• Sakshar Law Associates

Endorsement agreement at Glance

Updated: Sep 2


By

Sakshi Shairwal

Anjali Kumar



Introduction:


An endorsement agreement allows a company to utilize a celebrity's name and reputation to advertise a product or service with his permission. A celebrity in this category must be a well-known figure in their area. The endorser (celebrity) is compensated or paid to promote the company's product or services. An endorsement agreement with a celebrity describes the terms and conditions of the endorsement, such as how to advertise or use the product or service. It also lists the endorser's other responsibilities, such as wearing clothing while advertising the product or performing in a commercial, or presenting the items or services flawlessly.


Who is the one who signs the Endorsement Agreement?


The firm that owns the product and the celebrity who promotes it are both parties to an Endorsement Agreement. The warranty and guarantee periods of the firms and the endorser are specified in the agreement so that future problems are avoided. During the term of this contract, the company commits to providing the endorser with the product at his request, which will be provided free of charge and as part of the compensation.


The Endorsement Agreement's Purpose:


The primary goal of an Endorsement Agreement is to promote a product or service by enlisting the help of well-known people in the industry or in other fields.


Endorsement agreements include a moral provision to limit the endorser's harmful behavior, which will reflect negatively on the brand or product. Some undesirable behaviors in the endorser's personal life, such as sexual actions, drug usage, and scandals, will be strongly prohibited under such moral provisions. When the endorser is an actor, actress, or other public figures, this moral clause is employed. Basically, endorsements deal with sports endorsements or celebrity endorsements.


The Endorsement Agreement's Contents:


It's either a Sports Endorsement Agreement or a Celebrity Endorsement Agreement when we look at an Endorsement Agreement sample. When it comes to sports sponsorship, the contract has several conditions, including a public appearance clause, exclusivity clause, and remuneration clause.


When a company sells sporting equipment, one of the most well-known athletes will be used to promote the product. The corporation compensates the employee in several ways, including base pay, bonus pay, and so on. Occasionally, the firm will choose a sports team with a good possibility of winning and give sponsorship for them, for which the organization will sign a sports sponsorship deal.


Celebrity endorsement is the next factor to consider. Celebrity endorsement is one of the most effective ways to promote goods and services because firms choose a celebrity figure who has a large following or fan club, for example. When signing a deal with a celebrity to endorse a company's brand, the celebrity should consult an attorney for advice on the constraints outlined in the contract.


What should you think about before you sign the Endorsement Agreement?


When it comes to Sports Endorsement Agreements, when an endorser decides to sign the contract, he or she should be aware of the deal's terms and circumstances.


i.) Endorsers should know the compensation plan of the company. (i.e, royalties, fees, additional incentives, etc.)


ii.) Endorsers should go through the moral clause to know about the restrictions,


iii.) If any dispute arose from the contract then they resolve the disputes by themselves or they can take the assistance of an attorney.


iv.) In the case of Celebrity Endorsement-When it comes to celebrity endorsement, the celebrity should understand the obligations of the contract. (i.e, what to wear, how to promote or use the products and services),


v.) Celebrities can terminate the agreement if they think their image is damaging due to the promotion of products and services.


Benefits and Drawbacks of the Endorsement Agreement


Benefits


In a product endorsement, using famous figures helps the brand to show that they are better from the others,


Product Endorsement helps in building brand credibility.


Drawbacks


Endorsers are very expensive to promote a product of a company,


Products that are bad would never get support for the endorsement.


Important Endorsement Agreement Clauses:


The most significant clause of an Endorsement Agreement; a transaction cannot be completed without these sections. Certain clauses are included in the Endorsement Agreement:


Parties


This is where the agreement begins with the first clause. Because there can be no contract without the parties. An Endorsement Agreement begins with identifying the parties to the agreement, as well as their individual status or any other proof of identification.


Term


This phrase specifies the term of the agreement, i.e. how long both parties agreed to be bound by the contract. Typically, the term is for a set number of months or a year. It is conceivable that the agreement will be renewed through one or more processes, such as communication from one of the parties or mutual agreement between both parties, etc. If there is a request for an extension, the additional time will be considered.


Indemnity


In most cases, the party will be able to collect the other party for any losses incurred as a result of their negligence or false representation. The scope of indemnification and the procedure for obtaining it must be outlined carefully.


Dispute Resolution


This clause specifies that if a dispute occurs as a result of the agreement, the parties will address it cooperatively. Arbitration (resolving a dispute through an appointed third party), mediation (a person who settles a conflict by intervening on both sides), and conciliation are some of the major dispute resolution methods (which help the party to compromise between themselves).


