10 Must Know NIL Contract Tips
There’s so much that Student Athletes (SA) need to know when entering the Name, Image, and Likeness (NIL) arena. A Student Athlete has to know their state’s laws, college or university’s regulations, and least of which, what and how to negotiate the best contract for them. I put on my lawyer hat to boil down the most important things to consider when you get into that negotiation room (or chatroom) with a potential sponsor.
1. There Must Be “Consideration” for a Binding Contract
Before considering whether it’s a good contract, SAs need to make sure they have a binding contract at all. This means that SAs must give something, in order to get something, known as “consideration” for the contract. This will typically be providing some deliverable to the sponsor, like a post on social media, an appearance at their storefront, or some other agreed-upon consideration. In return, SAs will get a benefit from the sponsor, like money, apparel, or access. So, bottom line is that there must be some exchange of consideration for the contract to be binding.
2. Watch out for Pay-for-Play clauses
Athletes must make sure that their endorsement deals are for licensing their NIL rights only. SA’s cannot enter deals that are tied to enrolling at a certain school, or for some particular athletic feat or performance. A violation of pay-for-play rules could result in disciplinary action up to and including a ban from college sports.
3. NIL Usage and Duration
Most deals have some sort of NIL right usage in exchange for something, but for how long? It’ll be important for SAs to specify how long they grant their NIL to their sponsor. A clause that limits the duration of the NIL to a certain time period ensures that the agreement is equitable, and if the sponsor wants more, they can always negotiate another deal. Once more, unless specifically contracted against this, contracts will often exhaust once the SA graduates.
The same goes for where they can use your NIL. Some contracts will say “worldwide” usage, meaning they can use it wherever they see fit for a certain duration. SAs should ensure that the usage rights are specifically tailored to a certain level and type of usage, and if the uses really are “worldwide,” be compensated accordingly.
4. Barred Endorsers
SAs are barred from engaging in NIL deals with specific products and industries. These barred sponsors include gambling, tobacco, and alcohol companies, as well as any companies that conflict with your institution’s exclusive partnership - meaning a SA can’t have a deal to wear Addidas when the college has an exclusive deal with Nike.
5. Moral Clauses
In the NIL space, your reputation is your currency, for the SA and the company alike. SAs and sponsors alike will want to work with moral, ethical, trusted people, because doing the opposite may have their negative reputation rub on yours. To that end, both parties can get some peace of mind by adding a clause that allows a party to terminate the endorsement deal if the other party engages in unethical, illegal, or immoral behaviors. Make sure these are specifically outlined to your liking, so that the other party can’t back out without clear proof of bad behavior.
6. Tell Your Institution
Some states outright demand that all athletes disclose their deals, but either way, SAs should make sure to clear any deals with their athletic department to make sure they keep their eligibility.
7. Are you Exclusive?
Some sponsors will want you to exclusively partner with them, others will just want you to not work with a competitor, so specifying the level of exclusivity is key. Also, SAs should be sure to include a clause that allows them to wear or use competitor products when they are mandated or the only option at a competition or other team event. Otherwise, a Powerade athlete might be in violation if they drink Gatorade during a meet.
8. What Happens if I Transfer?
The short answer is, no one knows. In principle, the rules of the state that the college is located in govern. However, most states don’t have any clauses about transfers, and no court has given guidance on this situation. But as a general principle, it would be a good idea to make sure that your contract is in line with the state law and college regulations that you’re within. So if a transfer would change that, SAs should revisit and rework their contracts with their sponsors to make them in line with the new state and college’s regulations. At the end of the day, it’s in both of your interests that you stay eligible.
9. NIL and Financial Aid
Because the money SAs make in NIL deal is considered taxable income, SAs will also have to report that income if they have need-based financial aid. To be clear, academic and athletic scholarships are not considered need-based so they will not be affected, but for those athletes receiving need-based financial aid, their financial award package may be affected by their last year’s NIL payout.
10. Force Mejeure Clauses
Force Majeure, or “act of God” refers to times when some unforeseen event prevents a party from fulfilling a contract. These are typically earthquakes, tsunamis, volcanoes, war - basically any outside force that is out of your control. In the event of these, parties should be excused from the contractual duties, you don’t want to be worried about tweeting when the tsunami is inbound.
Bonus Tip: Everything is Negotiable
Everything is negotiable in a contract. Every word. If you have an agent, make sure they argue the best deal on your behalf. If you are your own agent, be your own best advocate. Talk with your mentors, teammates, coaches, and anyone generally on your side before signing to make sure that you’re getting a fair deal.
With these tips in mind, go confidently ink your fair and fruitful NIL deal. For other ways to monetize and maximize your platform, join Couro, connect directly with your fans and athletic community, and start earning today.
By Cam Van
