What Is A Buyout Clause In Soccer?

Since the beginning of the Premier League era in 1992/93, football in the UK and across the rest of the world has seen a massive increase in professionalism. One of the consequences of this is that behind the scenes, professional players are typically supported by high-earning individuals dedicated to ensuring their clients are comfortable, successful, and well-remunerated for their on-field performances. The role of the football agent has changed rapidly over the last decade or two, and these days agents have more power than ever before.

One of the key responsibilities handed to agents in football is the negotiation of player contracts. Numerous details must be considered when contracts are written up and signed, and one element of these negotiations that is important in the modern game is the buyout clause.

Depending on whereabouts in the world you go, the presence of buyout clauses can vary immensely, but for anyone interested in exploring this part of the football industry, it's crucial to have a good understanding of what a buyout clause is. That's what we'll be focusing on in this article.

A Brief Guide To Player Contracts In Soccer

The primary goal of a sports agent is to secure the best possible deal for their client, and much of this responsibility rests on the process of contract negotiation. Professional players are required to sign an employment contract every time they join a new club, as well as any time their contract with their current club runs out.

Effectively, this is a legally binding written agreement made between the player and the football club that outlines what the terms and conditions of employment are, what the employee (aka player)'s rights are, how much they will be paid, and the details of any specific bonuses or additional rewards they will receive.

At the point of contract negotiation or renegotiation, an agent will be looking to maximise the earnings of their client while also ensuring that other key factors are taken into account, such as playing time, squad status, and the player's general comfort and security. Weekly wage is evidently an important aspect of contract negotiation, but there are many other detailed matters to attend to in these talks. One crucial thing to consider is what clauses the agent and player would like to slip into the contract.

What Is A Release Clause In Soccer?

In legally binding contracts, clauses are used to explicitly state terms and conditions and clear up any confusion about what the rights and responsibilities of each party are. In professional football contracts, one of the most common types of clause is the release clause.

A release clause is a clause built into a contract that states a club is automatically required to accept an offer of a pre-agreed amount.

This amount is set out in the release clause section of the contract, and it could be any number, from £1.5m to £100m or more. If a purchasing club makes an offer for a player that matches the minimum amount stated in the release clause, the player will be entitled to speak to the potential purchasing club, and the player's current club will not be able to stand in the way.

What Is A Buyout Clause In Soccer?

A buyout clause in soccer is slightly different from a release clause, although it also relates to transfers from one club to another.

Effectively, a buyout clause provides the player with an opportunity to buy themselves out of their own contract and thereby leave their current club.

Typically, this will be done by the purchasing club transferring an agreed fee to the player, who will then transfer that sum of money onto their current club, thereby buying themselves out of the contract they are tied to.

Typically, a buyout clause will be set at an extremely high rate that doesn't often reflect the actual market value of a player. This amount will usually be far too high for the player in question to be able to 'buy themselves out of', so the purchasing club will be required to pay the player the amount in order to facilitate the transfer. Once they have bought themselves out of the contract, the player will become a free agent and the buying club can swoop in. There are some logistical issues relating to these kinds of transfers, largely regarding tax, which we'll get into shortly.

What Are The Benefits Of A Buyout Clause?

The purpose of buyout clauses is to attach a huge fee to a player in order to dissuade buyer clubs from attempting to purchase them. Buyout fees will often be inflated above market value, which will put off potential suitors from transferring that amount to the player to acquire their signature.

As well as warding off rival clubs, the attachment of a significant fee is also a show of faith in the player's ability, and as a result it can also increase loyalty to the club on their part.

According to FIFA Regulations, "the advantage of this clause is that the parties mutually agree on the amount at the very beginning and fix this in the contract. By paying this amount to the club, the player is entitled to terminate the employment contract unilaterally.

With this buyout clause, the parties agree to give the player the opportunity to cancel the contract at any moment and without a valid reason… and no sporting sanctions may be imposed on the player."

In essence, the clause minimises risk for the player, by granting them an exit mechanism. A player with a buyout clause in their contract is not as strictly tied to their club as a player with one; on the other hand, the club is given control over the player's future situation by having the opportunity to slap an enormous buyout fee on their star talent, a fee that neither the player nor the prospective new club could afford, thereby ensuring their long-term service.

The Problems With Buyout Clauses

Historically, a major problem with buyout clauses has come down to practical tax logistics. A purchasing club transferring a buyout fee to a player, who then in turns buys out their contract, can be a complicated process, one high-profile example being Manchester United's failed bid for Ander Herrera in 2013, which fell through after the Red Devils' lawyers were put off by the "extra costs involved in tax".

The laws surrounding buyout clauses were changed in 2016, making the buyout fee advances to the players no longer subject to tax. After this alteration, only the fee itself had to be paid. Buyout clauses continue to be permitted under FIFA regulations and most national laws, but most clubs are not obligated to include this clause in player contracts. However, there is one football-mad country where buyout clauses are extremely common.

Why Are Buyout Clauses Common In Spain?

In 1985, legislation was introduced in Spain to allow soccer players to unilaterally rescind their contracts for a compensation fee decided by the courts, if their contract did not include a buyout clause when signed. Since then, buyout clauses have become extremely common in Spanish professional football contracts.

Ultimately, it makes sense for all parties involved to set the buyout clause at a specific rate when the contract is signed, rather than remain in the dark and potentially leave it up to the courts to decide.

A key reason for the Spanish league's adoption of this practice is that a football player's career is short, and if they are stuck on the sidelines for long periods of time because of an unresolved contract situation, it can be extremely frustrating for all parties. Setting up a buyout clause offers a way out and prevents players remaining at a club longer than they want to. According to Spanish sports lawyer Marcos Galera, the fact that "players don't want to be unable to play for months or even years" is a key driver behind the use of this law.

In Spain, La Liga — the highest level of professional football in the country — is typically used as an intermediary between clubs and players. The buyout clause amount will be deposited with La Liga in order to release the player from their contract, and then that fee will be passed onto the selling club to complete the deal.

It's also worth noting that buyout clauses can often benefit the bigger, richer clubs; they are able to place unrealistic price tags on their star assets in order to prevent other sides from buying them, but if they want to poach a player at a smaller club and pay their buyout fee, they usually have the funds to be able to do so.

Which Players Currently Have Buyout Clauses In Their Contracts?

There are a few famous players who currently have a buyout clause inserted into their contracts. According to reports, this summer, a new buyout clause came into effect with Erling Haaland's Manchester City contract, worth a rumoured €200m. Elsewhere, most of La Liga's top players, including Pedri, Vinicius Jnr. and Ronald Araujo all apparently have significant buyout fees detailed in their contracts.

Previously, Karim Benzema, Federico Valverde, Pedri Gonzalez, Ansu Fati and Ferran Torres have all been reported as having enormous buyout clauses of €1 billion written into their contracts.

With all this being said, it's very rare for regular fans to be party to the specific details included in a professional player's contract. Some aspects of the contract may be told to the press or leaked online, but large parts of a deal will remain secretive, shielded from the public by the player, their agent, and the clubs involved.

The most high-profile example of the public becoming aware of a specific buyout clause came in 2017, when PSG activated Neymar's buyout clause to purchase him from FC Barcelona for a gigantic €222m. He remains the most expensive football player in history.

If you'd like to find out more about the ins and outs of player contracts in professional football, check out our article on the role of the release clause in soccer.