Player Contracts in e-Sports generally resemble those of traditional sportspersons. However, traditional sports are governed by well-developed regulatory frameworks, protecting the rights of teams and players. Such regulations ensure, among other things, contractual stability. The term "contractual stability" is often used in sports in relation to the set of rules and restrictions imposed on the movement of athletes from one team to another to ensure integrity of sports and competition.
In the absence of such regulations, the e-sports industry is heavily reliant on contracts. 1 It, therefore, becomes important to understand the contractual relationship between e-sports teams (or clans) and players and how these contracts can take shape and be enforced in India. While drafting an e-sports player contract, certain industry-specific contract provisions should be considered:
1. Player services: The services offered by a player commonly extend beyond participating in competitions/leagues and it is necessary to exhaustively describe all the player services. They can, for example, include creating video content. The amount of content (streaming hours) expected to be created by the player for the team should then be quantified and incorporated in the contract.
2. Player obligations: Player obligations include participating in tournaments of the team's choice, wearing team apparel and accessories while representing the team, participation in a certain number of hours of training per day with teammates (or solo) and participation in team or sponsor events and promotions. Teams often mandate upwards of twelve to fifteen-hour practice sessions.2 The impact of such hours on the player is to be considered while drafting the contract.
3. Player restrictions: A player is expected to exclusively represent the team and is not allowed to play in competitions without the team's authorisation. A player is also expected to not promote competitors of the team or of its sponsors. A few years ago, teams used to force players into contracts that prevented them from having any individual endorsement deals.3 Rules and regulations of the competitions are to be followed and violations of the code of conduct is made subject to fines which are deductible from the remuneration of the player.
4. Non-disparagement clauses: Such clauses protect teams and its sponsors from defamatory remarks by players. Teams have, in the recent past, sued players for the breach of such clauses.4
5. Remuneration and other benefits: The monthly salary (if any) and all other expenses covered by the team are to be specifically mentioned in the contract. Teams typically arrange accommodation for players and coaches and pay for all competition-related travel. However, accommodation is sometimes made conditional on the satisfactory performance of the player.5 Performance-related bonuses may also be incorporated.
6. Image rights: A player is expected to grant the team the right to use her image (including her name, voice, appearance, gamer tag or ID, in-game avatar etc.). Additional compensation may be negotiated by a player for such rights, depending on her profile and past performance.
7. Equipment: As the quality of the equipment provided by the team is essential to the performance of the player, the contract typically provides specifications of the equipment provided by the team.
8. Revenue-sharing: Players are often guaranteed a percentage of the earnings of the team through revenue from sale of merchandise (including in-game items such as skins), sponsorship, prize money and streaming. For player-specific revenue, the player can be provided a higher percentage of the earnings and for those of the team, the player may be provided a small percentage (as shared between all the players in the team). The prize money from tournaments is split between the team members with the team taking a minor percentage. The sponsorship revenue from team sponsors is at times also shared with the player. There have been controversies over teams demanding a percentage of the player's independent sponsorships.6
9. Roster Management: The contract has to clarify the roster of the team and the number of starting players and substitutes or reserves. It is also necessary to clarify whether "benching" of a player would affect her remuneration. Owen "smooya" Butterfield, a CS:GO pro player, had his salary reduced from US$2,000/month to US$700/month due to being benched by his team, Epsilon and this benching decision eventually affected his career as a whole.7 Benching for a prolonged period without prospects of participating in competitions can be made a ground for termination.
10. Termination and renewal: Compensation can be determined for early termination of the contract in the form of a buyout clause. Buyout clauses quantify the value of the remaining contract period of the player depending on the investment made by the team in her. Post-termination obligations are commonly included in such agreements including return of equipment, deletion of data and non-disparagement obligations. Teams may also opt to incorporate a right of first refusal in case another team wishes to sign the player and make it binding upon the player to accept the team's offer if it matches the third-party's offer. Teams also seek to prohibit its players from contacting and negotiating with other teams during the term of the contract. Non-compete clauses are also included by certain teams.
11. Loans: It is common practice for teams to loan out players on their roster to other teams for a limited period of time. This is done by incorporating a provision for the assignment of obligations under the contract to the new team. It is recommended that detailed provisions on potential player-loans and procedure are included in the contract to avoid disputes.
