Endorsement Contracts: Everything You Need to Know
Endorsement contracts are used to detail the agreement between brands and celebrities or famous figures paid to represent the brand.3 min read
Endorsement contracts are used to detail the agreement between brands and celebrities or famous figures paid to represent the brand. Endorsement contracts come with explicit morals clauses as a way to limit and handle negative activity that is seen as a negative reflection of the brand.
Morals clauses are written in the contract specifically to prohibit certain behavior in the personal life of the endorser. The morals clauses usually deal with objectionable behavior, including sexual acts, drug use, scandal, or public disrepute. The morals clauses are used with endorsement contracts for:
- Celebrity figures.
- Sports figures.
Morals clauses area also appear in divorce judgments or marital dissolution. An example is that when children are present, unmarried adults may not cohabitate. If the morals clause is violated, it may result in:
- Termination of the contract.
- Suspension of the contract.
- Financial penalty (without termination of the contract).
- Payment of damages for breach.
Sports Endorsement Contracts
Sports endorsement contracts cover several important areas that must be agreed to by the brand, athlete, and their counsel. A sports endorsement contract typically will include the following:
- Public Appearance Clause
- Will state the expected appearances the athlete will make.
- The amount that will be compensated for costs associated with public appearances.
- The length of time the athlete must be present at the public appearance.
- Exclusivity Clause
- The exclusivity clause is used to determine how the athlete's likeness, image, and name is used for marketing and promotion purposes.
- Compensation Clause
- The compensation clause stipulates how the athlete will be paid and what forms of compensation will be used.
- Base compensation is what is paid for endorsing the product.
- Bonus compensation can be based on several factors, including time spent on the field while wearing the product being endorsed.
Steps to Consider When Signing a Sports Endorsement Deal
When entering into an endorsement contract, the following five steps should be considered:
- Confirm that you understand the compensation plan, including fixed fees, royalties, and additional incentives that are listed.
- Review the morality clause to understand what actions would put you in violation of the clause.
- Verify the contract has an indemnification clause, which protects you from the actions of others.
- Identify the specifics of company representation, including when the products should be worn, for example, during games or personal appearances.
- Check with your lawyer to see if there are competing endorsements. This will eliminate the issue of any conflict with pre-existing endorsement contracts.
Celebrity endorsements are used with a person who has an established fan following, especially in social media. Celebrity endorsements are extremely successful and are used frequently to promote brands. Along with actors and actresses, advertisers have started using social media influencers as a way to promote their brand. Traditional marketing forms, such as television and print media, are still in use. However, they are being replaced with social media influencers from all areas.
On Twitter, a celebrity may be paid by the tweet to promote a product. Celebrity endorsers must follow disclosure laws put in place by the United States Federal Trade Commission, such as letting their followers know they are paid to promote the product and brand.
Celebrity endorsements should also have well-drafted contracts to stipulate all conditions of the endorsement. The contract should cover:
- Exclusivity obligations that ensure the celebrity will not wear, promote, or use competitor products, e.g., an actress wearing a competitor's jewelry at high-profile events.
- Termination rights stemming from the actions of the celebrity that tarnish or harm his or her image.
- Termination if the brand and the celebrity conflict in relation to a specific social, environmental, or charitable cause. For example, a model is found to use drugs with a brand that works heavily with drug-use prevention.
- Mitigation measures that must be used to limit the damage of the brand if the celebrity has acted or spoken inappropriately. For example, the celebrity must present a public apology or appear at press conferences to address the issue directly.
- Trademark and intellectual property rights should be clearly stated in the contract. This may refer to how the celebrity's image and name are used, and who has control over the trademark and intellectual property rights if the endorsement contract ends.
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