In brief
Hong Kong has long been a go-to destination for overseas sports teams to play exhibition matches, but the recent football showdown between Hong Kong Select XI and a MLS Team stood out – seldom has the hype been so focused on almost entirely one player in a team – the record eight-time Ballon d'Or winner and Argentina's World Cup-winning captain.
Unfortunately, the subject player did not play in the match as club management reported that he was injured.
Apart from disappointed fans, the aftermath of the match proved significant for other reasons. As the funding agreement between the Government and the organiser stipulated that the subject player should play for at least 45 minutes, subject to fitness and safety considerations, the organiser has now withdrawn its application for the Government subsidy. Had the organiser not made this decision, no doubt with wider brand management issues in mind, the resolution of such an issue will likely have revolved around the "fitness and safety" aspect of the clause.
As Hong Kong strives to become the hub for world-class sports and entertainment events, what can parties involved do to better protect their respective interests and to facilitate a win-win situation?
Key Takeaways
Major sporting and entertainment events will usually involve multiple parties, and inevitably significant financial and reputational considerations at stake.
The funding party and other sponsors will likely prefer to have clauses in their contracts which provide absolute obligations for a key player to play and / or attend off-the-pitch events, potentially coupled with direct financial recourse such as liquidated damages.
On the other hand, the organiser and the team may prefer "endeavour" clauses to allow leeway for compliance where there is risk of not being able to procure a key player to play due to injury.
While endeavour clauses may create uncertainty for funding party / other sponsors, depending on the bargaining power of the parties, these clauses if precisely drafted may be a reasonable trade off where an absolute commitment could not be given.
In Depth
Here are a few considerations for some of the parties who may be involved in sports and entertainment events:
- Funding party and other sponsors:
- Parties offering funding will want certainty in ensuring that the organiser procures the team (and key players) to play in the match, so they may prefer to use clauses which are absolute in stipulating a stated outcome coupled with ones which provide for liquidated damages where appropriate.
- These parties should also consider inserting clauses which provide for contingencies in case the main obligation is not performed. For example, where a key player could not play in the match, other off-the-pitch obligations for such players (such as providing a speech and / or attending any post-match events to address fans) should be made absolute in the terms.
- The organiser and the team:
- Although separate contracts may govern the relationship amongst (i) the funding party / other sponsors vis-à-vis the organiser; and (ii) the organiser vis-à-vis the team, both the organiser and the team will want to manage in their respective contracts, the risks that an obligation could not be achieved especially where a stated outcome is not within its control or in relation to which there is less certainty – such as when a player could not play due to an injury.
- In these scenarios, such a party may wish to adopt endeavour clauses rather than absolute clauses in respect of these obligations. Two common types of endeavour clauses are:
- "Reasonable" endeavours – This is the least onerous type, and requires the promisor to objectively consider what a reasonable and prudent person in its position would do to satisfy a stated outcome. The promisor is not normally required to subordinate its own commercial interests to the promisee, and its own circumstances are relevant in considering whether it has satisfied the obligation. Hence, an "honest try" may be considered enough.
- "Best" endeavours – This is the most onerous type, and requires the promisor to step into the shoes of a prudent, determined and reasonable promisee and take all steps that promisee would take capable of achieving the stated outcome. The promisor is often required to subordinate its own commercial interests to the promisee.
- Whichever type of endeavour clause is adopted, one needs to ensure that (i) the practical steps a party must undertake to satisfy the endeavour obligation; and (ii) the desired outcomes, are set out as precisely as possible. In this context, compared with a promisor bound by an absolute obligation, a promisor who is incentivised to ensure compliance with an endeavour clause by actively taking the stipulated practical steps may arguably be more likely to achieve a desired outcome.
Not only does everyone involved in major sporting and entertainment event want a great show, but also to leverage on the commercial value. It is important to ensure that the appropriate contractual clauses are in place to manage the overall event experience and to enable it to be as commercially worthwhile as possible.
