Tips and considerations for drivers and their agents around negotiating new contracts

This article, originally published on leading sports law website LawInSport, provides guidance for motorsport drivers and their representatives on navigating contract negotiations and covers essential elements every driver should understand before signing – from confidentiality clauses to performance requirements, helping them protect their interests while navigating the complex world of motorsport agreements.

Introduction

Lewis Hamilton’s shock decision to move to Ferrari on a multi-year deal from the 2025 season caused a ripple effect across the wider motorsport world. It wasn’t just drivers in the Formula 1 paddock that were pulled into the shake-up of the status quo: ever since Adrian Newey confirmed he was leaving Red Bull, motorsport journalists and fans alike had been wondering whether Lewis’ decision had triggered a seismic shift of technical staff moving teams: perhaps Ferrari Team Principal Fred Vasseur is a genius who had persuaded Red Bull’s aerodynamist impresario to join the future he was creating in Italy; or perhaps Lawrence Stroll’s ambitious plan to build a Formula 1 team from the foundations up would tempt him (as it happens, Aston Martin won the day). As is typical in motorsports, negotiations appear to have been protracted, all while Adrian Newey is on garden leave with Red Bull, his skills and working hours redirected to Red Bull’s hypercar rather than Formula 1, to (at least in theory) reduce his access to highly valuable confidential information.

Once the dust settled and the mock-ups of Lewis in Ferrari red lost their lustre, several drivers were left considering their options. Most notably Carlos Sainz, whose contract expired after Hamilton agreed to join the team in 2025. Motorsport (and Formula 1 especially) can be a fickle sport, with financial backing often just as, if not more, critical than driver ability. Though this is not so much of an issue for a driver with the star power of Lewis Hamilton, drivers such as Sergio Perez have been the subject of discussion in terms of their financial contribution to the team (sometimes at the expense of their on-track performance).

But setting aside the complex publicity and sponsorship agreements, what should drivers and their agents or managers be aware of during negotiations?

The simplest advice a lawyer can give a client is to make sure they read and understand what they are agreeing to. When it comes to a driving contract, it will be worth seeking legal advice. Motorsport contracts can be notoriously complex, especially the confidentiality and notice provisions.

The contractual relationship between the team and the driver (or any other member of the team) can either be a contract of employment or a contract for services (more common for racing drivers). A contract for services means a contractor and client relationship which can be beneficial if the individual has other duties outside of their work for the team, or if they are based in another jurisdiction and want to simplify tax or regulatory concerns. The points below will often apply to a contractor relationship too, though the client (for example, a team) would need to be careful to ensure they do not exercise too much control over a contractor (the driver), to avoid any potential arguments of a disguised employment relationship, which would have legal and tax implications for both parties.

Confidentiality obligations

Motorsport is a fiercely competitive industry. Confidential information is likely to be extensively defined to include all aspects of a driver’s role. Motorsport employers can and will take legal action against someone who they consider has misused or disclosed confidential information without proper authority (some readers will remember the infamous “SpyGate” scandal that saw McLaren being fined $100m and expelled from that year’s constructors’ championship). Defending legal action can be costly, so it is vital that drivers understand what they can and can’t say to those who work outside of the team. If the driver is likely to speak to the media, the employer should provide them with training and guidance on what they can say, and what the red lines are. If this isn’t clear in the contract, consider making it so.

It is important also to be aware that the confidentiality obligations may extend past the end of the term of a contract. The enforceability of this type of provision will be governed by how detailed the requirement is. Generally, a clause is more likely to be enforceable in relation to “trade secrets”. A trade secret is defined by law as being secret in the sense that the specific components of the knowledge are not generally known or accessible within the circles that normally deal with that type of information. For more information on protecting trade secrets in motorsport, please see this article on LawInSport.

It is critical that drivers understand these types of clauses. Breaches, however inadvertent, can lead to injunctions (meaning legal action to prevent the driver from taking a particular action, such as joining a new team) or claims for damages.

The general legal principle is that confidential information can be protected as confidential for as long as it retains its confidential nature. That sounds obvious, but in reality a lot of confidential information loses its commercial value, especially in motorsport where teams are constantly evolving their know-how in a very public sphere.

Using a Formula 1 example, Red Bull spotted a technical update on the McLaren car’s rear wing immediately and raised a query to the FIA. If a driver worked for McLaren and wanted to move to Red Bull for example, they may try to argue that the mechanics of the wing were in the public domain so the confidentiality of the knowledge had dissipated. However, consider the actual workings of that rear wing – it’s unlikely that the truly valuable information, about how the wing works in practice and what it does, would be public. This level of technical information could possibly amount to a trade secret and as such will be fiercely protected by the team (and, accordingly, by the courts).

