When do playing contracts become binding? Hopoate v Parramatta EelsCassandra Heilbronn
The topic of National Rugby League (NRL) playing contracts always comes with debate on whether or not the system adequately protects the Clubs, the players and the fans. Given sport is a multi-billion dollar industry in Australia, there is little wonder that contract negotiations result in media attention, public scrutiny, and stress for the players who face the possibility of not having a Club the next season. In 2015, the media focus of NRL contract negotiations was on Daly Cherry-Evans and the now infamously reported ‘backflip’ where he turned down the offer to move Clubs and join the Gold Coast Titans to stay with the Manly Warringah Sea Eagles on a reported $10 million contract over the next 10 years.1
There was also, however, another interesting story brewing at the time. It concerned the contract negotiations between player William Hopoate and his existing club, the Parramatta Eels (Eels). The negotiations were for a three-year extension to his NRL Playing Contract. Unfortunately for Hopoate, despite receiving, and – on his view – accepting, an offer from the Eels, he was left without a Club after the Eels refused to register his (extended) playing contract. Instead they released him, arguing that the contract extension was never validly executed and that they were not bound by it.
As Australian readers will know, Hopoate sought recourse by instituting proceedings. While the trial is yet to take place, there is interest in the sporting industry as to how proceedings came to be instituted given the highly regulated system regarding NRL Playing Contracts,2 and how the competing contentions of the parties will be resolved at trial. This article explores the arguments from Hopoate and Eels to give further understanding of how the claim came to fruition and the legal and factual issues the court will have to grapple with.
Recap of key facts
William Hopoate is a player who has, some may say unintentionally, changed the stereotypical image of an Australian Rugby League Player. From 2012 he took a two-year sabbatical while in the rookie stages of his career in the NRL in order to honour his commitments to his religion.3 Sections of the public responded with admiration and while some questioned his dedication to the NRL, ultimately Hopoate’s actions were generally applauded.
Prior to leaving for his sabbatical, Hopoate signed with Parramatta Eels for the 2014 season on a two-year contract, after deciding to leave his 2011 premiership winning team Manly-Warringah Sea Eagles. With the Sea Eagles boasting players such as Brett Stewart, some were suggesting that the decision to move clubs would allow Hopoate to have more playing time, in addition to the reported $500,000 a year contract.4
During the final year of his contract with the Eels, on 9 April 2015, the Eels wrote to Hopoate's Manager, Tryan Smith with a three-year offer expiring 31 October 2018 (Offer). Hopoate says that he accepted the Offer by signing and returning it to the Eels on 10 April 2015.5 The pleadings are silent as to whether or not the Offer attached to it a NRL Playing Contract (standard form), or if Hopoate's manager inserted the terms of the Offer into a blank Playing Contract and gave it to the Eels. In any event, Hopoate says that the NRL Playing Contract was entered into on 16 April 20156 (Contract). The Eels, in its Amended Defence, accept this date, but say that it never signed the Contract7 and the terms of this Contract were different to that of the Offer.8
Controversy arose when the Eels failed to register the Contract with the NRL, despite Hopoate’s continued demands. This essentially left Hopoate a free agent - not an ideal position for any player towards the final rounds of the season, let alone a player who was coming into his own as a professional rugby league player. Accordingly, on 17 August 2015, Hopoate instituted proceedings in the Supreme Court of New South Wales, Equity Division against the Eels.
The pleadings of both sides are relatively short, but are essentially consistent on the key facts.
Hopoate is arguing that the Offer was intended to form his Playing Contract with the Eels under the NRL and it did so by way of the Contract.
The Offer contained terms including that Hopoate would be paid as follows:
- 2016 Season - $670,000 package fee, plus up to $175,000 per annum in Third Party Agreements.
- 2017 Season - $690,000 package fee, plus up to $200,000 per annum in Third Party Agreements.
- 2018 Season - $710,000 package fee, plus up to $225,000 per annum in Third Party Agreements.9
It is important to comment here that under the NRL Playing Contract and Remuneration Rules, NRL Playing Contracts are in standard form, with variables largely restricted to the player name, the Club, the term and payment (including third party allowances). There is little scope for amendment to an NRL Playing Contract by players or Clubs. If either party did seek to make amendments to the standard form, it is likely that the NRL Playing Contract would be rejected by the Salary Cap Auditor for non-compliance, with the parties given the opportunity to remedy the deficiencies or avoid the NRL Playing Contract all together.10 This would give either party an opportunity, at this juncture, to argue that the Playing Contract was now void as the terms agreed were not capable of being fulfilled.11
Hopoate says that there was a valid NRL Playing Contract and that the Eels should have registered it with the NRL. He says that their refusal to do so meant that he was prevented from playing in the NRL for the 2016 season or until such time as the Contract was registered.
Hopoate’s claim (initially) sought relief through specific performance of the Contract, an order that the Contract be registered with the NRL, and damages for breach of contract and misleading and deceptive conduct with interest and costs. This was later amended when he signed with a different team (see below).
