Article

Five points that sports clubs should consider when entering into contracts with service providers and sub-contractors

15th September 2023

Irrespective of the sport, sports clubs enter into numerous service agreements relating to their business operations with third parties. Common examples can include:

  • Fan engagement and ticketing solutions
  • Concessions involving refreshments sold onsite
  • Cleaning and maintenance
  • Security
  • Non-sport related events such as concerts and trade shows.

These functions are fundamental to the smooth running of a club’s venue and the events held there. Regarding sports events, if the club is an organiser, it may sub-contract some obligations to third parties to help provide those services.

Recent years have witnessed several important issues that may affect service or vendor agreements or sub-contracts including increased supplier costs, staffing shortages, delays in the supply chain and increased demand. Therefore, it is important to ensure agreements are well-drafted to maximise this relationship’s potential and also robust enough to prevent you incurring unwanted liability.

1. Be clear with your obligations and responsibilities

It is vital, when entering into commercial agreements requiring another party to perform certain obligations, that these obligations are clearly set out. Regarding sub-contracts, it is especially important to ensure the clubs obligations, and liability, are included in the main agreement flow down to the sub-contractor in the sub-contract.

An inaccurately drafted agreement can cause confusion, delay and sunken costs if a party does not perform their obligations, so it is useful to explicitly list the provided services and each parties’ obligations.

It is common to see key performance indicators (KPIs) or service levels drafted into certain agreements detailing clear consequences and processes when they are not met.

It is important for service providers and sub-contractors to provide undertakings about how they interact with attendees to ensure the club can build and maintain a friendly reputation.

A club should ensure the service provider complies with club policies, which can be broad including health and safety, worker welfare, data protection, accreditation, IT security, brand guidelines, etc. Service providers should also comply with applicable laws.

What happens when the contractor is in breach? By the time of breach, the damage could already be done to the club. Termination of the contract would be an obvious remedy, but a club should include indemnities into an agreement to protect its position. Negotiating the inclusion of a security mechanism into a contract could put the club in a stronger position.

2. Protect your intellectual property

Intellectual property is an essential asset for the club. If a club grants any licences to service providers in relation to its intellectual property – such as logo usage or promotional images – this should be clearly defined and include appropriate restrictions regarding the use.

In general, a club will want to protect its intellectual property ensuring all rights and goodwill in the intellectual property remains vested in the club. If a service provider develops any intellectual property whilst engaged by a club, the club should ensure it has rights to any intellectual property created and appropriate provisions will need to be included in the agreement relating to the ownership of any created intellectual property.

3. How to generate additional revenue?

Instead of paying a contractor to provide services, a fee structure could be included to potentially generate revenue for the club. For example, this could be included as commission in a concession agreement. These are useful revenue drivers for a club.

4. Limit your liability

Service agreements and sub-contracts come with risk. It is therefore likely for the parties to want to limit their liability should something go wrong, either by limiting the type of liability that can bring rise to a claim or seeking to cap the amount that can be recovered. As such, limitation of liability clauses are likely to be a source of negotiation between the parties.

It is important that the club requires the vendor/service provider to obtain and maintain appropriate insurance for the term of the contract and longer if necessary.

5. Other points to consider

Counterparties like to publicise that they are working with a club but announcements or press releases by service providers should be subject to prior approval of the club.

The club should consider including robust confidentiality accreditation provisions in the agreement as contractors will have access to the club’s premises and confidential information. Data protection and privacy issues should also be addressed. It is likely some contractors will process personal data of some type and, given the serious consequences and potential fines this can result in, a club needs to tackle and address these head on.

Depending on the services provided by the contractor, the club may want to consider whether to include exclusivity provisions in the agreement to protect its commercial position.

Finally, despite being obvious, make sure both parties sign the contract and it is not left in draft form.