As another example, who can forget the “Pink Mercedes” from 2020, where (then named) Racing Point entered a racing car that other teams argued was a complete copy of the dominating 2019 Mercedes F1 car[2]? This is a great illustration of how confidential information works in motorsport: on the face of it, a competing team could argue that the design of the 2020 Mercedes was no longer confidential information or a trade secret, because it had been reverse-engineered by Racing Point. But the actual behind-the-scenes mechanics may still retain some confidentiality because without actual design and technical specifications, arguably one can never truly know exactly how the components of the car work.

Helpfully for drivers seeking to move teams, generally the legal position regarding a driver’s own knowledge and skills is that they are their own. For example, a driver would learn how to operate the car. Though that information may still be helpful for a rival team, as it is their own knowledge and skill, it belongs to them and they can use the knowledge and skill at their new team. This position was originally confirmed in case law from 1916 (Herbert Morris Limited v Saxelby [1916] 1 AC 688).

Post-termination restrictions

A contract is also likely to have detailed restrictions on what a driver can do after the contract comes to an end. Broadly speaking, restrictions must only protect the employer or client’s legitimate business interests but, in motorsport, where confidential information is guarded jealously and can be worth millions, they should expect restrictions to be as detailed and as far-reaching as the law will allow. That said, they must be reasonable in terms of scope, duration and location, but motorsport is usually an international business, and a driver should expect to be prevented from competitive practices such as poaching race engineers or seeking to persuade a sponsor or supplier to change allegiances. Alongside restrictions like these, a driver may also be required to agree not to make any comment (either in writing or verbally) which may be derogatory or detrimental to the reputation of the team or its staff.

A clause is more likely to be unenforceable if it goes beyond what is reasonable. For example, if a driver works in a solely UK-based competition (such as the British Touring Car Championship), it would almost certainly be unreasonable and unenforceable for the team to seek to prevent a driver from moving to a competitor outside the championship or in a different country.

In the author’s experience, teams often include wording to confirm that a driver has taken legal advice on the clauses, so it’s important that  a driver does take advice. Post-termination restrictions will almost certainly impact on the next steps in their career.

Image rights

When it comes to image rights, there are a few key points to be aware of. Firstly, it is important  to understand what the contract defines as constituting their image. This may include their name, likeness, signature, and any other personal attributes. The contract should specify the scope of usage rights granted to sponsors or other parties, including the duration, geographic territory, and types of media where the image can be used. Additionally, drivers should ensure they retain the right to approve or reject specific uses to prevent any association with brands or messages that could harm their reputation. It is important to include clauses that address compensation for the use of a driver’s image, depending on the commercials of the deal, and outline procedures for resolving disputes. Careful consideration of image rights helps to safeguard their reputation and personal brand.

Performance and notice obligations

A critical part of the contract will address what happens if something goes wrong in the working relationship: are there performance requirements that are achievable? If a driver is not performing, does the contract set out how long they get to improve? Do they have a probationary period in order to meet set expectations with a reduced notice period? Red Bull are rumoured to utilise strict performance obligations with their drivers and can remove a driver from the team if they do not meet these. All teams in Formula 1 are subject to a cost cap now and accidents, crashes or damage to the car all add to a team’s running costs.

With the price of success so high, performance obligations are certain to be an important part of team contracts for the foreseeable future. Obligations to maintain good physical health such as restrictions on participation in extreme sports are also common.

Exits

If a driver decides the environment isn’t for them, how can they get out of the contract? What is the notice period? Contracts are likely to be weighted towards the team but that does not mean a driver cannot negotiate terms. In a contract for services, in theory the playing field should be more level on the basis that it’s a commercial agreement between two entities, but that is not always the reality, especially if one party is a motor racing team and the other party is a driver relying on the work for their earnings.

A lot will depend on the circumstances of a driver’s exit. If they are seeking to move to a competitor, the team will often seek to hold them to the letter of the contract and that may mean a lengthy notice period, ongoing sponsor requirements and potentially a removal from “front-line” activities to work out the notice elsewhere (for example, as a reserve driver).

