Pre-contracts

What are pre-contracts?

When we talk about pre-contracts, we have to keep in mind that this legal instrument is the precursor to an employment relationship, before key terms and obligations have been established. A pre-contract in the sports context “is a preparatory agreement in which the guidelines for a future employment relationship are established. It can be modified later when the definitive sports employment contract is perfected”.[1]

So is a pre-contract actually a contract? And if not, how does it differ? This was considered by CAS and they found that “a preliminary contract is a contract under the law of obligations that creates the obligation to conclude a main contract at a later point in time, a party to the preliminary contract is not entirely free to exclude itself from the negotiations in relation to the conclusion of a final agreement. Instead, the parties must negotiate in good faith and should not abandon the negotiations without compelling reason for doing so.” (CAS 2016/A/4489 Beijing Renhe FC v. Marcin Robak)

Following the landmark ruling of the European Court of Justice (ECJ) of 15 December 1995 (Bosman Case) and the implementation by FIFA of registration periods, or “transfer windows”, as commonly (and wrongly) referred to by the press, any player can accept an offer from a new club in the six months prior to the end of their contract with their current club.

So why are they problematic?

Both developments have resulted in players entering more frequently into pre-contracts, which are drawn in different terms, but always under one premise: that a player is registered and joins the new club at a future date. The speculative nature of pre-contracts may also lead to misinterpretation by the parties of their legal effects, giving rise to disputes when a party fails to perform its obligations under the pre-contract (a typical obligation would be to conclude an employment contract). A large number of clubs are experiencing or have experienced confusion regarding the proper way to enter into a pre-contract. Ignorance regarding the rights and obligations in pre-contracts can make players believe that no effective link is generated between the player and the club, which leads to the signing of multiple pre-contracts with more than one club.

An analysis of the FIFA RSTP (Regulations on the Status and Transfer of Players), shows that the governing body does not set out the basic elements or requirements for entering into a pre-contract, respecting the contractual freedom of the parties. The lack of regulatory definition leads to more cases coming before the FIFA DRC (Dispute Resolution Chamber) to decide whether an agreement is enforceable with subsequent economic and disciplinary repercussions for the party that fails to comply with the obligations stipulated in the agreement. In determining the validity of the pre-contract, FIFA’s DRC takes into account the behaviour of the parties for example, correspondence between the parties and whether any money changed hands.

When are pre-contracts binding?

The regulatory framework is evolving, but legal practice has not kept up. This does not mean that there are no legal guidelines out there to determine when a pre-contract is binding between the parties and enforceable in case of breach. In CAS 2015/A/3953 & 3954, the Panel set the main elements that a pre-contract shall contain in order to be enforceable:

“A document that includes: (i) a date, (ii) the names of the parties, (iii) the duration of the contract, (iv) the amount of remuneration, and (v) the signature of the parties is considered to include all elements of the “essentialia negotii” principle and is therefore a valid and binding agreement.

Future editions of the FIFA regulations will surely seek to address this lack of definition. At the recent congress organised by the Royal Spanish Football Federation, FIFA was seeking to improve the contractual relationships of the main actors in this industry. If stakeholders in the footballing industry sought professional advice from sports lawyers to draft their pre-contracts perhaps they could avoid lengthy disputes and costs, which would create a safer and healthier environment for the sport.

Mateo Tapia

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References

[1] JIMÉNEZ RISCO, E. LA RALACIÓN JURÍDICA DEL TRABAJADOR DEPORTIVO (Caso de futbolístas y entrenadores de Fútbol). Revista de Ciencias Jurídicas. Universidad de Costa Rica, Facultad de Derecho-Colegio de Abogados. Revista Número 103. San José, Costa Rica, 2004, Pp. 97-99

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