Does cancellation of matches due to the pandemic constitute just cause for terminating a player’s contract without damages?
Sports governing bodies around the world are cancelling or postponing league matches. Players are ending competitions early, often when they were entering the decisive phase, and despite their readiness to play are forced to take a holiday. On highly developed sports markets, players’ rights in such situations are secured like the rights of employees ready to work whose employers cannot assign them tasks due to circumstances beyond the control of the parties. How does the situation with players look in Poland?
Contracts to perform sports services
In Poland professionals typically do not play on the basis of an employment contract. Usually they enter into “contracts to perform sports services” with clubs or sports governing bodies. Almost always these contracts are concluded for a definite period (one or more seasons). Can the club or federation terminate a player’s contract early due to cancellation of matches because of the pandemic? How should the accounts then be settled between the parties?
For some sports in Poland, the governing bodies have detailed regulations as well as an extensive database of decisions by sports tribunals on what constitutes just cause for early termination of contracts as well as the consequences for each of the parties of termination without just cause. Some sports lack such regulations and decisions. Then the issue must be resolved on the basis of regulations governing contracts of mandate (umowa zlecenia), which apply as relevant to contracts to perform sports services.
Under Art. 746 of the Civil Code a contract of mandate can always be terminated for just cause, even if the contract was concluded for a definite period (and the right to terminate for just cause cannot be waived). A party terminating a contract for just cause will not suffer any negative consequences, even if the contract terminated early was concluded for a definite period. A party must pay the other party damages for early termination of a contract of mandate only if the termination was made without just cause.
Just cause or extraordinary change in circumstances?
This all-or-nothing solution would not raise doubts if just cause under these provisions referred only to circumstances rendering continuation of the contract moot and attributable to the other party (loss of the skill or authorisation necessary to perform the contract, even for fortuitous reasons, or serious breach of contract or the like). It is hard for one party to blame the other party for terminating the contract under such circumstances attributable to the party and undermining the sense of maintaining the contract in force.
But it is accepted in judicial decisions and in the legal literature that just cause for early termination of a contract of mandate, without any consequences for the terminating party, also includes circumstances independent of both of the parties. It is sufficient if from the point of view of the terminating party, the circumstances objectively undermine the purpose of continuing the contract.
It takes little imagination to realise how this view can lead to injustice. Even if the circumstances undermine the purpose of continuing the contract from the perspective of one of the parties, permitting early termination of the contract with no consequences might infringe the legitimate interests of the other party. Continuity of the contract and the certainty arising out of it may be critical to the other party. This was expressed well by the Wrocław Court of Appeal in its judgment of 22 August 2012 (case no. I ACa 725/12). The dispute involved a contract to which the court ultimately decided not to apply the regulations on contracts of mandate, and the contract was impacted by the financial crisis, not a pandemic. But in considering application of the “just cause” clause in the court, the court stated: “The defendant’s reliance on the economic crisis cannot justify its behaviour infringing the interests of the other party. This behaviour did not involve only seeking to deprive the plaintiff of a significant portion of the fee which it counted on when concluding and performing the disputed contract, but also, contrary to fair practice, taking over the plaintiff’s employees and assigning duties to them owed to the plaintiff under the disputed contract. … The defendant’s action aimed at increasing its effectiveness at generating revenue in this manner cannot by any measure be regarded as ‘just cause’ for terminating the contract.”
The example of cancellation of sports matches due to the coronavirus epidemic well illustrates this problem. On one hand, further performance of player contracts may cease to make economic sense for the clubs. On the other hand, in concluding their contracts with clubs, players expected that they would duly perform the contract and receive the pay provided for in the contract for the entire period for which the contract was concluded (and certainly not lose the right to pay during the course of the season). Depriving them of pay under these contracts without any compensation would obviously stir their objection.
The problem of unfair consequences of applying a “just cause” clause arises, in my view, when this clause is used to try to solve a situation that should be approached under regulations governing an extraordinary change in circumstances. If a change in external circumstances undermines the purpose and economic balance of the contract, the principle of rebus sic stantibus set forth in Civil Code Art. 3571 should be applied. It allows the interests of both parties to be weighed, modifying the contract or dissolving the contract upon payment of appropriate compensation or other arrangements.
Termination of contract for just cause but at the wrong time: Are all causes equal?
As an effect of the dissonance connected with the all-or-nothing nature of “just cause” clauses, the conception of termination of a contract of mandate “at the wrong time” has developed in the legal literature and court decisions. Under this notion, a party terminating a contract of mandate for just cause must nonetheless pay the other party appropriate damages if the termination occurred at an inopportune time, i.e. when it would cause negative consequences, unacceptable from the point of view of contractual fairness, for the other party, which relied on continuation of the contract. As explained by L. Ogiegło: “Termination of a paid mandate for ‘just cause’ (e.g. illness of the terminating party, change in life situation or residence, failure to receive advances, loss of confidence etc) does not give rise to liability for the injury arising as a result of termination of the mandate. … Despite the lack of an express provision (along the lines of Art. 513 of the [former] Code of Obligations), liability in damages may arise as a result of termination of a mandate at the ‘wrong time’” (comment on Civil Code Art. 746 in Pietrzykowski (ed.), Civil Code: Commentary (9th ed. 2018), citations omitted).
This conception, although lacking any basis in the literal wording of the regulations, allows a weighing of the interests of both parties, as occurs when applying the principle of rebus sic stantibus.
The understanding behind the notion of the “wrong time” to terminate a contract of mandate should be taken a step further to say that if the “just cause” clause is applied to grounds justifying termination of a contract but not attributable to either of the parties, it should be accepted that “just causes” justifying termination of a contract of mandate before the end of the period for which it was concluded will not necessarily be “just causes” justifying release of the terminating party from all liability to the other party. They might be just causes sufficient to justify ending the contractual relationship but also calling for payment of appropriate compensation to the other party in this situation (specifically because early termination of the contract occurs at an inopportune time for the other party).
The parties to a contract of mandate (or other contract to which these rules apply as relevant, such as a contract to perform services) should therefore always consider not only whether the given circumstances justify early termination of the contract, but also whether in the given circumstances, the other party, who relied on continuation of the contract, should be owed compensation on this basis.
Fair play in a time of pandemic
This principle also applies to clubs and federations considering early termination of contracts with players for performance of sports services because of cancellation of matches due to the coronavirus pandemic. The crisis sparked by the virus does not abrogate the principles of fair dealing, which in the context of sport include the principle of fair play fundamental to this sector.
It is significant that clubs will act towards players from a superior position in negotiations on this issue. Many players will be inclined to agree to the solutions proposed by clubs in light of the difficulties they might face if they sought to pursue their rights individually. Players’ organisations can thus play a key role in ensuring respect for players’ rights during negotiations of this type.
Stanisław Drozd, adwokat, Sports Law practice, Dispute Resolution & Arbitration practice, Wardyński & Partners