Transfer Agreements – pre contractual requirements and essential elements
Article 18 par. 3 of the FIFA RSTP mandates every prospective club to notify a players’ current club in writing prior to entering into a negotiation with a player. This provision is binding at both a national level and an international level and is aimed at maintaining the contractual stability.
With this in mind, in case a prospective club fails to notify the players’ current club in writing prior to entering into discussions with the player, the prospective club risks being held liable to have induced the player to breach the contract with his current club. This duty of the prospective club applies as long as the player is still under contract with his current club.
It is further pertinent to note that it is not necessary for the prospective club to seek the approval of the player’s current club prior to entering into negotiations with him. Instead, the prospective club is only required to merely inform the players’ current club in writing of its intention to enter into negotiations with the player.
In order to complete a transfer, the normal course of procedure is first for the transfer agreement to be concluded between the two clubs involved, and only afterwards the new club and the player may enter into an employment agreement.
However, this order of entering into agreements may not (and in most cases) is not always followed. Sometimes it may be necessary for the new club to secure terms with the player prior to entering into the transfer agreement with the player’s club. This is where the nature of the offer offered to the player become important, and must be specifically stated that the offer is subject to the conclusion of a transfer agreement and not binding until then. If not, the offer that includes the essential terms of an employment contract could bind the parties, and put the player in breach of his present employment contract.
In such negotiations, the necessity to always act in good faith is important. Both FIFA and CAS lay emphasis on this condition and place liability on the party that acts in bad faith in accordance with the principle of culpa in contrahendo.
Accordingly, it is necessary for parties to note that they can be held liable based on the doctrine of culpa in contrahendo if the following conditions are met – i) existence of contractual negotiations, ii) trust that merited protection, iii) breach of duty – deriving in particular from the principle of good faith, iv) harm, v) a causal link, and vi) fault.
The liability however, unlike regular contractual breaches, is based on the negative interest principle – that is, to place the aggrieved party in the position it would have been if it had never entered into negotiations for the agreement.
Notable jurisprudence:
- Beijing Renhe FC v. Marcin Robak[1]
“the duty to act in good faith already exists in fact at the time of contractual negotiations – i.e. independent of the existence of a written preliminary contract, letter of intent, or similar things – and is known as culpa in contrahendo. Culpa in contahendo under the here applicable Swiss Law means the negligen/intentional breach of pre-contractual duties. A finding of culpa in contrahendo requires of pre-contractual duties. A finding of culpa in contrahemdo requires the existence of contractual negotiations, trust that merited protection, a breach of a duty, harm, a causal connection, and fault [includes intent and negligence]. The breach of a duty in particular derives from the principle of good faith, and of providing information, including the duty to negotiate seriously and in a fair manner. It essentially constitutes an independent basis of liability, somewhere between a contract and a tort. According to Swiss legal doctrine, it is a special form of liability for breaches of trust (see for example SFT 120 II 331 p. 335, 336).”
- Damián Alejandro Manso v. Al Ittihad Club[2]
“no culpa in contrahendo exists when a party starts negotiations with more than one party. The Club has not provided any satisfactory evidence to assume that the Player had acted in breach of the general obligation to act in good faith. Furthermore, the Club has not proved that the Player could have committed culpa in contrahendo nor that the Club was induced by the Player to concluded the contract.”
- Lukas Grozurek v. Pafos FC[3]
“Under Swiss Law culpa in contrahendo means the negligent/ intentional breach of pre-contractual duties. A finding of culpa in contrahendo requires the existence of contractual negotiations, trust that deserves protection, a breach of a duty, harm, a causal connection, and fault. At the contractual negotiation stage it includes – regardless of whether a contract is concluded later on – certain duties of care, consideration, good faith, and of providing information, including the duty to negotiate seriously and in a fair manner.”
“In addition, the Sole Arbitrator recalls that for a compensation to be awarded based on the principle culpa in contrahendo, a damage/harm is required.”
