Sign and trade
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In the National Basketball Association, a sign-and-trade agreement is a type of contract allowed in the collective bargaining agreement (CBA) wherein one team signs an unrestricted free agent to a contract and trades him to another team of the player's choosing. This is typically done to allow the eventual acquiring team to offer the player a higher salary and/or a greater number of years than would ordinarily be permitted under the NBA salary cap.
Provides league stability
The sign-and-trade helps teams to capitalize on assets that they would otherwise lose if a player became a free agent. It is a factor in the departing player's increased salary and extended contract. It helps the team gaining the player by offering a better and more competitive contract to the player than otherwise would be allowed under league rules. Often circumstances arise where a team, knowing that a player is planning on pursuing free agency in the coming off-season, knows that at least one of the other NBA teams are sure to sign him and the current team will get nothing in return. However, because the team is the player's current contract holder, the team can offer the player more money per year than any other team and can sign the player to a longer contract (per the NBA collective bargaining agreement). It is therefore in the economic interest of the player to be signed by his current team to the more lucrative contract and then traded rather than pursue free agency. The player's current team will receive players, cash or draft picks in return for the player they are losing.
Sign-and-trades are considered to be atomic transactions under league rules; if the acquiring team rescinds the trade for some reason (such as a failed physical examination), then the contract signed with the initial team is also voided. In this way, such an occurrence does not result in the initial team being stuck with a player they do not want, or under terms they might find unacceptable; the player is also protected from ending up under contract with a team he may no longer wish to play for. Such an event happened in 2005, when Shareef Abdur-Rahim was acquired by the New Jersey Nets in a sign-and-trade with the Portland Trail Blazers; the trade was subsequently canceled by the Nets when a physical exam discovered scar tissue in Abdur-Rahim's knee. As a result of the cancellation, Abdur-Rahim once again became a free agent; his contract with Portland (who had his Bird rights) was voided.