What defines 'split contracts' in the context of player contracts?

Split contracts refer to agreements that have two distinct salary amounts; one for when the player is on the active roster and a reduced amount if the player is placed on the reserve list. This structure allows teams to manage their salary cap effectively while accommodating player situations such as injuries or performance issues.

The concept of split contracts is significant as it gives teams financial flexibility and incentivizes players to maintain their fitness and performance levels to remain on the active roster. When a player is on the active list, they receive the higher salary stipulated in the contract. However, if the player is injured or not performing well and needs to be placed on a reserve list, the team can transition to the lower salary, minimizing their financial liability.

Understanding the intricacies of split contracts is crucial for agents and players, as it affects negotiations and can influence decisions about player movements, contract structures, and the implications for the team's salary cap.