Last updated 30 April 2026

A contract is a binding agreement between two or more parties. In most cases, a binding contract need not be in writing, nor must it contain formal terms. Provided the parties have intended legal relations, have reached agreement, and there is ‘consideration’ (something for something), then there can be a legally binding contract. That contract then determines the legal relationship between the parties. For this reason, athletes can contract with sporting organisations with respect to the terms of their playing conditions. This may be an employment contract or as an individual contractor. For example, an athlete might agree to:

  • not play for any other team (particularly after retiring to end an existing contract)
  • not discuss playing terms with any other club during the life of a contract
  • only change employers (clubs) in designated periods or through set means (e.g. a player draft)
  • accept restrictions on the level of income that can be earned (e.g. a salary cap)
  • importantly, abide by any rules that require them to be suspended (or disqualified permanently) from playing as a result of any infringement of those rules.

Courts will, however, declare as invalid a clause that restrains a person’s trade because of public policy grounds. To not be invalid, the restraint must be reasonable, both to the interests of the parties involved (e.g. a club and a player) and to the public.

Unreasonable or invalid clauses might include:

  • stating that a player will never play for any other team during their career
  • establishing provisions for suspensions or disqualifications that are not directed at maintaining the rules but at removing the player
  • preventing players from permanently supporting or endorsing the product of a sponsor’s rival.

To date, a salary cap in professional sports has not been declared as an unreasonable restraint of trade, but it has not yet been challenged, so it is unclear how a court would view it. Other income-based restrictions (e.g. a wage ceiling, limiting the maximum salary a player may bargain for)have been declared unreasonable. Other restrictions on changing employers (clubs), including player drafts, have also been declared unreasonable (Adamson v NSWRL). However, the legality of each use of such mechanisms turn on their own facts. A ‘draft’ is not always unreasonable.

There are further restrictions on anti-competitive behaviour in pt IV of the Competition and Consumer Act 2010 (Cth) Competition and Consumer Act) however, these do not apply to employment contracts. It can apply to other agreements such as those between clubs and a governing body.