Liquidated Damages in NIL Deals: What “Exit Fees” Really Mean (and When Courts Enforce Them)

Name, Image, and Likeness (NIL) agreements move fast—especially when athletes transfer. That speed is one reason we’re seeing more disputes over liquidated damages provisions, sometimes described in news coverage as an “exit fee” if a player leaves for another program.

For example, the University of Cincinnati recently filed a lawsuit in federal court in the U.S. District Court for the Southern District of Ohio against former quarterback Brendan Sorsby, seeking $1 million in liquidated damages after he transferred to Texas Tech. The lawsuit claims Sorsby signed an 18-month NIL contract with Cincinnati on July 1, 2025, covering the 2025 and 2026 seasons and set to expire on December 15, 2026, with a $1 million liquidated damages/buyout due within 30 days if Sorsby "transferred to another university before completion of the agreement's full term." Sorsby entered the transfer portal on January 2, 2026, and almost immediately signed an NIL deal with the Red Raiders reportedly worth between $4 million and $6 million. Sorsby's agent, Ron Slavin, called the lawsuit "misguided" and argued the $1 million liquidated damages clause is "nothing more than an unlawful penalty under Ohio law," noting that Cincinnati paid Sorsby $875,800 for the 2025 season he fully completed, making this a key test case of whether such exit fees in NIL contracts are enforceable or constitute unenforceable penalties.

This is just one high profile example of what could become the next wave of NIL litigation.

Here’s a plain-English guide to what liquidated damages are, how they work in NIL contracts, and how key states—including Ohio, Texas, Florida, California, Virginia, North Carolina, and Maryland—generally evaluate whether these clauses are enforceable.

What are liquidated damages?

Liquidated damages are a contract term where the parties agree ahead of time: if a specific breach happens, the breaching party pays a set amount (or an amount determined by a formula).

They’re often used when the parties believe it would be hard to measure the financial harm later. In NIL deals, that harm can include:

• costs of creating content and marketing materials,
• event planning and travel costs,
• disruption to a campaign timed around a season,
• the cost of finding a replacement athlete quickly.

How do liquidated damages work in NIL contracts?

In NIL agreements, liquidated damages may be triggered by things like:

• failing to complete promised appearances or social media deliverables,
• breaching exclusivity (promoting a competitor),
• early termination under certain conditions,
• leaving a program or market if the agreement is drafted so that the athlete’s ability to perform is tied to that school/community.

A key point: liquidated damages are not automatically enforceable just because they’re in the contract. Courts often refuse to enforce clauses that operate as a penalty—meaning a number set mainly to punish someone or scare them out of leaving.

The “penalty” problem (why some exit fees don’t hold up)

Across most states, courts ask variations of the same basic questions:

1. When the parties signed, were damages hard to estimate?
2. Is the number a reasonable estimate of likely harm—rather than punishment?

Red flags that can make a clause look like a penalty:

• a flat, one-size-fits-all number (e.g., $1,000,000 no matter what),
• no adjustment for timing (leaving before any work is done vs. after most deliverables are completed),
• the liquidated amount is wildly out of proportion to what the athlete was paid (or what value the deal realistically had),
• the contract is vague about why a transfer makes performance impossible.

What do these states generally allow?

The short version: all of the selected jurisdictions listed below generally permit liquidated damages—if they’re reasonable and not punitive. The fight is usually about whether the clause is a fair estimate of real harm or an unenforceable penalty.

Ohio

Ohio courts generally enforce liquidated damages when they reflect a reasonable estimate of anticipated losses and are not disproportionate. In NIL disputes, a well-supported, deal-sized, time-sensitive amount is more defensible than a headline “exit fee.”

Texas

Texas typically looks at whether damages were difficult to estimate at the start and whether the figure was a reasonable forecast. Texas disputes also often focus on whether the amount is out of line with actual harm, which makes careful deal documentation important.

Florida

Florida generally enforces liquidated damages when actual damages are hard to determine, and the amount is not grossly disproportionate. Clauses that read like punishment rather than compensation are vulnerable.

California

California’s approach is shaped by statute (Civil Code § 1671) and context. In negotiated commercial settings, liquidated damages are often enforceable unless “unreasonable,” but California courts still scrutinize clauses that function as penalties—especially if they look like a deterrent rather than an estimate.

Virginia

Virginia generally enforces clauses that reasonably estimate expected harm and rejects penalties. A formula tied to real costs and remaining deliverables is usually easier to defend than a blunt “pay X if you leave.”

North Carolina

North Carolina generally follows the same principle: enforce if it’s a reasonable estimate of probable damages and hard to calculate otherwise; do not enforce penalties. The more the amount tracks the economics of the deal, the better.

Maryland

Maryland also generally enforces liquidated damages that are a reasonable forecast of harm that’s difficult to measure, and refuses penalties. Maryland analysis is highly fact-specific, so clarity and proportionality matter.

Practice Tips (for universities, collectives, sponsors, and businesses)

If you’re paying for NIL services and want a liquidated damages clause that’s more likely to hold up:

1. Use a sliding scale, not a flat fee. Consider different amounts depending on when the agreement ends and how many deliverables are completed.
2. Tie the clause to real-world costs. Make sure the number reflects things like production costs, non-refundable spend, and the cost of replacing the athlete on short notice.
3. Be clear about the obligations. Vague deliverables make enforcement harder. Specific content/appearance commitments make it easier to show what was lost.
4. Avoid “transfer = breach” shortcuts unless justified. If the deal truly depends on being tied to a school/community, say so and explain why performance changes after a transfer.
5. Keep your “why” in the file. Courts like to see that the parties tried to estimate likely harm at signing. Even brief notes or recitals can help.

Practice Tips (for athletes, parents, and agents)

If you’re reviewing an NIL deal that includes an “exit fee” or liquidated damages:

1. Ask: does this number match the deal? If liquidated damages are far higher than the money/value involved, that’s a warning sign.
2. Push for pro-rata or reimbursement-based remedies. A common fair alternative is: repay any unearned advance plus documented, non-cancellable costs—rather than a large, fixed fee.
3. Make sure the trigger is clear. “Transfer” isn’t automatically a breach unless the contract makes it one—and even then, enforceability may be challenged.
4. Negotiate a cure period where possible. If a deliverable is missed, a short window to fix it can prevent an immediate liquidated damages claim.
5. Don’t sign in a rush. These clauses can have real financial consequences. A quick review before signing can avoid a much bigger dispute later.

Takeaway

Liquidated damages aren’t automatically “bad”—they can be a legitimate way to handle hard-to-measure losses in NIL agreements. But across Ohio, Texas, Florida, California, Virginia, North Carolina, and Maryland, the central rule remains the same: reasonable estimate = potentially enforceable; punishment/penalty = likely unenforceable.

Recent headlines show that “exit fee” and liquidated damages fights in NIL deals are no longer theoretical—and that these clauses can quickly become the center of a high-stakes dispute when an athlete’s circumstances change. Because enforceability depends heavily on the contract language, the surrounding facts, and the law of the governing state, athletes, families, agents, collectives, and sponsors should treat these provisions as negotiated terms—not boilerplate. This post is for general informational purposes only and is not legal advice; if you have questions about a specific NIL agreement or dispute, consult qualified counsel in the relevant jurisdiction.