Sports and Entertainment

William Bowyer
January 2025

Associate and sports law specialist William Bowyer comments on how McLaren’s claim against Palou will likely set a precedent for similar F1 contract disputes going forward – it will either enable racing drivers to have greater choice with respect to moving teams, or discourage them from moving whilst still under contract.

William’s comments were published in City AM, 24 December 2024, and can be found here. 

“Given the value of the claim, the current profile of F1, the nature of a driver’s role within a race team and McLaren’s position in the sport, this is a hugely important sports law case and will likely set a precedent for similar F1 contract disputes going forward.

“Given the nature of this case, it will be interesting to see what the court considers – or does not consider – to be caused by Palou’s breach of contract and/or what is reasonably foreseeable regarding the losses claimed by McLaren. McLaren will be pushing for a wide range of losses to be considered from livery changes, new marketing spend, unforeseen spend on new drivers and loss of sponsorships.

“When a party breaches a contract, the “innocent” party (in this case McLaren) often has a right to an award of damages if they have come into loss as result of the breach. It is important to remember that the purpose of damages (from an English Law perspective) is to put the innocent party in the same position as if the contract had not been breached. Therefore, McLaren can only be awarded as much as the court considers necessary to reach that position. We often see scenarios where parties attempt to recover beyond what is necessary to place them back in that position.

 “Should the court side with McLaren, drivers would be discouraged from moving teams whilst still under contract based on their perceived chances of success, and help ensure that race teams hold the power.

“However, should the court consider the damages to be far lower than McLaren claims, racing drivers will likely breathe a sigh of relief. Whilst they would still have to pay damages for breaching a driving contract, it may enable them to have greater choice to choose teams based on the opportunities presented to them – if they consider the pros of switching teams whilst still under contract to be greater than the costs they may incur.

 “Importantly, McLaren’s dispute with Palou highlights the importance of drivers seeking tailored and sports-specific legal advice before signing any ‘seat deal’ – especially before a decision as big as changing teams.”