Five Cautionary Steps When Signing an Endorsement Deal

April 11, 2017
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Athletes and other celebrities often benefit from endorsement deals, but it’s important that they do so in a manner that protects them and their reputation they have worked so hard to build. This is where the nuts and the bolts of an endorsement deal become important.

Exceptional athletes frequently garner attention when companies intend to use the athlete’s reputation and popularity to promote a product or a service. However, it’s important to consider all of the different aspects that may be included in your endorsement contract.

Step 1: Understand the Compensation

The primary concern for you as the athlete or celebrity is to identify any items that may come in the form of compensation, including fixed fees, royalties, free products, incentives or any other opportunities offered. Make sure you are being paid for all aspects of your services.

Step 2: Review the Morality Clause

A morality clause will most likely be included in an endorsement contract. This helps to keep a company from being associated with what they would term “immoral behavior”.

When your image and reputation is being used to promote their company, any activities that could harm this image may lead to a breach of contract. Your lawyer should carefully review this to identify what actions could qualify for triggering this clause. For your benefit as the athlete or celebrity, only the most serious behavior should trigger this clause.

Step 3: Don’t Be Blamed for Actions of Others

Make sure you have an indemnification clause in your deal contract. This would essentially protect you from being liable for the actions or inactions of others. If you were to be sued because of someone else’s behavior, you want to make sure they will step in and defend you. For instance, you represent the product you are endorsing in a certain light due to the company’s representations of you. Suppose they lied to you and you are sued because you repeated the lie?

Step 4: Identify The Specifics of Your Representation

Endorsement deals can cover a broad range of situations, but it is essential to be as specific as possible. For example, the company may request that you only wear their logo or certain clothing types while you are playing your sport. In the event that you have to travel and make personal appearances, this information should be clearly outlined in the contract so that you can make appropriate travel arrangements and include this in your schedule.

Step 5: Ask Your Attorney to Determine Whether or Not There Are Competing Endorsements

The more popular that you become as an athlete or celebrity, the more likely you are in demand for endorsement deals with numerous companies. Identify potential conflicts well before they arise.

If you have a pre-existing sponsorship or endorsement deal with somebody else that may continue after your new agreement takes place, you need to clarify these deals upfront and tell the new sponsor and your current sponsor about them. There is a good chance that your current endorsement agreement will prohibit you from entering into other sponsorship agreements with what the company would classify as direct competitors.