Buy-out clauses in football contracts

A buy-out clause provides a player with a right to “buy” himself out of a contract with a Football Club and become a free agent without having a just cause to do so. It is not obligatory to include such a clause into a contract and what is more important, it is permitted under FIFA Regulations and most national laws. It is worth mentioning, that although national laws and national sporting regulations may be taken into consideration, it is not decisive in international transfers.

The Commentary on the FIFA Regulations provides a very detailed explanation on buy-out clauses and how it operates:

“The parties may, however, stipulate in the contract the amount that the player shall pay to the club as compensation in order to unilaterally terminate the contract (a so-called buyout clause).  The advantage of this clause is that the parties mutually agree on the amount at the very beginning and fix this in the contract.  By paying this amount to the club, the player is entitled to unilaterally terminate the employment contract.  With this buyout clause, the parties agree to give the player the opportunity to cancel the contract at any moment and without a valid reason, i.e. also during the protected period, and as such, no sporting sanctions may be imposed on the player as a result of the premature termination.”

What are the risks?

For the player. The absence of an exit mechanism, such as the buy-out clause, in a contract between the player and his current club puts the player in a position where he will be tied to his current club (until the expiration of his ongoing contract).  The player’s club may ask for astronomical figures for a release, which neither the player himself, nor his new football club, would be able to afford.

For the new club. Where the player invokes a buy-out clause without his current club’s consent, it may be considered as a unilateral termination of the player’s contract without just cause. The player may then be liable to pay compensation to his current club.

On top of that, the player’s current club may claim that the new club induced the player to breach the contract during the protected period. If established, the player and the new club may then be subject to sporting sanctions (Article 17 of the FIFA Regulations).  Furthermore, the player may be banned from playing in official matches from 4 to 6 months, which is a significant period of time for a player’s  short-term career, whereas the new club may be banned from registering new players nationally and internationally for two entire transfer windows.

Why is this important?

The imposition of sporting sanctions may cause irreparable damage to the player’s football career and significant losses for the new club.  Hence, whenever a player is transferred from one club to another, before the expiration of his current contract with the club or before the expiration of the protected period, it is important for clubs to be sure of their legal position.

For more information or advice on these risks, please contact Madina Tatraeva at madina.tatraeva@iaw.co.uk