News broke recently that Barcelona have reached an agreement with the 18 year old midfielder Pedri to extend his contract until June 2026, including a release clause of €1 billion, cementing his future at the club.
What is a release clause?
It's the minimum amount of money a club is willing to accept for the sale of a player to another club. A release clause is not legally binding except where both parties (clubs) reside in the same country.
A release clause, similar to a buy-out clause is a contractual clause in a player's contract that automatically requires a club to accept an offer that is expressly set out in the contract from the offering club. If the minimum amount stipulated in the contract is triggered (i.e. accepted) by the buyer club, the player is allowed to speak to that club.
What is a buy-out clause?
On the other hand, a buy-out clause is a legally binding, contractual provision specifying the compensation fee that a player must pay to his club in order to terminate his contract. A player can essentially buy himself out of the contract.
Buy-out clauses are seldom used in Premier League contracts. However, buy-out clauses are more common in Spain as they are a mandatory provision in most Spanish contracts, set at a very inflated (and discouraging) figure.
The "buy out clause" is legally binding between a club and a player. The "buy out" is effectively what it says - a means for the player to buy himself out of the contract. If a player triggers the buy-out clause, they are effectively becoming a free agent.