MLB option contracts look different for every Club and Player. Because we rarely see mutual option contracts like that recently offered by Toronto, I think it is worth our time to introduce 4 types of option contracts:
- Player Option,
- Conditional Option,
- Mutual Option, and
- Club Option Contract
MLB Option Contracts: Player Option
If you are unfamiliar with a Player’s option, here is what happens. At the end of your contract year, Players tell their team whether they want to play next season and thereafter.
Sometimes, Players call their “player option” contract an “opt-out” clause.
I believe the gold standard is seeking an option for a player. As you might recall, the New York Mets have a history of offering options to their players.
MLB Option Contracts: Conditional Option
A conditional option works like this: a player’s contract identifies a goal or performance. Upon meeting that goal, a player has the option to extend their contract.
A conditional option offers a wonderful opportunity for success. On the other hand, a manager’s decision to take a player off the field or a player becoming injured makes a conditional option contract unattractive.
Sometimes, Players and Clubs call this a “vesting option”. In my experience, the term “vested” or “vesting” makes this type of agreement more difficult than it really is.
MLB Option Contracts: Mutual Option
Like I mentioned above, a mutual option is rare and unpopular. I believe MLB option contracts are unfavorable because it still grants leverage to the Player’s club. If a MLB player performs at a high level and want out, a Club has to sign off on it. If the player under performs and they want to stay with the Club, a Club likely has the right exercise their option.
Generally, Players see mutual options because of their age or as a negotiating strategy to lengthen their contract by one more year.
MLB Option Contracts: Club Option
If you stuck with me, then discussing the least attractive type of MLB option contract will be easy. Players generally dislike this type of arrangement for two reasons:
- Players are left hanging (which is why your contract should have a deadline), or
- Performance likely supports higher wages.
In my opinion, a Club option works well when a Player’s wages are increased along the way. Other times, these types of agreements can be extremely frustrating.