Factors to consider in a contract when a company sponsors an event

Deborah Fosbrook Company and Commercial Law 0 Comments

The purpose of the agreement is the focus not the genre

  • Relationships between commercial companies, their brands and products and charities, social enterprises or other third party companies can take many different forms. There may be direct and identifiable sponsorship and product promotion related to a single event. Alternatively the agreement may relate to a seasonal social media campaign in which the parties are involved in a complex series of varied media events, promotions and targeted packaged products which are specifically created to benefit both parties. Whatever the reality there are a few basic principles which thread through all the agreements which a company should try to include to protect their interests.

 

Aim to protect the business and its products

 

  • Where the directors of a company decide to align the business with an event which they believe will benefit them and extend their market appeal. They have either decided that the event matches its own ethos and brand image or that the prestige and success of the event will allow them to discover a new wider demographic audience. Whatever the reason, the new agreement with the organisers of the event should be drafted on a commercial basis to protect the company and any subsidiaries so that its biggest assets – its name, logos, brands, products and reputation are not damaged or diminished by the relationship.
  • It should be made clear whether the company is the only sponsor or whether it is one of a number in a tier of funding groups. The status of the company in those groups is important as all the benefits it will acquire flows from that ranking. The company may have the right to have its name mentioned as part of the official title for the event or as a specific award for a category of a competition. If the company is to be – ‘the official supplier of’ – a genre of products or the main supplier of the hospitality or insurance or the venue. Then the exact credit to the company to be used should be specified and the formats and methods of exploitation to which it shall apply stated in detail.
  • There may also be credits agreed for brand names and products as well as reference to any copyright notices or registered trade mark notices. There should be no doubt as to when the organisers of the event are obliged to use the reference to the company being the official supplier. For example on the first page of the event website and any app and in all advertising and promotions in any media such as posters, marketing emails, on site marketing at the venue and the event brochure.
  • The company may require that it be provided with copies of all such material either for the purposes of approval in draft form before it is distributed or merely in order to retain a copy on record for future reference.
  • Conversely the company should try to ensure that the agreement does not limit the circumstances outside the event in which the company may make reference to the fact that it was the official supplier for that year and that event.

 

Acquire IP rights and ownership of the material to any adaptations or new developments

 

  • The company should require that any use of the company name, brand names, images, logos, trademarks and product details to be reproduced by the organisers should comply in an exact form with the information supplied by the company. The organisers should acknowledge they do not have the right to change the content, size, layout or dimensions without consent. The company should provide a portfolio of dimensions, colours and layouts of the text and artwork to be used in any format required. The organisers must then be under an obligation to seek approval from the company in the event there is any suggestion that there might be any problems.
  • The difficulties of ownership arise where new material is created either as a result of the organisers commissioning a third party or through the work of a consultant or employee. If new images, logos, text, music and formats are created in respect of the products, brands or company which are not based on the originals owned and controlled by the company then problems may occur at a later date. There may not be an obvious correlation between the originals supplied by the company and these later adaptations or developments.
  • The company therefore needs a clause in the agreement that they shall have the right to have the intellectual property rights and any computer software rights and trade marks assigned to them. Together with the supply of the master copies of all the material, even if the company has to pay for the costs incurred in its creation.
  • There also needs to be a clause that sets out that any additional assignment documents that the company may require and provide in each case shall be signed by the relevant parties for the consideration of a nominal fixed sum. If there is no such clause is in the agreement then these new rights and material may belong to either the organisers or a third party or a marketing consultant. The aim is to protect the ownership of not just variations of existing rights but also those developed and used in conjunction with them at the event.

 

Editorial control of the event and other forms of exploitation

 

  • The company may decide that it wants the right to approve any planned content before third parties are contacted and to examine any draft forms of marketing and proposed exploitation in any format in any media. This would include the right to veto certain contributors, performers, music or other content. As well as to have a right to approve the methods and forms of marketing and exploitation of the event. This may be because the company does not want to be associated with third parties which it believes would reflect badly on its perceived image or purely as a form of managing the event so that it is not suddenly linked to a political controversy or is unsuitable for the purposes proposed by the company

 

Funding payments; termination and indemnity

 

  • The payments by the company should be made in stages and linked not just to dates but the completion of verified work by the organisers and approval of material by the company.
  • Where a shell company has been created or the organisers have not been trading very long and have a limited track record. In order to endeavour to protect the company an undertaking should be sought from a parent company or the directors personally.
  • In any event no further payments should be due where the event is cancelled for any reason whether due to force majeure or otherwise. For this reason it is always worthwhile for both parties to consider insurance cover as part of the budgeted costs. The company should seek to have very wide rights of termination and the right to terminate the agreement for any reason which in their view is in the best interests of the company at anytime. This may be because tickets have failed to sell or a major contributor has failed to agree to appear or because there is a serious security risk.
  • The termination clause can then be linked to the fact that no more money is required to be paid. If this cannot be agreed then it is a good idea to set a fixed maximum payment which must be paid regardless of when termination takes place. Together with an undertaking by the organisers that they will not seek to claim any further sums.
  • The company must assess the extent of its potential duty of care, risk and liability as not only a major sponsor of the event but also as regard its attendance as a company who is taking part in the event. The company should try to limit any indemnity and liability which relates directly to the actions and failures of its staff, products, equipment and promotions. The company may try to agree a financial limit of its total liability and the cost of any indemnity for all matters except personal injury and death.
  • The organisers may agree a list of subjects for which the company is not liable and for which there is no indemnity and for which it is clear that the company shall not be required to pay for any costs.

 

Specifying the benefits to the company

 

  • It is often specified in an agreement that the company may have the right to set up its own advertising and promotional material at the site at agreed locations. That it may set up a specific number of stands and bars for uniformed staff who sell its specially created branded goods. As well as stage hospitality parties for its customers and executives and to be provided with a number of entry tickets at no additional cost.
  • The company may decide after the agreement has been signed that it would like to make a film behind the scenes with a production company or be interviewed by news companies on its stands at the venue. It is much easier to try to include this sort of filming in the main agreement than agree terms at a later date.
  • The company may want to be able to film the entire event with its own crew and use it for any reason at a later date. It may want access to material commissioned or arranged by the organisers at the event. The company may decide months later that it would like to use some of the text or film on future products, adverts or in competitions. These are just some of the examples of problems that may arise during and after the event. Therefore it is to the advantage of the company to take a very broad approach and to ask for far more than it immediately assesses that it requires. It is much easier to acquire the right to have access for filming or to be supplied with archive footage or stills when negotiating an agreement. It is much better to draft and acquire rights widely than to limit yourself to the absolute minimum.
  • As a final point it is always good to consider whether the company can pay a nominal sum for the option to be the major supplier on the same terms next year or whether both parties would agree to a first right of refusal on the new funding terms to be offered by the organisers.

 

Deborah Fosbrook is the author of Contract and Copyright Drafting Skills, The Complete A-Z of Contract Clauses Pack and The Media and Business Contracts Handbook

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