Parramatta Eel’s Defence
In their Defence, the Eels deny that a valid, binding contract came into effect between the parties. They say that, despite sending the Offer to Hopoate, they never signed it; and that there was no consideration provided by Hopoate to the Eels. Specifically, they are arguing that:
- the terms of the Offer indicated that the parties did not intend it to constitute a binding contractual arrangement; further or alternatively;12
- the Offer did not provide any consideration by Hopoate to the Eels; further or alternatively;
- the terms of the Offer were incomplete and missing essential terms.
The Eels say that the terms of any final deal were actually intended to differ to that of the Offer to the extent that the Playing Contract provided for a:
- 2016 Season total playing fee of $500,000;
- 2017 Season total playing fee of $525,000; and
- 2018 Season total playing fee of $550,000.
Hopoate’s Amended Claim
On 20 October 2015, after unsuccessful without prejudice discussions, Hopoate received legal advice to attempt to enter into a contract with another NRL team as it was unlikely that the Eels would honour the Contract.
Hopoate’s manager was said to have attempted to negotiate a contract with other NRL teams on behalf of Hopoate, however each team that was approached reported that player negotiations for the 2016/2017 season were finalised and salary caps were exhausted.13 On 4 November 2015, however, Hopoate was successful in signing a two-year contract with the Canterbury-Bankstown Bulldogs Rugby League Club on an annual salary of $120,000.14
Following this, Hopoate amended his pleadings removing the prayer for specific performance and for the Contract to be registered, and claiming quantified damages in the amount of $1,830,000, being the difference between the sums Hopoate would have earned had the Eels registered the Contract, and his new salary with the Bulldogs.
The Eel submitted an Amended Defence restricted to amendments resulting from Hopoate’s Amended pleadings and maintaining that there was no intention for the Offer to be binding on the parties.
Key discussion points
This case raises a number of issues for discussion, both on the specific facts of the case and more generally.
- Did the Eels intend for the Offer to form a binding contract in the event it was accepted by Hopoate?
This is of course a matter of contractual construction that will have to be determined on the facts. As with any contractual construction case, the Court will review the matter on an objective basis in order to determine, if there was a valid contract. The requirements of contract formation are largely known, and specific to this case the Court will be interested in did the parties intend for the Offer to form the Contract, what were the express terms of the Offer, and if consideration was sufficient. Another issue relevant on review of the pleadings is which party amended the fee terms from those contained in the Offer to what was presented in the Contract.15
Of note on the issue of contract formation, the Amended Defence of the Eels does not plead that they could not fulfil the Offer, rather that there was no intention on the part of both parties for it to form an NRL Playing Contract, and essential terms were missing.
Hopoate will likely argue that the Offer by the Eels formed the basis of his NRL Playing Contract (which he says he signed), no further material terms required negotiation, he communicated his unequivocal acceptance of the Offer, and the registering of a renewed NRL Playing Contract for a continuing player (as opposed to a new player) was more of an administrative step (provided it met the Salary Cap).
The Eels will likely argue that the intention for the Offer and Contract to be binding was not evident until they took the step to lodge a properly executed NRL Playing Contract with the with NRL Salary Cap Auditor, and/or that the change in terms to the fee showed that there was no intention for the Offer to form an NRL Playing Contract as negotiations were to be ongoing, or ceased completely.
What is interesting to note, however, is how the Contract terms as pleaded by the Eels16 interplays with the NRL Salary Cap. The Eels were recently found to have breached the Salary Cap,17 which could on one view suggest that they were having some difficulty ensuring that the Offer was within the Cap or in otherwise fulfilling the Offer made to Hopoate. It must be commented that the pleadings limit the 'materially different terms' to the term relating to the fee only (not the duration of the contract). The fee in the Contract (as pleaded by the Eels18) is less than what is contained in the Offer, which obviously benefits the Eels more than it does Hopoate. Both parties pleadings agree that Hopoate signed the Contract (albeit the Eel’s Defence states that the version he signed was for a lesser fee than that which was in the Offer – although precisely when this happened is not clear). Without the benefit of hearing any of the parties submissions or reviewing the evidence, it seems open to the Court to conclude that the Eels had intended for the Contract to be binding, particularly when the change in fee was to its benefit.
- Was the Offer (or Contract) incomplete because it was missing essential terms?
The next issue is that the Eels say that the Offer did not contain the essential terms for an NRL Playing Contract, which seems odd given that the terms of a contract are a standard from contract (i.e. the majority of the terms it contains are provided by the NRL and the various governing documents referred to above), save for variables regarding salary, term and allowances. The Eels do not particularise how the Offer lacked essential terms, and it may be that this argument is restricted given that the NRL Playing Contract is a standard form and that the parties have limited ability to amend the terms.
