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Restraint of trade.

May 30, 2012

Proactive Sports Management Ltd v Rooney & Ors [2011] EWCA Civ 1444

Rooney’s case involved an image rights representation agreement which he had entered into as a 17 year old with Proactive Sports Management Limited. Rooney invested his image rights in a company called Stoneygate. Under the agreement  Stoneygate agreed to pay commission to Proactive of 20% of all sums payable to the company for the duration of the agreement.

Wayne Rooney terminated the agreement along with his agreement with Stoneygate in 2009. Stoneygate sued for breach of contract and commission due under the terms of the agreement and for post termination commission.

The Court of Appeal upheld the High Court decision and said the agreement entered into by the parties was unenforceable as it imposed an unreasonable restraint on the footballers’ trade because it imposed extensive restraints on Rooney’s freedom to exploit his earning capacity:

  •  over a very long period of time;
  • on terms that were not customary; and
  • which were not the product of a negotiation between “equals” (relevant issues included the fact he was 17 and did not receive legal advice).

It did not matter that the exploitation of Rooney’s image rights was not his primary trade and the fact that Rooney was still making a significant amount of money from the deals sourced by Proactive did not override the fact that the terms of the deal were one-sided and oppressive.

The contract was therefore unenforceable and the Defendant could not rely upon the agreement to recover  sums which would have fallen due to it under the agreement or sue for breach of contract.

Lady Justice Arden

  • “It will be recalled that the Rooney’s had no legal advice at the time of execution. This is all the more important in the light of the judge’s finding that, on Proactive’s side, a longer term than usual was demanded for the IRRA because it was known that WR was ‘hot property’. The absence of independent legal advice in my judgment deprives the fact that the Rooney’s were content with the terms of the IRRA of probative weight on the restraint of trade issue. It underscores the inequality of bargaining power between the parties. Moreover, it predisposes the agreement to a finding that it was one-sided, unfair or oppressive.”

The court did find that the Defendant could seek a fair and reasonable payment for the 20% commission payable under the agreement but that would be decided at another hearing.

The decision shows the importance when entering into a contract that both parties are on an equal footing and have legal advice. In this case Rooney entered into the agreement without any legal representation or advice on the terms of the agreement. The agreement would have lasted a large proportion of his footballing life.

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Revised May 2012