Can Collectives Actually Enforce NIL Buyouts in College Football Star Contracts?

An unprecedented situation in college football is transpiring over name, image, and likeness contracts.

Sparked by the transfer of quarterback Madden Iamaleava, the Arkansas Razorbacks have hired an attorney to enforce the buyout clause in the departed star’s agreement with the school’s NIL collective.

CBS Sports reported that, in addition to using Iamaleava as a prominent headline, the program is also pursuing efforts with former receiver Dazmin James.

Regardless of the outcome, the optics of a collective suing former college athletes with the apparent backing of the Arkansas athletic director are not great.

Are these efforts enforceable?

Sports attorney Kelleigh Irwin Fagan, chair of The Collegiate Sports Law practice, which primarily represents and advises schools, in addition to working with NIL entities, athletes, conferences, and coaches, spoke exclusively to NIL Daily On SI to provide insight on the matter. 

Fagan thinks that collectives are generally reluctant to enforce NIL buyouts, if they even have them in contracts. The negative publicity is something to consider. From a legal standpoint, the situation presents as a breach of contract claim that can be litigated under the state law that applies to that contract, usually defined within the terms therein.

The legal arguments to consider will be whether buyout clauses are enforceable, whether contracts were negotiated at arm’s length, whether language is styled as liquidated damages or considered more of a penalty, and how they would be intended to be used within a contract.

The American Bar Association defines liquidated damages as a pre-agreed amount of money specified in a contract to be paid to one party in the event of a breach and are intended to compensate losses that may be difficult to calculate or prove. 

A contract specifies liquidated damages as a pre-agreed sum of money that one party must pay to another in the event of a breach. This amount is intended to compensate for losses that are difficult to prove or calculate.

Per Fagan, if there’s a defined amount that a party will receive, that’s a reasonable ascertainable number that wouldn’t require a liquidated damages clause. The questions and arguments will focus on vaguer terms of value. 

“The other side of it is that there may be more than just the amount that a school or collective is paying an athlete,” Fagan explained. “It’s the value or potential lost value over time of no longer having that party hold up their end of the bargain. So that may be the argument about how it's not reasonably ascertainable, and then the parties then agree on a certain amount in the contract.”

The debacle underscores a dire need for athletes to all have proper representation in negotiations, particularly for high-profile athletes signing NIL agreements with significant amounts.

However, the crux of the issue lies not only in the enforceability of these terms but also in the potential risk that schools and collectives face regarding their possible entry into employment relationships. 

“Whether it’s a school or collective, they have to make that risk assessment and decide if they're comfortable with it,” Fagan said. “Versus the risk of somebody leaving and not being required to pay back or to be able to benefit from no longer being there in a financial sense. There are a lot of those risks that universities and collectives are having to balance at this point with these new agreements that are being negotiated for the first time, at least aboveboard.”

In the case of Iamaleava, it seems like more headache than it's worth to recoup the loss of $200k in an NIL contract when the optics of suing a 19-year-old wouldn’t look less problematic should it be in the millions.