Some legal issues that should be considered when drafting player contracts:
1. Age of the player: The career of an e-sports player typically starts early, often much before she is 18 years of age (a major under Indian law). This presents an obstacle. Under the Indian Contract Act, 1827, minors are not competent to conclude contracts and such contracts are void.8 Though this does not make such a contract illegal, it will be unenforceable against the minor. The position in other countries is not as inflexible. In the United Kingdom, a minor can be held bound to a certain extent in cases of contracts for apprenticeship, employment and necessaries.9 In the United States, a minor is given the right to disaffirm a contract but has to pay restitution for any tangible benefits accrued.10 In France, Decree no. 871 was brought in to deal with e-sports which states that participation in e-sports competitions by minors requires parental authorization.11
2. Enforceability of contract terms: The enforceability of some of the other provisions mentioned above is also questionable under Indian contract law. The Contract Act (Section 27) also considers agreements that restrain others from carrying out their trade or profession to be void.12 For example, non-compete clauses may be voided, unless they are considered by the court to be reasonable given the context. Non-compete clauses applicable during the term of the contract are often considered reasonable but those applicable beyond the term of the contract will have to satisfy a higher threshold of reasonableness.13 An unduly extended "gardening leave" or benching without reasonable explanation may also be considered to be in restraint of trade and hence in violation of this legal provision.14 Similarly, any restriction on the player speaking to other teams can also be construed to be a restraint of trade unless it is considered reasonable in order to protect the confidential information and trade secrets of the team. Unilateral extension clauses which are often included in player contracts could also fall founl of this principle as they represent a restriction that operates beyond the original term of the contract. Considering these issues, the ideal approach to protect the team's interests might be to include a negotiation period prior to the end of the term of the contract where the parties are expected to negotiate a renewal.
3. Independent contractors or employees: Players are commonly treated as independent contractors as opposed to employees by teams. As independent contractors they are not entitled to the same statutory protection or benefits as employees are. Accordingly, teams would structure the contract as one relating to an independent contractor, but in the event of a dispute, a player may contest this position. Even if the contract carries specific provisions stating that it is a contract relating to an independent contractor, as it should, a court may evaluate the true nature of the contract. This evaluation will turn on the extent of control exercised by the team on the player. The greater the control, the more likely it is to be a contract of employment.15
Since the e-sports ecosystem in India is in the nascent stage, it might be useful for industry bodies or relevant regulator to lay down guidelines for teams and players regarding contracts.
1. FIFA, FIBA, FIVB and all other major sporting bodies have regulations on contractual stability. E-sports does not follow the same model but it is to be noted that game publishers like Activision Blizzard and Riot Games have mandated basic requirements in contracts of players participating in their competitions.
2. Holden, John et al., A Short Treatise on Esports and the Law: How America Regulates Its Next National Pastime, University of Illinois Law Review 509 (2020) available at https://ssrn.com/abstract=3441843.
3. Ben Fisher, Esports Players Have Less Endorsement Freedom, available at https:// www.sportsbusinessdaily.com/Journal/Issues/2018/05/28/In-Depth/Endorsement.aspx
4. Julia Alexander, Faze Clan sues Fortnite star Tfue, claims he earned more than $20 million from streaming, available at https://www.theverge.com/2019/8/1/20750678/faze-clan-tfue-lawsuit-20-million-streaming-earnings-rival-esports-team
5. Supra note 3.
6. Jonathan L. Israel, TFue v. FaZe Clan : Three-Ring Litigation Circus to Continue in 2020, available at https://www.natlawreview.com/article/tfue-v-faze-clan-three-ring-litigation-circus-to-continue-2020
7. Ellen M. Zavian and Jim Schmitz, Genesis of an Industry: The Emerging Workforce and Regulations of esports, available at https://www.accdocket.com/articles/emerging-workforce-and-regulations-of-esports.cfm
8. Section 11 r/w Section 10 of the Indian Contract Act, 1872 and Mohiri Bibi v. Dharmodas Ghosh 7 CWN 441
9. Roshan Gopalakrishna, Minors' Agreements in Sports, available at http://sportslaw.in/home/2011/07/20/minors-agreements-in-sports/
10. John H. Shannon & Richard J. Hunter Jr., Principles of Contract Law Applied to Entertainment and Sports Contracts: A Model for Balancing the Rights of the Industry with Protecting the Interests of Minors, 48 Loy. L.A. L. Rev. 1171 (2015), available at: https://digitalcommons.lmu.edu/llr/vol48/iss4/3
11. Decree n ° 2017-871 dated 9 May 2017 available at https://www.legifrance.gouv.fr/eli/decret/2017/5/9/ECFI1709990D/jo/texte
12. Section 27 of the Indian Contract Act, 1827
13. Percept D'Mark (India) Pvt. Ltd. v. Zaheer Khan & Anr, AIR 2006 SC 3426.
14. V.F.S. Global Services Ltd. v. Mr. Suprit Roy 2008 (2) BomCR 446
15. Ram Singh v. Union Territory of Chandigarh, (2004) 1 SCC 126
Originally published 11 April, 2020.
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