Escape Room: Young MLS Signings and the Contracts that (May) Bind Them

Recently, Major League Soccer has signed several players under age 18 to lengthy (five-to-seven years) professional contracts.  While these contract terms exceed the maximum allowed by FIFA for under 18 players, the contracts are likely valid under US laws.  This article discusses creative solutions these players may have to free themselves from their long contracts.   

On February 28, 2022, Maximo Carrizo celebrated two events.  One was signing his first professional contract – a seven-year deal with MLS’ New York City FC.  The other was his fourteenth birthday.  Together, these made Carrizo the youngest player to sign a first team contract in MLS history. 

But this record is not the interesting part of the story.  In fact, Real Salt Lake’s Axel Kei set the previous mark only six weeks earlier, and Carrizo only bested him by 15 days.

The real story only appears when we widen the lens and see that Carrizo’s deal fell within MLS larger trend of signing (very) young players to long-term contracts.  For example, in 2022 alone, MLS teams signed thirteen players younger than age 17 to contracts of at least five years.[1] [2]  Among this group, the longest deals belong to Carrizo and his NYCFC teammate Christian McFarlane – six years, plus a one-year team option.         

While these players will make decent money at a young age, they are ceding control over important stretches of their careers to MLS.  With terms that long, MLS will have all the leverage.  It can demand high fees from any clubs that want to sign these players.  In turn, clubs that would otherwise be interested might find them too expensive.  This could block the players from development environments that suit them better.  And if a player excels, he will have more trouble converting his increase in market value to a higher salary.  In short, the long contract terms limit players’ flexibility and may close some doors they would rather have open. 

Players may be able to escape these contracts

For these young American players, hope may not be lost.  In fact, the portions of their contracts after three years are likely void under FIFA rules.  The problem is that the contracts are valid under most US legal regimes. So while a player could void the contract and move to a new club, he could also face breach of contract liability in the United States.  This Catch-22 means escape from these onerous deals carries risk.

The contracts violate FIFA rules

Based on the information available, these contracts violate FIFA rules.  Article 18.2 of FIFA’s Regulations on the Status and Transfer of Players (the “RSTP”) sets the maximum length of players’ contracts.  In relevant part, it reads

[T]he maximum length of a contract shall be five years. Contracts of any other length shall only be permitted if consistent with national laws. Players under the age of 18 may not sign a professional contract for a term longer than three years. Any clause referring to a longer period shall not be recognised.

The three-year limit on minors’ contracts is as simple as it looks.  FIFA jurisprudence interprets the language as an unqualified ban on terms longer than three years.[3]  The language does not invite any other conclusion.  Note that the provision limiting contracts for under 18 players comes after the sentence allowing contracts longer than the maximum five years “if consistent with national laws.”  The natural interpretation is that FIFA does not allow contracts for minors to exceed three years, regardless of whether they are “consistent with national laws.” 

Because the above-referenced thirteen contracts exceed three years, the years beyond that do not count – at least to FIFA.[4]  The same would apply to any other contract an MLS player signed prior to age 18.    

The contracts are valid under most US legal regimes

The catch is that, under most circumstances, US law does not void a minor’s contract simply because it extends beyond three years.[5]  So any player who discards an otherwise valid contract would be subjecting himself to a breach of contract suit. 

Damages are the determining factor

Breach of contract liability would not block a player entirely. 

In and of itself, an adverse judgment would inflict little damage.  The question would be damages.  For example, if the judgment stuck the player with $20 million in damages, he may want to rethink his departure.  On the other hand, if the damages were mild, he or his new club could pay the amount.  Thus, he would be free to complete the transfer.

At this point, the potential damages start to resemble a buyout or release clause.  Many players, from all over the world, have these.  As the name indicates, rather than negotiating a fee with a player’s current club, a buying club can pay the amount of the release clause.  This ends the player’s contract with his current club and allows the buyer to sign him.

In some instances, a penalty clause functions as a buyout or release.  So the contract might impose a penalty of, say, €10 million on the player if he breaks his contract and signs with a new club.  Provided they can afford the amount, it is easy enough for the new club to pay the penalty for the player.

If a minor breaks his contract with his MLS team, his breach of contract damages would function the same way.  The buying club could pay the damages, leaving nothing to block the player from completing the transfer.

But for this to work, the damage amount must fit the buying club’s budget.  And without a judgment, the amount would be, at best, an educated guess.

For these cases, breach of contract damages would come in two forms: liquidated or expectation.  Liquidated damages are an explicit penalty set forth in the contract.  So for example, a contract may force the player to pay $100,000 if he breaches the contract.  This clause would behave like a buyout, release, or penalty clause.  If a new club wants to buy the player, they could pay the $100,000 in liquidated damages.  At that point, any practical impediment to the transfer disappears.    

If the contract does not have a liquidated damages clause, expectation damages would apply.  These entitle the non-breaching party to the “benefit of the bargain” – or the benefits it would have realized had the contract not been breached.  So imagine a player who sues his team for breach of contract because the team failed to pay his salary for a season.  The wages for that season would be his expectation damages. 

The scenario at issue here is the opposite: a player breaches his contract by signing with another team.  Flipping the parties’ positions makes it more difficult to reduce expectation damages to a monetary figure.  The team could claim at least part of any signing bonus it paid the player.  This money rewarded the player for signing the entire contract, including the term beyond three years.  As the team did not receive the full benefit it was owed, the player should not receive the full benefit he was provided.  

The team might also pursue the cost of replacing the player.  The new player would require a salary and acquiring him may cost the team a fee.  Other transaction costs – legal fees, scouting, etc. – could add a relatively low amount to the total. 

The issue would be determining what qualified as an adequate “replacement.”  Is it any player the team pays the same salary as the departing player?  Is it a player of equal quality and production as the departing player?  If so, how would a court determine this?  If the team did not pay an acquisition fee for the departing player (likely, since most are homegrown), could it still recoup any acquisition fees for the replacement?  These and other questions have yet to be explored, which emphasizes how defining a “replacement” is a task covered in subjectivity.

Nonetheless, whatever damage figure prevailed would become the player’s release clause.  The problem is that the player and his potential new club would want to know this number before executing the transfer.  This would be tough – especially for the first players to try this strategy.  But even if more attempts began to establish a rough formula, it would only shrink, rather than eliminate, the uncertainty.    

Bottom Line

The youth players who sign these 5-to-7-year contracts have a means to escape them: leave their current team after three years and pay the breach of contract damages that might ensue.  But the damage amount is a variable and getting it wrong may stick clubs or players with costs beyond their budgets.  So again, this creative strategy is also a risky one.

[1] This number does not include MLSNext signings.

[2] Notably, Kei was not one of these players.  His initial contract with RSL runs only two years.

[3]   See CA Paranaense v. Silva Santos and Estoril Praia, Decision of the FIFA Dispute Resolution Chamber, 5 December 2019, ¶¶18-22; See CA Paranaense v. Vinicius de Lima Ferreira and SL Benfica, Decision of the FIFA Dispute Resolution Chamber, 6 December 2019, ¶¶24-28

[4]   See CA Paranaense v. Silva Santos and Estoril Praia, Decision of the FIFA Dispute Resolution Chamber, 5 December 2019, ¶¶18-22; See CA Paranaense v. Vinicius de Lima Ferreira and SL Benfica, Decision of the FIFA Dispute Resolution Chamber, 6 December 2019, ¶¶24-28

[5]   Contracts with minor can be invalid for reasons other than the term of years.  And in some cases, a parent or guardian must sign the contract in place of a minor.  Nothing indicates these were issues here.

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