- Al Sadd Sports Club v. Parma Calcio 1913 slr[4]
“However, the Panel finds that, already since 16:00 CET (18:00 QT), the Parties assumed obligations towards one another by having orally agreed on the Transfer Agreement, because they expressed their intention to transfer the Player from Parma to Al Sadd, knowing very well the conditions precedent included in the Transfer Agreement.” (Para 137)
“It is held in Swiss legal doctrine that Article 151 SCO does not accurately describe the consequence of the condition precedent, in particular because such condition does not affect the existence of the contract itself nor the existence of the obligations of the parties, but rather only the effects of the parties’ obligations, i.e. the effectiveness of the contract. Swiss law perceives the condition precedent as a modality of the obligation. The latter exists, but its effects are subordinated to the advent of the condition. The text of the first paragraph of Article 151 SCO is therefore somehow inaccurate. The existence of the obligation is given; it is the effects which are subordinated to the occurrence of an uncertain event.” (Para 143)
“While the contract is thus not yet effective pending the fulfilment of the conditions precedent, the parties bound by it have certain obligations with respect to the conditions precedent.” (Para 144)
“Put differently, the (yet unfulfilled) condition does not affect the validity of an agreement but only the effectiveness of the parties’ obligation / the performance of the contract.” (Para 145)
“… In summary, there are three distinctive periods when considering a contract subject to a condition precedent: i) the period before the conclusion of the contract, when the contract is not binding but only pre-contractual duties exist between the parties; ii) the period after conclusion of the contract, but before the fulfilment of the condition precedent, during which the performance of the contract is suspended but a binding expectation exists between the parties (“the Suspension Period”); iii) the period after the fulfilment or not of the condition, when the contract becomes or not fully effective and when the parties may or not claim its performance.” (Para 150)
“During such “Suspension Period”, Article 152 (1) SCO obliges the parties to conduct themselves in good faith and to refrain from doing anything that would impair, frustrate or thwart the fulfilment of the agreed conditions.” (Para 151)
“The parties to a conditional agreement are subject to an obligation to act positively, in a way that is expected from them in good faith, and the parties must therefore take any measures necessary in view of the fulfilment of the condition precedent. This also entails a duty to act in a timely fashion, without objective motivation, and thus in violation of the rules of good faith, which results in an unjustified delay or impossibility of the fulfilment of the condition precedent.” (Para 153)
“… if a condition is agreed and its fulfilment depends to a certain extent on the will of one of the parties to whom the contract imposes obligations, that party is in principle not entirely free to refuse such fulfilment and thus to release itself from its contractual obligations. On the contrary, it must act fairly and in accordance with the rules of good faith; … the degree of freedom remaining for the party concerned, on the one hand, and the duties imposed on it by the rules of good faith, on the other, must be determined in each individual case taking into account all the circumstances and, in particular, the object and purpose of the contract, duly interpreted in accordance with the principles of trust.” (Para 156)
“The key question to be addressed by the Panel is therefore whether Parma or Al Sadd failed to act with the diligence required under Article 152(1) SCO in assuring in good faith the fulfilment of the conditions precedent set forth in the Transfer Agreement, potentially subjecting them to liability vis-à-vis one another.” (Para 161)
“This is another test than the one invoked by Al Sadd, since the valid conclusion of the Transfer Agreement does not bring into play the concepts of a pre-contractual breach, or culpa in contrahendo.” (Para 162)
Similar to an employment agreement, FIFA does not mandate for any particular template of a transfer agreement. However, by the basis of cases before the FIFA Football Tribunal and CAS, the main essential elements of a transfer agreement include as follows:
- The names of the parties and their obligations,
- The nature of the transfer – permanent or temporary,
- The transfer fee involved,
- The signature of the parties.
