advice to ensure they are making informed decisions. A well-negotiated NIL contract can help secure both financial stability and the athlete’s personal brand long after their athletic career is over.
- Pat Brown, MBA
