MEDICALS AND TRANSFER AGREEMENT: CLUBS BEWARE
Negotiating transfers during the final days of the transfer window is usually a pretty pressurised environment for clubs, players and agents alike. Successfully completing a transfer in that often frenetic time necessarily requires accepting a level of commercial risk. However, as the English Football League Panel decision in a dispute between Barnsley Football Club (“Barnsley”) and Hull City Tigers (“Hull City”) demonstrates, unknowingly accepting commercial risk can prove costly.
The dispute arose because of non-payment by Hull City to Barnsley of an outstanding transfer fee instalment for a player whose appearances had been severely limited by an undisclosed medical condition. Hull City refused to pay the outstanding transfer instalment on the basis that it was offset, and in fact dwarfed, by the amount owed to the club by Barnsley under an indemnity in the player transfer agreement (“Agreement”). As most will know, an indemnity protects the indemnified party from loss(es) or expenses it would otherwise incur upon the occurrence of a pre-agreed event, with the indemnifying party assuming liability for those loss(es) and expenses. Indemnities are often given by the indemnifying party in connection with a warranty, i.e. the indemnifying party will warrant and represent to the indemnified party that a certain fact is true or set of circumstances exists, and give a related indemnity as a form of additional comfort to the indemnified party. In transfer agreements, the selling club may warrant and represent facts about the relevant player including, for example, that it currently holds the player's registration and will arrange for the registration to be transferred to the buying club. The selling club will usually agree to indemnify the buying club for any loss or expense it incurs if the warranty later proves to be untrue.
The indemnity in this case, Hull City successfully argued, was engaged by the breach by Barnsley of a warranty, which it appears, Barnsley did not know that it had given.
This came about because Barnsley accepted Hull City's offer to draft the Agreement. Barnsley had assumed that the draft prepared by Hull City would not differ too drastically from Barnsley’s standard form or other transfer agreements it had previously seen. Unfortunately for Barnsley, Hull City's draft, which was ultimately signed without amendment, contained an unusual warranty that Barnsley had made full and honest disclosure to Hull City of the player's past and current medical history including any injuries, conditions or illnesses which could affect the player's fitness or ability to play football.
Barnsley’s club doctor, who knew that the player had experienced symptoms of an undiagnosed but potentially career-limiting condition, was not informed of the transfer or of the warranty. The club doctor in his 25 year career at Barnsley, had “never requested disclosure of an incoming player’s medical history” and so had no reason to expect that Barnsley was required to make such disclosure in this instance.
The combined effect of the unusual warranty and the lack of disclosure of the player’s symptoms led to Barnsley breaching the warranty and being liable to indemnify Hull City against losses suffered by it as a result of the player’s diminished ability to play consistently and the related fall in his commercial value.
For club officials wary of falling into the similar difficult situations, clubs should:
Where possible, use the club’s own nuanced template transfer agreement as the basis for negotiations. If the other club wins the battle of which template transfer agreement to use as the basis of the negotiation, make sure in-house or external lawyers give it, at the very least, a sense-check and/or red flag review alongside the club's decision makers. The club’s lawyers should be able to isolate and identify unusual and/or onerous clauses and then negotiate accordingly; and
Ensure their executives, medical and technical teams are joined up in their approach. It's usually only when things go wrong that steps are taken to remedy particular processes. Try and be ahead of the curve and prepared for the inevitably frantic pace of the transfer window.
Nii Anteson is a Senior Associate in the Sports and Esports Group at sports, media and entertainment law firm Sheridans. He advises players, athletes, clubs, governing bodies, federations, broadcasters, sponsors, agencies, creators and media companies. You can follow him on Twitter at @SportsLawBore and @sheridanssport and contact him at nii.anteson@sheridans.co.uk.