How do NBA Contracts Work?


Estimated Reading Time: 6 minutes

We see the high flying dunks and incredible athleticism every night in the NBA, but what we don’t see is what goes on behind the scenes. There are many aspects of the NBA world that are largely unknown to the general public and, carry an element of mystery despite their importance.

How do NBA Contracts Work? A contract between the NBA player and team which goes into minute detail to ensure that every outcome and contingency in the NBA is accounted for when a player signs for a NBA Team.

One of those facets is NBA player contracts, which play a massively important role in the overall function of the league. With that being said, let’s try and clear up some questions surrounding NBA player contracts.

What Are NBA Contracts?

Similar to most deals, NBA player contracts are legally binding documents. The difference is contracts within the association are quite complex and in depth in comparison to conventional agreements. Due to their complexity, careful attention and consideration must be given when players are signing and negotiating new or extended deals. In essence, NBA contracts are designed to cement and agreement between a player and his employer, all whilst protecting and keeping both parties happy throughout the duration of the deal.

Why does a Player need a Contract?

By having a legally binding document, it ensures all terms and conditions are laid out to ensure the protection of both the franchise and player. As such, a contract solidifies the future of a player for the duration of the deal. Understanding how much money a player will make, and where he and his family will live gives piece of mind enabling them to focus on their job and plan their financial future.

When signing a player contract, an organization ensures their player will not do anything to compromise the franchise’s integrity (gambling, doping, inappropriate behaviour), as well as avoiding activities that are detrimental to their health (drug consumption, excessive drinking).   

Why is an NBA Contract so Complex?

NBA contracts are so detailed because they need to cover every possible outcome and contingency. Although it may seem unnecessary, these contracts cover aspects player’s lives they wouldn’t even dream of doing anyway. For example, a common stipulation in NBA player contract doesn’t allow players to ride a motorcycle in order to avoid serious injury resulting in a hindrance to team success. Even if most players wouldn’t even consider riding a motorcycle in their life, it needs to be included regardless to cover all bases for the franchise.

Contracts also cover personal conduct in order to avoid any scandals or negative media attention that could hurt the organization’s image. All in all, failure to abide by any of these restrictions in place will spell the end of your time with the franchise, and lead to the termination of the contract.

Other areas included in an NBA contract are; how much money a player will receive per season, the total sum he will receive over the course of the contract, and how long the duration of the contract is.

For some superstars in the NBA, their contract can also include benefits for their nominated family, friends and agents usually in the form on monetary earnings. Although players may play for the same team, it’s important to note every single player on the roster will have a slightly different contract, given their time in the league, their age, their production, their specific stipulations and a whole range of other factors.

Adding to the complexity of player’s contracts is their endorsement and sponsorship deals away from the floor. A contract will determine the ability for a player to negotiate contracts with companies that desire their services, as well as endorse the brands already associated with the organization whether that be brands or drinking certain beverages.

Further, NBA contracts will also include lucrative bonuses for both individual and team successes. A team bonus could be winning a championship, and an individual bonus could be the selection as an All-Star. Like normal bonuses, these are typically an additional lump sum paid at the end of the season.

Perhaps the most unique aspect of NBA contracts is that players are guaranteed to entire sum of the contract they’ve agreed and signed. Whether they play one minute or every minute, whether they’re injured for the entire season, or whether a team cuts them prematurely in their first year, players are entitled to the full compensation. As you can imagine, franchises include numerous physical performance standards that players must maintain to avoid being stuck with an unproductive or out of shape player.

Lastly, all elements of an NBA player contract must abide by the rules stated in the Collective Bargaining Agreement regulations. The “CBA” protects the players outlining minimum salary and contract length guidelines.        

What is the NBA Salary Cap?

You may be wondering what determines the monetary value of a contract, or what determines the length of a contract. There are many factors that go into this, however, the salary cap is the most important one. A salary cap is a budget limitation the NBA enforces to ensure an even playing field.