In Masters v Cameron,19 the Court found that when entering into an agreement, parties can fall into one of three positions:
- The parties have finalised their agreement and intend to be immediately bound, however intend to put the agreement into more precise form (ie a term sheet has been agreed for insertion into a proper form contract).
- The parties have agreed on all terms, but have made performance of one or more terms conditional upon the execution of a formal document.
- The parties do not want to be bound until they have completed the formal document (ie parties may retain the right to withdraw from the agreement if terms cannot be reached on any outstanding matters).
Hopoate's case as pleaded could fall within one of the first two positions. On one view, when applying the principles enunciated in Masters the Eels’ defence appears to face significant legal obstacles given the limited ability for the parties to amend an NRL Playing Contract.
Based on the pleadings, it may be difficult for the Eels to argue that the situation fell into that of the third position given it presented the Offer and any change to its terms was to its material benefit. The success of the Eels defence will likely turn on:
- who made the changes to the fee in the Contract,
- if the terms said to have been missing were 'essential', and
- if the Court finds that the Eels were not willing to accept these terms (which were of greater benefit to it than to Hopoate).
- Does an NRL Playing Contract provide adequate consideration by a player for a Club?
It seems odd to suggest that an NRL Playing Contract, which on its own terms forms an employment contract,20 did not provide any valid consideration for a Club. It would stand to reason that a player promising to attend training commitments, sponsor engagements and to play in the NRL (or a lower grade depending on form) constitutes sufficient consideration. It is not known if the Eels intend to pursue this point as a focus argument of its defence.
If pursued, the Eels may have difficulty in proving a lack of consideration as this issue was long ago decided in Alabama Football Inc v Wright,21 where a Texan Court found that the Alabama Football Club benefited from Wright (the player) executing the player contract and obtaining his playing services. While talking in the context of bonus payment (where it could be argued further services or consideration of a player may be required prior to payment being made), as opposed to a base payment or fee, the Court said:
"even assuming the contract required more than the execution of the contract, these benefits accruing to Alabama upon execution of the contract would provide ample consideration to support the bonus payment".22
- If Hopoate is successful, what are the potential consequences for a Club that reneges on an accepted offer to a player's detriment?
This issue has caused much concern within the NRL, and has resulted in many debates around the NRL's then "Round 13 Rule". Briefly, the NRL Playing Contract and Remuneration Rules mandates a process whereby new contracts cannot be registered until after Round 13 (being half way through the regular NRL season) to allow for a player’s current club to meet the terms of what the new (proposed) contract was said to include. The Rules also govern anti-tampering by Clubs, and a player’s ability to negotiate with a new Club and what notice has to be given and to whom. Proposals for reform about contract negotiations are much discussed but cannot be adequately commented on here, save to say that the NRL and the Rugby League Players Association are set to start negotiation talks for the next NRL Collective Bargaining Agreement.23 The ability to negotiate, and then enter into a Playing Contract is heavily regulated and subject to review by a number of people including a Club’s Chairman and the Salary Cap Auditor.
It could be said that the conduct of the Eels is a reverse situation of the Cherry-Evans and Gold Coast Titans contract negotiations (i.e. a club walking away from a de facto (“in principle”) agreement with a player, rather than a player walking away from a deal with a club, which is more common). However, if Hopoate is successful in his claim (which includes a misleading and deceptive conduct argument), it will put Clubs on notice that they need to be extremely careful in contract negotiations and cannot make an offer to a player, have that offer accepted, and then unilaterally withdraw it (or fail to register it), absent a lawful justification for that course of action. Such course of action by a Club seems to only benefit it, as it could take steps to retain a player with the intention of preventing that player signing with another Club.
Next steps in the case
As at the date of publishing, the proceedings are still before the New South Wales Supreme Court with a Directions Hearing listed for 23 June 2016. As with any litigation there are likely without prejudice discussions taking place at present.
If the matter was to settle by agreement between the parties, the determination of these issues by a Court will not need to take place and it will be left unknown as to whether or not a Court holds the view that:
- the Offer contained the essential terms required to form a Playing Contract ;
- the change in fee terms to what the Eels say were outlined in the Contract, meant that there was no intention for the parties to be legally bound;
- a Playing Contract, which on its own terms says is an employment contract, fails to offer consideration by a player to a Club; and
- a Club can unilaterally withdraw an offer it presented, as signed for or on behalf of a player, without cause and it not be found to be a breach of contract or have engaged in misleading and deceptive conduct.
There is no doubt that managers, clubs and sports lawyers alike await with curiosity the judgment in this matter.
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- Tags: Australia | Contract Law | Employment Law | National Rugby League (NRL) | NRL Playing Contract and Remuneration Rules | Rugby
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About the Author
Cassandra is a Senior Associate in the Insurance and Corporate Risk practice group at MinterEllison. She has over ten years’ experience in insurance claims and corporate risk advisory work, and her sports practice includes acting for Australian and international sporting Federations, Clubs and corporations in matters involving commercial disputes, player disputes, sponsorship and image rights issues, and general risk management.