What is a contract buy-out?

Sometimes players and teams decide to divorce each other. They do this by mutually agreeing that: • The team will waive the player; • If the player clears waivers, the compensation protection for lack of skill (see question number 91) will be reduced or eliminated; • Optionally the payment schedule for the remaining salary may be shortened or lengthened. For example, the Celtics did this with Dino Radja prior to the 1997-98 season. They mutually agreed to reduce Radja's compensation protection to 50% of its value, and then the Celtics waived him. When he cleared waivers he was paid the 50% he was owed, and he was then free to return to Europe. But there's a twist, which needed an arbitrator's ruling during the 1999-00 season to resolve. As detailed in question number 91, on January 10 all contracts become guaranteed for the rest of the season. Compensation protection insures the player against loss of salary after being waived for lack of skill. But if he is waived after January 10, ...  more

Sometimes players and teams decide to divorce each other. They do this by mutually agreeing that: • The team will waive the player; • If the player clears waivers, the compensation protection for lack of skill (see question number 91) will be reduced or eliminated; • Optionally the payment schedule for the remaining salary may be shortened or lengthened. • Optionally the team's set-off rights (see question number 55) may be waived. For example, the Celtics did this with Dino Radja prior to the 1997-98 season. They mutually agreed to reduce Radja's compensation protection to 50% of its value, and then the Celtics waived him. When he cleared waivers he was paid the 50% he was owed, and he was then free to return to Europe. But there's a twist, which needed an arbitrator's ruling during the 1999-00 season to resolve. As detailed in question number 91, on January 10 all contracts become guaranteed for the rest of the season. Compensation protection insures the player against loss of ...  more