Illustration: If there are two parties ‘A’ and ‘B’, where ‘A’ is a company and ‘B’ is a famous personality. They both had an Endorsement Agreement and after some days certain disputes arose between both parties. Then they will resolve it by themselves or bring a third party to resolve the dispute which has arisen between both parties.


Termination


An agreement can be terminated under specific circumstances, such as when it is regarded as fully completed or when the agreement reaches the end of its period.


If a party violates the Endorsement Agreement, the contract might be terminated by the other party. This frequently occurs when businesses fail to pay on time, or when the celebrity fails to deliver on time or to the satisfaction of the business.


The duty of the celebrity


It is the duty of the celebrity to promise not to commit or engage in any action or behavior in the region that might jeopardize their reputation, character, or work culture. The celebrity should validate that the product and services are original and do not infringe on any third-party intellectual property. During the period of the contract and for 12 months after its termination, the celebrity must undertake not to engage in any other actions that would jeopardize the company's goodwill and reputation. It is the celebrity's responsibility to approve the company's usage of his or her image. They should also give the company permission to utilize his name, biography, and portrait, among other things.


Consideration


This clause must specify the payment methods and timetable (i.e licensing fees, royalties, profits, cash, installment payments, etc). The amount of payment must be agreed upon by both parties. It should state explicitly how much interest will be charged if the payment is late. Companies set specific rules for payment reductions if a celebrity fails to perform at a given level or produce positive publicity.


Serena Williams' consideration for a Nike sponsorship is dependent on her Grand Slam ranking and performance.


Exclusivity


This provision emphasizes the need for an exclusivity clause in a contract, which prohibits the celebrity from providing the same service to a competitor. This contract also forbids the celebrity from using competitors' products for a set amount of time. Negotiations in an Endorsement Agreement should take exclusivity into account.


Force Majeure


This provision indicates that the parties are free of their rights and duties if there is any external pressure. Acts of God, war, and terrorist acts are examples of external pressure. If the Force Majeure continues for an extended period of time, both parties have the option to terminate their contract.


Moral clause


This clause protects the risk taken by the celebrity, where his value might be damaged by any misconduct. This clause also permits the company to end the Endorsement Agreement if the celebrity loses his or her image or the image of the company or its product or service.


Insurance


Consider a suitable "key person" life insurance policy to cover this risk with the celebrity's approval if the celebrities death or serious injury causes damage to the company's marketing program. The United Kingdom and the United States have been following this to preserve their investments and companies when celebrity endorsers are publicly humiliated.


The obligation of the company


During the time, the corporation acknowledges that the celebrity has primary authority to promote, present, and advertise the product within the territory.


Companies should not make any statements to the media (newspapers, radio, television, etc.) about a celebrity's personal life or personal views without the celebrity's prior written authorization.


Under the terms of this agreement, the company commits to notify the celebrity of any meetings that the celebrity will be attending.


Intellectual Property


This section gives the corporation restricted permission to use the endorser's name, image, signature, and other personal information, and it also stipulates that both parties must respect each other's intellectual property. To avoid ambiguity, the agreement should be well worded. Before using a celebrity's name, identity, signature, or other personal information, the celebrity must give his or her permission.


Illustration- There are two parties ‘A’ and ‘B’. ‘A’ is the company and ‘B’ is the celebrity. ‘A’ uses the name and identity or signature of ‘B’ without the prior consent of ‘B’ then ‘A’ has infringed the Intellectual Property of ‘B’ or ‘B’ uses the trademark of the company ‘A’ without the consent of ‘A’ then ‘B’ has infringed the Intellectual Property of ‘A’.


Confidentiality


Neither of the parties shall disclose any confidential information during the term of the agreement or after its termination.


Definitions and Interpretations


The agreement should clearly mention a list of definitions to clarify the meaning of the important terms of the contract.


Territory


This describes the geographical area in which the parties perform their obligations as well as their rights under the agreement. This can be a particular country, state, city or the entire world.


What happens in the case of Violation?


Both parties have the right to terminate the relationship if the Endorsement Agreement is violated. When a firm fails to follow the contract's conditions, the endorser has the option of terminating the agreement or filing a lawsuit against the company. Similarly, if the endorser fails to meet the contract's requirements, the company has the right to terminate the agreement.


Any party dealing with the Endorsement Agreement should use the services of an attorney to avoid any contract-related problems. Before signing the agreement, the endorser should read and understand the terms and conditions. When deciding whether or not to join a contract, a party must seek legal advice.


Conclusion:


Endorsement agreements are frequently made between celebrities and companies, or between sports idols and companies. Endorsement agreements aid in the promotion of a company's products and services. The sports idol or celebrity must be a well-known figure. This agreement binds the parties legally. If one of the parties has a loss, that party may be compensated.





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