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NIL Deal Structure for Student-Athletes, Businesses, and Institutions

BY: RJ CURINGTON



Photo: www.ekusports.com


Student-athletes across all collegiate sports have signed name, image, and likeness (“NIL”) agreements with businesses. From major national corporations to local shops, all kinds of businesses are seeing the benefit of student-athletes promoting their brands. To follow on the collection of NIL considerations, this informative article outlines the types of deals made, and guides student-athletes and businesses on important terms in a NIL contract.


The two common deals, besides individual endorsement deals, are college-wide deals and team-specific deals. College-wide deals are those in which an institution enters into a collective licensing agreement with a company that is available to almost every varsity student-athlete.[i] Each student-athlete can elect to participate, regardless of team or sport. This type of collective licensing agreement enables student-athletes to benefit financially from their NIL through opportunities like jersey sales, merchandise, and unique engagements while using the institution’s trademarked logo.[ii] Similarly, team-specific deals are those in which a business makes a general offer to a specific team of an institution such that any student-athlete on that team can elect to participate by signing a NIL deal directly with the company.[iii]


Below lists a few key contract provisions businesses, universities, student-athletes, and representatives should consider before signing a NIL deal of any type:


Location


Student-athletes and businesses should look to the policies of the state where the student-athlete is attending school for the applicable NIL laws and standards.[iv]


Agents, Attorneys, and Accountants


Businesses should be aware of student-athletes representation when negotiating deals, but also recognize any representation is strictly limited to procuring and negotiating market opportunities during the student-athletes eligibility.[v] It is important to note that institutions are prohibited from being involved in the specifics of their student-athletes NIL actions.


Consideration


In every contract, the student-athlete must provide some deliverable to the endorsing business and the student-athlete must receive some benefit from the endorsing business.[vi] All that is needed is an exchange, courts typically do not evaluate the value of what is provided or received.[vii]


Pay-for-Play Limitations


Any endorsement deal must compensate a student-athlete only for the use of his or her NIL rights. Student-athletes and businesses must avoid compensation that is contingent on enrollment at a particular university or specific athletic performance or achievement. Payment details should always be explicitly stated in the contract.[viii] Also, student-athletes need to know when they’re getting paid, how much they’re getting paid, and how they will be getting paid.


Usage Rights Clauses


Setting a specific period that defines the length and limitations of a sponsoring company’s use of a student-athlete’s NIL rights for products or materials is an equitable arrangement for both parties.[ix]


Exclusivity Clauses


Businesses usually want exclusivity, which prevents an athlete from signing deals with competing brands.[x] If additional value is provided, student-athletes can consider aligning their NIL rights exclusively with certain products and brands. However, any exclusivity rights must be clearly defined and understood by both parties. Additionally, any exclusivity clause must contain language that permits a student-athlete to wear a competing brand when mandated at a competition or event.[xi] Businesses that create conflicts with a university’s exclusive partnerships are prohibited while participating in their sport (think Reebok sponsoring a student-athlete whose university wears Jordan equipment).



Force Majeure Clauses


Unforeseeable circumstances can prevent student-athletes and businesses from fulfilling a contract. A force majeure clause excuses contract performance when some “act of God” or extraordinary event occurs.[xii] Given student-athletes’ youth and unpredictable schedules, broader flexibility may be necessary to require performance while limiting harsh penalties for individuals who are still in college.[xiii]


Morals Clauses


Student-athletes and businesses will want to avoid association with individuals who engage in illegal, immoral, or unethical conduct. To protect their reputation student-athletes and companies can include a clause that permits termination of the endorsement deal if the other party is involved in such behaviors.[xiv]


Intellectual Property (“IP”)


Student-athletes and businesses must obtain consent to use the trademarks of their institution and other brands in all marketed materials.[xv] The third-party that created any media must also consent to its use in any endorsement. It is critical to specify which party is responsible for obtaining this IP clearance, and what happens if the other party is sued for contributory infringement.[xvi]


Disclosure


Regardless of state laws and university policies, student-athletes should clear every potential endorsement deal with their university’s athletic department.


Paying close attention to detail in contract drafting and negotiation is important in protecting student-athletes, businesses, and institutions from avoidable litigation.


RJ Curington, J.D., M.S. graduated from DePaul University College of Law. He can be followed on Instagram/ Twitter: @realrjcurington and Linkedin at RJ Curington.

[i] Knight, Jeff and Butcher, Erin E., “College-wide and team-specific NIL deals: Considerations for colleges and universities to avoid unwanted consequences,” https://www.bricker.com/insights-resources/publications/college-wide-and-team-specific-nil-deals-considerations-for-colleges-and-universities-to-avoid-unwanted-consequences (September 21, 2021) [ii] Id. [iii] Id. [iv] Burridge, Alexander, “Contract Basics for Every Student-Athlete NIL Deal,” https://www.jdsupra.com/legalnews/contract-basics-for-every-student-3793825/ (August 18, 2021) [v] Id. [vi] Id. [vii] Id. [viii] Gambino, Jessica, “How To Approach An Athlete For An NIL Deal,” https://sweetrosestudios.com/2021/09/approach-an-athlete-for-deal/ (September 7, 2021) [ix] Burridge, Alexander, “Contract Basics for Every Student-Athlete NIL Deal,” https://www.jdsupra.com/legalnews/contract-basics-for-every-student-3793825/ (August 18, 2021) [x] https://nameimagelikeness.com [xi] Burridge, Alexander, “Contract Basics for Every Student-Athlete NIL Deal,” https://www.jdsupra.com/legalnews/contract-basics-for-every-student-3793825/ (August 18, 2021) [xii] Id. [xiii] Id. [xiv] Id. [xv] Id. [xvi] Id.

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