In the early 1990s, creative contracts were commonplace in the NBA. The collective bargaining agreement was not sophisticated enough to tighten loopholes around how contracts were worded, and as a result, both teams and agents exploited this fact to craft deals that gave them significant advantage over their competition.
Teams would often write balloon payments into contracts -- long-term deals at low annual salary followed by a season with a massive raise, which would give the team cap flexibility. One of the more notorious examples on the agent side was David Falk's routine of securing long-term deals for his clients that included opt-outs after two or three years (Juwan Howard signed a 12-year, $42 million deal as a rookie with an opt-out after two years, one that he exercised and promptly secured a $100 million-plus deal).
Following the 1995 CBA (when the rookie scale contract was introduced) and 1998 CBA (when many of the current cap mechanisms like maximum contract lengths and values were set), NBA contract writing fell into cookie-cutter territory. Rookie scale deals are ironclad (two guaranteed years followed by two team options, restricted free agency after the fourth year), and vet contracts are limited in length, amount and even size of raise. For the better part of the past 15 years we have seen a standard type of contract: starting at a point, including maximum allowable raises, all years guaranteed.
However, recently teams have started to exercise a lot more creativity in contract structure. It started with second-round picks, players with little leverage (usually) and fewer rules governing how their deals can be structured. NBA rules allow teams to offer up to two-year minimum deals to second-round picks without using any cap exceptions; anything longer than two years, or worth more than the minimum, must use cap space or part of an exception (like the midlevel) to sign them. Chandler Parsons' original rookie deal with Houston was an excellent example of this: a four-year, $3.6 million deal with a team option on the fourth year. It paid him like a low first-rounder while giving the team the option of whether it wanted to keep him at a lower salary longer or bring him into restricted free agency a year earlier to take advantage of opportunities.
The irony is that the Rockets lost Parsons in restricted free agency due to another creative contract structure: the three-year, $46.1 million offer sheet from the Mavs that includes a player option on the third year and a 15 percent trade kicker. The deal made it difficult for the Rockets to match because (A) it would have robbed them of flexibility in the 2014 free-agency market, and (B) it made Parsons' deal very difficult to trade.
Of course, being creative doesn't mean being illegal, as the Denver Nuggets learned this week when their proposed rookie extension to Kenneth Faried had to be reworded in order to be valid. Originally, the Nuggets reportedly wanted to give Faried a five-year "designated player" rookie extension for less than the maximum allowable salary, something that is explicitly prohibited in the CBA.
Let's take a look at some other creative contracts of current NBA players that might raise an eyebrow.