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NBA Contracts

The average NBA fan does not realize that there is a lot more than just signing a player to an agreed amount of dollars for a season.

NBA contracts are actually quite detailed, complex, and several different options exist.

All 30 franchises in the National Basketball League must adhere to the salary cap. The “salary cap” is a pre-determined number by the league that a team can’t or should not go over. Think of it as sort of a universal budget.

The salary cap is designed to hopefully keep the playing field even as everyone operates with a similar payroll.

Now with that being said, there are two types of salary caps. A) The type of salary cap the NFL uses, called a “hard cap,” and B) the one that the NBA incorporates – a “soft cap.” With a “soft cap,” franchises have several exceptions that allow them to go over the salary cap if they so desire.

Meanwhile, NFL teams may not spend over the salary cap. No ifs, ands, or buts about it.

Franchises that decide to spend over the salary cap are penalized by a term the CBA (Collective Bargaining Agreement) defines as the “luxury tax.”

The luxury tax is a mechanism that helps control team spending, by taxing the organization one dollar for each dollar they have over the predetermined tax level. The tax level changes year-by-year, but in 2009-10 it was at $69.92 million while the salary cap was at $57.70 million.

It’s important that you understand both the salary cap and the luxury tax because NBA contracts are constantly influenced by these two numbers. Some organizations are notoriously cheap, such as the Los Angeles Clippers, while others, like the Dallas Mavericks, are traditional big spenders.

Unlike the NFL, when a player signs an NBA contract, he is entitled to the full amount of the contract. So unless the franchise and the professional basketball player agree to an early buyout, the player is due the guaranteed amount of the contract regardless of whether he’s cut after the first season or plays throughout the given time frame of the contract.

This makes the NBA contract incredibly important, as one large multi-year contract to a player who does not produce could allow the player to hold the franchise hostage for years.

The contract is also littered with several stipulations, rules, and duties the player must carry out during his deal with the team. The contracts also reward multiple personal and team bonuses to players, such as an extra $500,000 for each championship won while under contract.

The Collective Bargaining Agreement also outlines several rules such as the minimum a player can make per season, the number of years a player can be signed, and several other minor details.

The general structure of the NBA contract is the total sum the player will receive, how much he will receive per season (with each year generally progressing in value), how many years the contract is for (with player/team options if applicable), and if a signing bonus is awarded.

Traditionally, the star player is able to negotiate the structure and size of the deal much more than say, the rookie or free agent picked up halfway through the season. Rookies, actually, have the least amount of wiggle room (again, much different from the NFL).

The CBA outlines each pick of the draft with how much they will receive per season. The number one pick will obviously make the most, while the 30th pick will make the least of all first round selections. Second round picks are not guaranteed an NBA contract and will likely receive the league minimum if signed after training camp. All first round contracts are for three years with a team option for the fourth.

Team and player options are defined in the NBA contract as a way for the player to part ways with the organization a year earlier than that of which the actual contract expires. The team option allows the organization to part ways a year early even if the player wishes to stay.
The player option, usually only reserved for superstars, is a way for the player to end the contract early, even if the organization desires for him to stay.


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