Player A signed a contract with two guaranteed seasons worth $33 million and three nonguaranteed seasons worth an additional $37 million that Team X can decline in exchange for paying the player $6 million. Player A’s contract is reported to be a five-year contract worth $70 million.
Player B signed a contract with five guaranteed seasons worth $36.5 million and two nonguaranteed seasons worth an additional $27 million that Team Y can decline in exchange for paying the player $2 million. Player B’s contract is reported to be a five-year contract worth $38.5 million plus two additional team option years.
Which player’s contract is a guaranteed contract?
This seems like a silly question. Both contracts include guaranteed money and nonguaranteed money, as well as guaranteed seasons and nonguaranteed seasons. Categorizing the contracts based on whether each is “guaranteed” would seem to require establishing a pretty arbitrary set of criteria.
Nevertheless, such categorization routinely takes place and is accepted as common knowledge. Player A is New York Jets cornerback Darelle Revis. Player B is Cleveland Indians starting pitcher Corey Kluber. And as conventional wisdom informs us, MLB players are fortunate enough to sign guaranteed contracts, while NFL players only sign nonguaranteed contracts. Therefore, the correct answer must be that Player B’s contract is a guaranteed contract.
As this example shows, it is misleading to characterize NFL contracts as nonguaranteed as a general rule when any given NFL contract may share all of the characteristics of an MLB contract widely considered to be guaranteed. The differing terminology used to report NFL contracts creates a distorted perception as to the qualitative nature of the contracts, when in actuality the only differences between “nonguaranteed” NFL contracts and “guaranteed” MLB contracts are quantitative in nature.
As I explained last week, every NFL contract reflects a tradeoff between the team and player as to contractual risk, potential for surplus value, and optionality. The team incurs more contractual risk if more guaranteed money is included, obtains more potential for surplus value if the total contract amounts are lower, and retains more optionality if the contract contains more nonguaranteed contract seasons. Inversely, the player incurs more contractual risk if less guaranteed money is included, obtains more potential for surplus value if the total contract amounts are higher, and retains more optionality if the contract contains less nonguaranteed seasons.
Every successful NFL contract negotiation results in the team and player reaching a mutually agreeable resolution as to these contract considerations, resulting in some amount of guaranteed money and some amount of total stated contract value spread across some number of guaranteed seasons and some number of nonguaranteed seasons. The same is true in the case of MLB contracts.
The only difference between NFL contracts and MLB contracts – and presumably the source of the distorted perception – is the quantitative results of the negotiations. MLB contracts typically consist of mostly guaranteed seasons, with one or two nonguaranteed seasons included at the end, while NFL contracts very rarely consist of more than two guaranteed seasons, but often include three or more nonguaranteed seasons at the end.
The only conclusion that can be drawn from this comparison is that whether a contract should be considered “guaranteed” depends on the proportion of the contract seasons that are guaranteed. On the one hand, the majority of contract seasons in each MLB contract are typically guaranteed, so MLB contracts must be guaranteed contracts as a general rule. On the other hand, the majority of contract seasons in each NFL contract are typically nonguaranteed, so NFL contracts must be nonguaranteed as a general rule.
However, this distinction does not hold up to further scrutiny. NFL players could clearly convince teams to sign them to contracts wherein 100% of the contract seasons are fully guaranteed, which would mean – according to the logic above – that NFL contracts would then also be considered guaranteed contracts as a general rule. For example, Vinny Curry recently signed a contract potentially worth $46.25 million, $18 million of which is guaranteed. The first two contract seasons are guaranteed (and contain the entirety of the $18 million), and the final three contract seasons are nonguaranteed. The Eagles would surely have agreed to give Curry a five-year contract in which all five contract seasons were guaranteed, provided that the total potential value of such contract was $18 million, not $46.25 million. If all of the contract seasons were fully guaranteed, albeit at a lower amount in each season, would this make Curry’s contract a “guaranteed contract”?
In fact, the Eagles would almost certainly have agreed to sign Curry to a five-year contract in which all five contract seasons were guaranteed for a total amount even greater than $18 million. Perhaps the maximum amount of guaranteed money the Eagles would agree to include would be $25 million or even $30 million. The exact maximum amount is unclear (Expected Contract Value could be a good place to start), but it would certainly be less than $46.25 million. The point is that the team would be willing to incur some amount of additional contractual risk (more guaranteed money) and forfeit some amount of optionality (fewer nonguaranteed contract seasons) in exchange for receiving some amount of additional potential surplus value (less total contract value). This means that Vinny Curry willingly gave up some amount of theoretically obtainable guaranteed money and accepted theoretically unnecessary additional nonguaranteed contract seasons in order to obtain some greater amount of total potential contract value.
The same must be true of all NFL contracts. Any NFL player that is able to command any guaranteed money has the ability to sign a fully guaranteed contract that does not include any nonguaranteed contract seasons, but all NFL players with such bargaining power have historically foregone some amount of guaranteed money and accepted some number of nonguaranteed contract seasons in order to secure higher total contract values. Conversely, MLB players have historically not made a similar tradeoff, although there is no reason to think they would not be able to if they desired.
To summarize, there is no qualitative difference between MLB contracts and NFL contracts that would warrant referring to the former as guaranteed but the latter as nonguaranteed. Instead, the observable differences between NFL contracts and MLB contracts are due to the fact that for some reason – whether economic forces or salary cap rule influence or agent self-interest or merely unchallenged custom – NFL players tend to assume more contractual risk and forfeit optionality in exchange for more potential surplus value. NFL contracts may in fact be mostly nonguaranteed, but only because the players have decided that they want the contracts to be mostly nonguaranteed.
 For reasons that elude me, the nonguaranteed seasons in an MLB contract are consistently referred to as “team options” (that may be subject to a “buyout”), while the nonguaranteed seasons in a an NFL contract are instead referred to as “nonguaranteed seasons” (that may include “partially guaranteed salary”). This difference in terminology contributes to the mischaracterization of NFL contracts.