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This is from Baseball Reference.com:
"…after the 1879 season, the NL owners agreed to allow teams to list up to 5 players who other teams were forbidden to sign. The reserve list was originally a secret, but once it leaked out the system was written into the league rules.
After the peace agreement between the NL and the American Association, the leagues agreed to respect each other's reserve lists and to expand the size of the list. Over the remainder of the 1880s, the reserve list was expanded to cover each team's entire roster, and the formal reserve clause was added to the standard player's contract."
The Players' League, formed in 1890, was the first attempt by the players to get around the reserve clause. By the way, Wikipedia states that there were NO multi-year contracts in baseball prior to McNally/Messersmith going free agent.
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