If a driver is departing a team on good terms, perhaps for another non-competitive opportunity, parties can negotiate and agree a variation to the contractual notice period. A driver’s new team may wish to pay a fee to allow a driver to leave their contract earlier, which is often a key point of negotiation behind the scenes. However, when entering into contracts, they should always work on the basis that, no matter the circumstances, they will be held to the notice period included in the contract.

Outside interests

Individual drivers may have their own sponsors and these may sit alongside the team’s sponsors. Sometimes, the driver’s sponsor may clash with the team’s and in such cases a driver may have to negotiate an exit from one contract in order to enter into another.

Be mindful also of any restrictions in the contract that prevent drivers from having a conflict of interests. Sometimes such restrictions may also extend to their family. If a team is sponsored by one provider, they may not want an employee openly using a competing provider.

Claw back provisions

Remaining on the subject of the relationship ending, be conscious also of any claw back provisions within the agreement. This is common where the employer or client has paid for something in preparation of the individual starting the contract. This might apply to visa fees, in order to bring the individual to the UK or to allow them to work in the required jurisdiction. Alternatively, they may pay for a driver’s membership to a professional body or for them to take courses to improve their skills. The contract may contain a requirement for drivers to pay back any fees paid for, or they may be deducted from their final pay. Check this carefully.

Release clauses and option clauses

Mercedes confirmed that Lewis Hamilton activated a release clause in his contract in order to join Ferrari. He had only agreed a new contract the previous year. Release clauses are common in the motorsport world and can work to their benefit and detriment, depending on the scenario. A release clause allows a driver or the team to terminate the agreement earlier than the contract’s original length so would be more commonly found in a fixed-term contract either of employment or for services. Sometimes release clauses allow the contract to end early in specific scenarios, such as if the driver is dissatisfied with the team’s performance (as is rumoured to be the case for Charles Leclerc at Ferrari).

Similarly, other drivers have spoken of being offered “two plus one” or “one plus one” contracts. This typically means their contracts runs for two years with the option of one further year. Usually the team has the option of the further year, but sometimes the “option clause” goes in favour of the driver. Again, these are most commonly used if either party is dissatisfied with performance.

Negotiation

Broadly speaking, contracts can always be negotiated and terms can be varied from what the employer or client considers standard. When negotiating, be mindful that a particularly aggressive approach can put a potential employer or client off and this must be weighed alongside the protection of a driver’s earning potential.

Do check for provisions which allow the employer to unilaterally change the terms offered. Any such change should be subject to consent.

Alternatives?

And what if a driver does not get the contract offer they were hoping for? Motorsport is a highly competitive industry. Sometimes the sponsors a driver brings with them can be the difference between two talented individuals. That is the nature of the motorsport industry, which was reported to be worth over US$5 billion in 2023.

One alternative might be a reserve driver contract. Formula 1 teams boast an impressive list of back-up drivers, including Formula 2 rising stars and stand-outs of other series including IndyCar and the World Endurance Championship. There have been excellent performances from reserve drivers when they are given the opportunity to stand in for a Formula 1 driver, including Ollie Bearman, who has who has impressed in his rookie season for Haas Formula one team so far in 2025 after an equally impressive showing deputising for Carlos Sainz earlier in the 2024 season. Alongside reserve drivers, most teams also have dedicated simulator and development drivers. This is a critical function now that testing of the cars themselves is limited and closely regulated, and drivers can find themselves spending hours in a team’s simulator to provide critical feedback on how the car feels to drive.

And if Formula 1 isn’t an option, there are numerous other high-profile racing series, including IndyCar, World Endurance Championship, Formula E or Super Formula. Some former Formula 1 drivers have gone on to success in Indycar, including Romain Grosjean and Marcus Ericsson (who won the Indy 500 in 2022).

The contract is the foundation of a driver’s relationship with any employer, and it is vital that drivers are aware of the limits and obligations that are agreeing to. Starting a new contractual relationship is an exciting time, but relations sometimes sour. If drivers don’t properly read and understand the terms a driver agreed to, they may find themselves tied up in restrictions that prevent them from earning if the relationship ends.

The next time you’re considering a new contract for yourself or for a driver, keep these points in mind:

• When reviewing a contract, always consider the worst-case scenario. How could each clause work against the driver if the relationship sours?
• Confidential information and trade secrets are ferociously guarded – understand what is the driver’s intellectual property and what belongs to the team.
• Expect the driver to be heavily restricted in what they can do and say at the end of a relationship.
• Negotiate! In theory, no contractual term is set in stone and a term can always be varied, but some teams will take a harder line than others.