Marketing contracts are agreements between marketing professionals or marketing companies and an individual or company that wants to promote goods or services.

Basics of a Marketing Agreement

A marketing contract is a great way to make everything clear between both parties in order to avoid miscommunication. Such an agreement is a good idea for the following situations: 

  • You need a marketing professional or firm to promote your products and/or services. 
  • You're a marketing professional being hired to promote goods and services.

The product maker/business wants to make sure the brand is represented to be consistent with the company's vision.

In a marketing contract, you can lay out guidelines for the marketer. You'll be able to detail important points, such as the following: 

  • Terms of payment 
  • Billable tasks 
  • Non-compete clauses

If you're the marketing professional, you can use a contract template that makes it easy to put details of your professional relationship on paper. The contract can go over how you'll be paid and what a company is paying you for. In case you have a disagreement with the hiring party, a contract gives you some protection.

Agricultural Marketing Contracts

As an example, consider a marketing contract in the agricultural industry. Some marketing contracts ensure sellers are paid a guaranteed minimum price, no matter the market price of the goods at the time of delivery. This is common in selling hogs, for instance.

There's generally a minimum price established in marketing contracts involving livestock. The price the seller receives may be higher than the minimum allowed if the market price is more than the minimum at the time of delivery. The exact price the seller gets in that case has to be calculated based upon a formula detailed in the contract.

If the market price for comparable livestock at the time of delivery is lower than the minimum price, the seller will be paid the minimum price. 

Determining Price

A marketing contract designed for a long-term business relationship usually sets forth in detail how pricing is determined. For instance, some contracts base prices on the costs of inputs, while others base them on the market price. It's important to fully understand the basis for payment.

While both sides should understand the calculating formula, they must also evaluate whether or not a profit is likely under existing market conditions, based on terms in the contract. For instance, if the contract bases prices on a market price index and input costs raise substantially, the producer could end up losing large sums of money if the new, increased price of the inputs isn't reflected in the market price right away.

Amounts Owed

If the seller owes the buyer any amount, the payments may bear interest. The seller may repay the amount whenever the market price is higher than the minimum price.

When one party owes the other any amount under these types of contracts, one party generally extends credit to the other. If a seller owes a large amount of money, he or she may have a harder time getting continued funding from a lender. This could lead to defaults on a loan.

Some contracts include provisions for sellers to provide a security agreement to a buyer, so the buyer has a security interest in the seller's assets. This secures any amounts the seller may owe to the buyer. In this case, the seller and buyer have a different legal relationship. 

Based on the terms of the security agreement, the buyer may have a security interest in items belonging to the seller, such as the following: 

  • Equipment 
  • Machinery 
  • Livestock 
  • Crops

On the other hand, if the buyer owes money to the seller, the seller is providing unsecured financing. This may be a violation of the terms and conditions in the seller's loan agreements. If a seller has delivered livestock to a buyer, he or she won't be able to reclaim any of it based on the contract terms. Balances owed must be reconciled in some way, according to the contract.

Many businesses hire help in promoting their goods and services. A solid marketing contract ensures that both sides are on the same page, leading to a mutually satisfying business relationship.

If you need help with marketing contracts, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.