Notable jurisprudence:
- Club A v. Club C[5]
“In this respect, the Single Judge first of all wished to point out that, in order for a transfer agreement to be considered as valid and binding, apart from the signature of all parties involved, it should contain the essentialia negotii of a legal agreement, such as the parties to the contract and their role in the transfer of the player, the date of the transfer, whether the transfer was made on a loan or definitive basis, and the eventual compensation payable by the buying party to the selling party, if any.” (Para 8)
- Club A v. Club C[6]
“In continuation, the Single Judge concluded that the Claimant and the Respondent had agreed upon the essential aspects, namely the loan transfer of the player to the Respondent in return for the amount stipulated, as well as the fact that the latter agreement was duly signed by the Parties.” (Para 18)
- Real Betis Balompié SAD v. PSV Eindhoven[7]
“The Panel now proceeds to address the issue whether the Player’s refusal to sign an employment contract as alleged by Betis relieves it from its contractual obligations towards PSV.” (Para 48)
“Betis avers that it was unable to fulfil its contractual obligation towards PSV by completing the payment for the Player’s transfer because the Player himself declined to sign the Proposed Employment Contract.” (Para 49)
“The Panel concurs with Betis that a player’s consent is a key element for any successful transfer. On this point, the Panel notes that Betis and the Player had not only already agreed personal employment terms in case of an exercise by Betis of the Option, but had also agreed the duration of Betis’ second employment contract with the Player under the Option.” (Para 50)
“It is a standard practice in the world of football that a buying club should somehow protect itself from the risk of missing a player’s consent to the transfer. Normally, this risk is prevented by inserting a clause stipulating that the player’s consent is a precondition for the fulfilment of the transfer contract.” (Para 54)
“If Betis were keen on securing the Player on a permanent basis through exercising the Option, it was bound to safeguard itself against the risk of the Player refusing to sign with it. This is a duty which the Panel remarks cannot override Betis’ obligations towards PSV under the Loan Agreement.” (Para 55)
- Sevilla FC v. RC Lens[8]
“The Panel notes, however, that in the world of professional football the term “sale” is used in an inaccurate way. It is in fact not possible to describe the transfer of a player, from a club to another, in terms of a sale (or the contract entered into by the old and the new club as a sale contract), in the same way as one could refer to the sale of goods or other property. Clubs, in fact, do not have property rights in, or equivalent title to, the player, which could be transferred from one entity to another. Such property rights or title are inconceivable, whatever the law applicable to the relation between a club and a player.” (Para 23)
“In order to make good this lack of property or title and to establish a “right” which can be transferred from one club to another, and therefore become the subject of a “sale” in proper terms, the industry has identified a category of so-called “federative rights”, being rights stemming from the registration with a football association or league of a player with a club. Indeed, the Transfer Agreement itself refers to the “droits sportifs” or “derechos deportivos” as the property of Lens and the object of the transfer to Sevilla.” (Para 24)
“The ‘sale’ of a player, therefore, is not an agreement affecting a club’s title to a player, transferred from one entity to another against the payment of a purchase price. The transfer consented by the seller, and the price paid in exchange, do not directly consider a property right, but are part of a transaction affecting the employment relation existing between a club and a player, always requiring the consent of the ‘transferred’ player and of the clubs involved. Through the ‘sale’, then, the parties express their consent to the transfer (in the ways described below: see 27) of the right to benefit from the player’s performance, as defined in the employment agreement, which, in turn, is the pre-condition to obtain the administrative registration of the player with a federation in order to allow the new club to field him. This point is confirmed by Article 8 of the 2008 RSTP, under which ‘the application for registration of a professional must be submitted together with a copy of the player’s contract.’” (Para 26)
“In the context of a “sale” contract, a transfer, being object and purpose of the parties’ consent, can actually be made in two ways: (i) by way of assignment of the employment contract; and (ii) by way of termination of the employment agreement with the old club and signature of a different employment agreement with the new club. In both cases, the old club expresses its agreement (to the assignment or to the termination of the old employment contract, as the case may be) against the receipt of a payment – which substitutes for the loss of the player’s services; the new club accepts the assignment of the existing employment contract or consents to enter into a new contract with the player; and the player consents to move to the new club.” (Para 27)
“At the same time, the Panel recognises that a transfer of a player can also take place outside the scheme of a (“sale”) contract, in the event that the player moves from a club to another following the termination of the old employment agreement as a result (i) of its expiration or (ii) of its breach. In both cases, the transfer of the player from one club to another takes place without (or even against) the consent of his old club. Therefore, it takes place without a contract (“sale” or other), because there is no contract (let alone a “sale” contract) in a situation in which there is no obligation freely assumed by one party towards the other. In the second case (transfer following a breach), an amount is due to the old club, but cannot be defined as a “purchase” price, paid as consideration for the consent to the transfer, since it is of a different character and title: it is compensation for the damage caused by the breach. In other words, the transfer of the player in this case is not a sale, because the old club has not agreed to the transfer (necessary element under Swiss law: § 22 above), even if it implies the payment of an amount to the old club.” (Para 27)
Obtaining the consent of a player to a transfer agreement will always bring about certainty to the transaction, and also avoid conflicts at a later stage if the transfer deal does not proceed as planned. Such consent maybe obtained by making the player co-sign the transfer agreement or it can be expressed in an offer that is signed by the player, or in some cases, it can be deduced by the behaviour of the parties. The risk-averse option is to secure the player’s consent within the transfer agreement.
