What is a sponsorship agreement?
A sponsorship agreement is a contract governing the legal relationship between the sponsor and the individual, a team or event organiser being sponsored. The sponsored person or organisation is entitled to the benefits under the sponsorship agreement, but must also keep to the conditions of the agreement.
Sponsorship Agreements in Sport
What are the common kinds of sports sponsorship agreements?
Sports sponsorship is big business: it gives the individual the funding they require to participate in their sport, and provides numerous diverse opportunities for the sponsoring company to get their product name seen by potential customers. The bigger the sporting name, the greater the financial rewards to both parties.
The kinds of sponsorship in sport are as follows:
Sponsorship of individual sporting teams: the name of a corporate sponsor will commonly appear on the front of the team shirt. This will be the main sponsorship agreement for a particular sporting team, but there will also be subsidiary sponsorship agreements in place. For example, billboards around the side of the pitch will typically advertise the names of companies who have sponsorship agreements in place with the individual team.
Sponsorship of governing bodies: some companies sponsor a sporting governing body, for example, Adidas is a sponsor of the world governing body of football – FIFA. This means that all FIFA clothing will be made by Adidas, and its logo appears on promotional material.
Sponsorship of events: a corporate sponsor may sponsor a specific event. For instance, smartphone maker Vivo isFIFA’s official smartphone sponsor under a sponsorship agreement which includes the 2018 and 2022FIFA World Cup, and the FIFA Confederations Cup.
Sponsorship of sportsmen and women: many individual players and athletes will attract different kinds of sponsorship. An individual footballer, for instance, will be provided by the sponsor – under the sponsorship agreement – with the required sports equipment, such as football boots and shirts (the tools of his trade).
What should a sponsorship agreement include?
Written formal agreement
Sport sponsorship agreements should be formalised in writing. A written agreement, recording all the terms and conditions agreed, will protect the interests of both the sponsor and the other party, provide certainty, and minimise the risk of a dispute.
For example, in a sponsorship agreement for an individual player or athlete, the sponsor may wish to terminate the contract if the behaviour of the individual being sponsored could damage the reputation of the sponsor. This is particularly important when a sports personality may be involved in a scandal away from the sporting arena which could ruin the family image of the brand sponsoring them. A written agreement setting out the expected standards of the individual, and the consequences of a breach, means the sponsor can act quickly if necessary.
The following should be included in every sponsorship agreement:
- The definition of the benefits accruing to the sponsor
- Variations in those benefits (particularly where there is a long-term arrangement)
- The payments due under the agreement
- Variations in those payments (again, this is particularly relevant where the arrangement is long-term)
- The circumstances in which the trademarks may be used
- The rights of the parties to terminate the agreement
A corporate sponsor of a sporting event will typically be given exclusive use of the trademarks and name marks associated with the event. The organiser of an event will have to undertake a full rights protection and enforcement programme to ensure that other companies are not infringing these rights by using the trademarks, or similar marks, which may lead the public to believe they are an official sponsor of the event.
Products provided by the sponsor
The sponsor will provide the event organiser or sponsored party with its products to be used by that event organiser/party. For example, FIFA sponsors, such as Vivo, will provide their products to be used by FIFA; and a sponsor of an individual athlete will provide them with footwear and other equipment.
What issues may arise out of sponsorship agreements?
Many issues can arise following sports sponsorship agreements, including ambush marketing and conflicts between sponsors. For example, a sporting goods company may sponsor a particular team, while a rival sporting goods company may have individual sponsorship agreements with the team’s players. There can be a conflict in these situations, for instance, whether or nota goal keeper’s gloves and head gear are tools of the trade, and therefore which corporate logo it should bear.
Exclusivity of contracts
Sponsorship agreements often provide exclusivity in relation to certain products. For example, MasterCard was an official sponsor of the 2006 World Cup tournament held in Germany, so if you wished to purchase tickets to the event – you could only use a MasterCard.
However, this received much criticism from a German consumer organisation. Consequently, many event organisers who have similar agreements with credit card provider sponsors, will allow other payment options to avoid falling foul of Article 81 EC prohibiting anti-competitive agreements.
Entitlement to renew the contract
As sponsorship agreements in the sporting industry will only last for a specified period of time (such as a specific number of seasons for a club or player, or for the 4-year cycle of the World Cup for a body such as FIFA), it is often preferable to include an entitlement to renew the contract. In some cases, this can lead to legal disputes. In one case, for instance, an injunction was granted by the court preventing the sporting governing body to switch to the competitor for a period of 8 years.