Use Of Buy Back Agreement

April 13th, 2021

In the repurchase provision, a franchisee often implies that he has the first right to buy back the franchise if the franchisee decides to sell. Another example is a manufacturer selling bulk inventory to a distributor. The distributor ran into financial difficulties and decided to terminate the contract. When the manufacturer stipulates in the repurchase clause that the distributor must resell the items to the manufacturer, it eliminates the potential for liquidation or sale of items at reduced prices. A first refusal transfer clause gives the association that benefits from the clause the opportunity to be informed of any agreement that the selling club is willing to accept for the transfer of the player. This is different from a buy-back clause, as the selling club generally retains the power to decide whether or not to sell the player with a first refusal clause. Typically, a buyback clause automatically triggers the player`s transfer when certain terms of the contract are met. In practice, the selling club will not be able to refuse the takeover offer if the clause is designed as an automatic trigger and is developed accordingly. If such a provision exists and the amount of the redemption cancellation is paid to the original club, then the selling club is free to sell the player and accept a higher amount. If the club refuses to pay the buy-back price or if there is no clause in the contract, the original selling club should be able to apply the buy-back clause as long as it can agree on personal terms with the player and the player wishes to join the club (although these factors are not easy in practice!). This was a scenario similar to that of the situation of Toby Alderweireld discussed above. In practice, a selling association can benefit, as Atletico has done, from a buy-back clause defined in such a scenario, in which a third association offers more than the agreed redemption amount. The implementation of such a suppression clause may depend on the negotiating position of the parties.

If the original seller (who benefits from the buyback) is in a strong position, it is less likely that such a number of cancellations will be inserted or that, in the alternative, the number of cancellations will be set at a high amount. Since these are commercial agreements between the contracting parties, it is always possible to remove a buy-back clause if both parties consent (usually by paying the club that benefits from the buy-back clause). An interesting situation was reported in the summer with Atletico Madrid defender Toby Alderweireld, who was on loan at Southampton for the 2014/15 season.

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