Notable jurisprudence:
- Villarreal CF SAD v. SS Lazio Roma S.p.A.[9]
“A loan contract is in principle only concluded between the two clubs. The co-signing of the loan agreement by the player merely entails him/her not needing to enter into a separate agreement with the club of origin, whereas the effects of the employment contract are temporarily suspended. This also has the result of assuring the destination club that the previous employment contract is suspended. A loan contract can only be deemed to be a tripartite agreement if it establishes the terms of the loan and employment.”
- Club A v. Club C[10]
“On account of the above, the Single Judge turned his attention to art. 8 of the transfer agreement, according to which “The effectiveness of this agreement is subject to [the player] and [the Respondent] entering into a valid employment contract. If the transfer of [the player] does not take place because of the fact that the aforementioned condition is not fulfilled, this agreement shall be null and void; in such case the Parties shall have no claim for damages or any form of compensation against each other.” (Para 7)
“In this respect, the Single Judge deemed that, by means of the relevant article, the parties intended to establish a concrete and pertinent validity clause in the agreement. In other words, the conclusion of a valid employment contract between the player and the Respondent was, as explicitly agreed by the parties, a precondition for the validity of the agreement. Having said that, the Single Judge highlighted that, as a preliminary issue in the present matter, it has to be determined whether a legally binding employment contract had been concluded between the player and the Respondent subsequently to the signing of the transfer agreement by the Claimant and the Respondent.” (Para 8)
“At this stage, the Single Judge deemed it relevant to recall that in order for an employment contract to be considered as valid and binding it should contain the essentialia negotii of an employment contract, such as the parties to the contract and their role, the duration of the employment relationship, the remuneration. Moreover, the Single Judge pointed out that such essentialia negotii have to be accepted by all relevant parties concluding a contract. The Single Judge further referred to art. 12 par. 3 of the Procedural Rules, according to which any party claiming a right on the basis of an alleged fact shall carry the burden of proof.” (Para 9)
“In this context, the Single Judge turned his attention to the contract offer, which was provided by the Claimant in its submission (cf. point I.18 above) and signed by both the Respondent and the player, in which the latter expressly accepted the conditions contained in the offer, however, mentioned that “is pending the payments terms conditions”. Furthermore, the Single Judge pointed out that such offer was subject to “a successful medical test”. Therefore, considering that such offer had been made provided that the player successfully passed his medical test and bearing in mind that no other document was presented by the Claimant in this respect, the Single Judge concluded that the contract offer presented by the Claimant lacked the essential elements to be considered as a valid employment contract and it cannot be convincingly concluded that such offer was accepted by the player. On account of the above, the Single Judge decided that the contract offer presented by the Claimant cannot be qualified as a valid and binding employment contract.” (Para 10)
“In view of the foregoing, and in accordance with art. 8 of the transfer agreement, the Single Judge came to the conclusion that the transfer agreement signed by the Claimant and the Respondent was null and void, in the absence of any legally binding employment contract subsequently concluded between the player and the Respondent. Therefore, the Single Judge decided that the Claimant was not entitled to any amount based on the said transfer agreement.” (Para 11)
[1] CAS 2016/A/4489.
[2] CAS 2014/A/3573.
[3] CAS 2021/A/8008.
[4] CAS 2020/A/7582 – 7583.
[5] FIFA PSC Decision of 6 March 2018, Ref. No. 03180237-e.
[6] FIFA PSC Decision of 27 September 2017, Ref. No. 09171332-e.
[7] CAS 2010/A/2144, award of 10 December 2010.
[8] CAS 2010/A/2098, award of 29 November 2010.
[9] CAS 2013/A/3314, award of 7 March 2014.
[10] FIFA PSC Decision of 27 July 2016, Ref. No. 0716605-e.