By: Justin C. Carlin

Those who know me even moderately well know that I am a huge Florida State football fan. So, I was obviously very pleased to learn that FSU’s contract with its preeminent coach, Jimbo Fisher, was extended for five years. Upon reading the contract extension, however, I was somewhat dismayed that the buyout for his early termination of the contract was “a mere” $5 million in 2016, $3 million between 2017 and 2018, and $1 million before 2019.

While buyouts in the low millions are properly considered “real money,” it’s conceivable that a competing university (or even an NFL team) could, at some juncture, pay the buyout money and lure Jimbo Fisher away from FSU.  If Jimbo Fisher is considered so valuable to FSU, and FSU is offering Jimbo such a high salary (in terms of pay, the contract places Jimbo in the top five of all college coaches), why wouldn’t FSU require that the buyout be higher?

Rather than any inability of FSU to convince Coach Fisher to accept a higher buyout, I surmise that the buyout was mostly the result of Florida law, which prohibits so-called “penalty clauses” in contracts.  Under Florida law,

parties to a contract may stipulate in advance to an amount to be paid or retained as liquidated damages in the event of a breach. The Florida Supreme Court has established a two-prong test to determine whether a liquidated damages provision will be stricken as a penalty clause. First, the damages consequent upon a breach must not be readily ascertainable. Second, the sum stipulated to be forfeited must not be so grossly disproportionate to any damages that might reasonably be expected to follow from a breach as to show that the parties could have intended only to induce full performance, rather than to liquidate their damages. READ MORE