NBA Free Agency Glossary: Why are some contracts not guaranteed?

Unlike the NFL, NBA contracts tend to guarantee most, if not all, salary. There are many reasons why this is the case, but the two biggest reasons are the absence of significant injury-related decline and the strength of the player’s union in the NBA.

However, there is no stipulation in the CBA that contracts must be fully guaranteed, and as such, many contracts contain some unguaranteed salary. 

Why do teams and players have non-guaranteed salary?

If it were up to teams, no contract would contain guaranteed salaries. Wouldn’t it be nice for the owners if they didn’t have to pay an injured or declining player? Conversely, players want all of their salary to be guaranteed to protect them from injury, decline, or the whims of an unscrupulous owner. In practice, most contracts contain fully guaranteed salary, but sometimes the two sides will meet in the middle. 

Unguaranteed salary usually comes in two forms, a final unguaranteed season of salary on a multi-year deal that functionally acts as a team option, or a partial guarantee for a season’s salary that acts like a buy-out clause. In both cases, the team and player see the tree and the forest. The player locks in a contract with a future salary figure they’d be unlikely to hit, and the team gains some future roster and financial flexibility. 

While the player is foregoing future financial certainty, they still have a strong chance to earn that unguaranteed salary. Unguaranteed salary has a trigger date or deadline to become guaranteed, much like options have a set date to be exercised. Sometimes a player will have performed well enough that the team believes they are worth guaranteeing their salary, and sometimes guaranteeing their salary is the best route to upgrade the roster. Take Chris Paul and the Golden State Warriors this offseason as an example. 

Paul has a $30 million unguaranteed salary for the 2024-25 season that he would have no chance of earning in free agency. While the Warriors eventually turned down guaranteeing his contract and waived him, they were interested in using his salary as part of a trade to bring in a more productive player. Because of this, the Warriors and Paul agreed to push back his guarantee deadline. This gave the Warriors the chance to upgrade their roster through trade and gave Paul his best chance to earn $30 million in 2024-25. 

Players with partial guarantees can face an identical fate, but they at least have the comfort of knowing they’ll get some money should they be released. We can functionally view contracts with partial guarantees in the final year as containing a buy-out clause, a very common clause in MLB contracts. 

For the most part, high-level players receive contracts with fully guaranteed salaries, but there have been instances where teams and players agree to future non-guaranteed salaries dependent on agreed-upon factors. 

When Joel Embiid signed his first extension with the Philadelphia 76ers, he had played a total of 31 games over three seasons due to foot and knee injuries. While he received a five-year, $148 million designated rookie scale maximum contract extension with language that would allow the contract to reach $178 million over the life of the deal, the deal reportedly contained language that would allow the Sixers protections should he suffer more debilitating injuries. Embiid got the contract he wanted, and the Sixers got protection from Embiid’s health completely derailing his career. 

Many low-level players have contracts with significant amounts of unguaranteed money. The reason for this is they're on the fringes of the NBA and any chance to be on a roster is incredibly valuable to them. So while most future salary in the aggregate is guaranteed, the total percentage of guaranteed contracts is much lower.