Sign-and-trade deal
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A sign-and-trade agreement is a type of contract allowed in the NBA collective bargaining agreement, wherein one team signs a player to a contract and trades him to another team. This is typically done to allow the eventual acquiring team to obtain a free agent player at a higher salary and/or a greater number of years than would ordinarily be permitted under the NBA salary cap.
The sign-and-trade helps teams to capitalize on assets that they would lose if a player became a free agent, it can help the player get more money or a longer contract, and it will help the team gaining the player by offering a better and more competitive contract to the player than otherwise allowed under league rules. Imagine a player who is planning on pursuing free agency in the coming off-season. His current team knows that at least one of the other teams will sign him. If this happens the team will get nothing in return for the player. However, because the team is the players 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 former team to the more lucrative contract and be traded instead of going to free agency. It is also in the best interests of the former team because it will then get players or draft picks in return for the player they are losing.
Sign-and-trades are considered "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. [1]