The league issues what is referred to as a “soft cap”, meaning that if teams go over their soft cap with player salaries, the franchise will be penalized by the CBA by paying what they refer to as “luxury tax”. There are exceptions that allow teams to go over the salary cap but franchises ensure their affairs are in order by carefully distributing their available funds throughout the roster.

Obviously, the star players get a larger piece of the pie, but the salary cap is always at the forefront of constructing a team.

What are the types of NBA Contracts?

Uniquely, the NBA offer different types of contracts and various stipulations within a contract. These are dictated by a range of factors including age, salary, how long you have been in the league, special circumstances upon many others.

Let’s touch on a couple of these.

What is the Standard NBA contract?

This is a standard contract between a player and organization. This deal is usually 45 pages long with the first 28 pages being non-negotiable. This contract includes all standard salary, total sum and overall duration.

What is the Rookie Scale Contract?

This is the first NBA contract a player will sign. This deal is between a franchise and their first round pick. The contract is for two years, with a team option for the 3rd and 4th year. The salary of this contract is determined by what position the player was selected in the draft (number 1 pick higher salary than number 14 pick).

What is the Veteran Playing Contract?

This is a contract for a free agent that has played eight or nine years in the league covering at least five seasons. One signed, this player cannot be traded for one year. This contract must make up at least 30% and no more than 35% of the team’s salary cap. If a player has under 10 years of service in the league and makes up 35% of the salary cap, this is what is known as a “super max” contract. No team can have more than two players making up 35% or more individually of the salary cap.

NBA Player Contract Renegotiations?

Renegotiations are amendments that can be made to players contracts to increase their salary before the contract has expired. Renegotiations can only be increases, and the increase in salary for each upcoming season must be more than the original salary.

EXTENSIONS
Extensions are amendments to a contract that adds additional years to the length of the existing term.

OPTIONS

The CBA allows two types of contracts options. The first is the ability to extend the term, and the second is the ability to terminate the contract early. The option to extend the term can be both a team and player option, whereas the option to terminate the contract early can only run in favor of the player.

QUALYFYING OFFER
A qualifying offer is a franchise’s ability to potentially retain a player. Once offered, a player becomes a restricted free agent meaning another suitor will have to match or beat their offer in order to obtain the player’s services.

OFFER SHEET

An offer sheet is an agreement given to a restricted free agent by another franchise in the hopes of securing their services.

TWO-WAY CONTRACT
A two way contract is between a franchise and a player who pay him a two-way salary to play NBA minutes and minutes in the G-League.

SUMMER CONTRACT
This contract does not count towards a franchise’s salary cap. This contract is signed before the regular season with the player earning money on a pro rate basis.

NON-GUARENTEED TRAINING CAMP CONTRACT
A Non-guaranteed training camp contract allows a team to terminate the contract prior to the first day of the regular season and pay minimal amounts to that player. This contract is designed to give hopefuls a chance at displaying their ability in training camp in the hopes of making the roster.

What is a 10 Day NBA Contract?

This contract’s length is between 10 days or 3 games, whichever is longer. A team can sign a player to a 10-day contract more than once in a season. These contracts can be used to temporarily fill a hole in a roster, or allow a player to make his case to be signed for the rest of the regular season.

What is the Rest-of-Season Contract?

Simply put, this contract allows a team to sign a player from that date until the completion of the regular season. The player’s salary is calculated on a pro rata basis.

In the interest of time, these are just quick run downs of the most well-known NBA player contracts. There is a wide range of various contracts and intricacies that are available and do exist, but unless you’re a player agent it may not be worth your time understanding.

As you can see, the unknown nature surrounding NBA player contracts is understandable, given their complexity and extensiveness.

Although confusing at times, the league cannot adequately function without them. Nowadays, they are vital, as players have all the power in their decisions, and their contracts are at the heart of building a championship level roster.  

James

A basketball court was built in my local park and at 15 years of age I fell in love with basketball. A late joiner to the game, I have played every season since. Some Indiana friends bought me some Pacers gear for my 17th birthday, and I have supported them ever since (who wants to follow the crowd). I love American sports apparel and the presentation of sports, they do it so well (bar all the advert breaks).

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