Sports Law: A Detailed Analysis of Sponsorship Agreements and Clauses

This report provides a comprehensive analysis of sponsorship agreements within the realm of sports law. It begins with an introduction to sponsorship agreements, explaining their significance as contracts that define the relationship between sponsors and other parties, such as athletes or event organizers. The report then delves into specific clauses essential for a well-drafted sponsorship agreement. Key clauses discussed include parties involved, the term of the agreement, renewal options, termination clauses, and the calculation and timing of sponsorship fees. It also covers crucial aspects like warranties, obligations and rights of each party, force majeure, liability and indemnity, and exclusivity provisions. The report further examines the implications of potential scenarios, such as a competing company attempting to sponsor an event, and the consequences of breaching exclusivity clauses. The conclusion emphasizes the importance of including these clauses to avoid disputes and ensure clarity regarding the rights and obligations of all parties involved. The report uses references to support its arguments and provides a practical overview of the key considerations for creating effective sponsorship agreements in the sports industry.

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Sports Law
Report
01-Mar-18
(Student Details: )

Sports Law
Executive Summary
Sponsorship agreement is a crucial part of sport law. Sponsorship agreement is basically a
contract which details on the arrangement of sponsorship agreement between the sponsor and the
other party. This report highlights the different clauses which have to be provided under the
present contract with Sport England. Each of the clauses would be detailed in this report and the
scenario where the other energy drinks manufacturer attempts to indulge in a sponsorship
agreement for the Youth Games is also detailed.
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Contents
Introduction......................................................................................................................................4
Specific Clauses...............................................................................................................................4
Parties..........................................................................................................................................5
Term.............................................................................................................................................5
Renewal option............................................................................................................................5
Termination..................................................................................................................................5
Sponsorship Fees.........................................................................................................................6
Warranties....................................................................................................................................6
Obligations and rights of parties..................................................................................................7
Force Majeure..............................................................................................................................7
Liability and Indemnity...............................................................................................................8
Exclusivity...................................................................................................................................8
Potential Implications......................................................................................................................8
Conclusion.......................................................................................................................................9
References......................................................................................................................................10
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Introduction
Sponsorship agreement governs the lawful relation which is present between a person and the
sponsor, where the person is entitled to get the sponsorship obligations enforced (UCL, 2018).
This person can be an individual athlete, organizer of event attracting sponsorship, or the owner
of location which is being sponsored. The sponsorship agreement covers a number of terms and
conditions for the services, in return of a fee being paid. These terms and conditions give
different rights to the parties, and also attract penalties for the parties. Owing to these reasons, it
is crucial that the sponsorship agreement is carefully drafted, and all the important terms are
included in the sponsorship agreement (In Brief, 2018).
This report aims to highlight the clauses which have to be included in the draft sponsorship
agreement, particularly for the new sports event, where the firm enters into sponsorship
agreement with Sport England. Along with this, the potential implications of another drink
manufacturer involved in sponsoring the Games on this sponsorship agreement with Sport
England would also be highlighted.
Specific Clauses
It is crucial that the sponsorship agreement is drafted carefully, and that all the terms are stated in
a clear manner. This is important not only to avoid ambiguity from taking place in the
sponsorship agreement, but also to avoid any dispute arising from such ambiguity (Sims, 2011).
Some of the crucial clauses which have to be included in the sponsorship agreement have been
covered here.
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Parties
The first requirement is for the sponsorship agreement to identify the parties to the agreement
and this also has to include the details of additional parties, who can be required to deliver the
rights of sponsorship, for instance, the name or logo (Morton Fraser Solicitors, 2018).
Term
The parties need to negotiate on the term or the length for which the sponsorship would be
undertaken. The standard here is to provide a fixed term, where the parties are obligated through
the contract, to undertake their obligations.
Renewal option
There is a need to include a renewal option or state that renewal is not possible. This is necessary
for the parties to be clear on the possible extension of the sponsorship agreement. This renewal is
often subjected to the consent of all the parties of the contract, and could be based on meeting of
certain targets, like winning promotions. The sponsorship agreement could also provide that
where the sponsor does not extend the sponsorship till a specified time period, then the other
party has the option of speaking to other sponsors before expiration of the term (Rosenbaum,
2018).
Termination
Where the sponsorship agreement is created for a considerably long period of time, it is often
deemed as appropriate to include a break clause, which gives the parties the opportunity to
terminate the sponsorship agreement in a legitimate manner. The sponsorship agreement has to
provide the grounds on which the agreement could be terminated. The examples of this could
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include the changed control in ownership of sponsor or late payment of sponsored money. The
sponsorship agreement should also provide on what would take place once the termination
happens. There is also a need to state clearly on what would happen to the balance of unpaid
sponsorship fees, where there is a breach by the party. There is also the need of clearly stating
the contingency arrangements.
Sponsorship Fees
It is crucial that the sponsorship fee is calculated before any written agreement is undertaken.
This fee could be a fixed amount or could be based on different parameters. The timing of
sponsorship fee also needs to be clarified; for instance, whether it would be paid in instalments
or whether it would be paid as a lump sum in advance (EMAP, 2017). There is also the need of
clearly stating the provisions related to reduction or provisions of sponsorship fee. The
arrangements could be made fee based or payment in kind based.
Warranties
The warranties also have to be clearly mentioned. For instance, the right holder could warrant
that it could bind the team members and clubs, has the necessary insurances, has the rights of
using the intellectual property rights, and would not subject to any commercial arrangement
which would conflict with the spirit of this agreement. The warranty could also be related to
minimum coverage of event where broadcasting arrangement, or for an event related to the
agreed venue and date (Lindsay, 2016).
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Obligations and rights of parties
It is crucial that both the parties of the sponsorship agreement follow the law, refrain from
making any kind of disparaging or disrespectful remarks regarding the other party, and to
safeguard the intellectual property provided by the other party, along with following the
restrictions or limitations on the use of such intellectual property. There is also a need for the
professional approach to be adopted, and such behaviour which has the potential of harming the
reputation of the sponsors or the brand, is avoided. The rights of advertising also need to be
clearly provided, along with the right of accessing the database of event organizer, the right of
using audio-visuals and photos of games, and the intellectual property rights.
Force Majeure
Under the legal terminology, force majeure clause helps in protecting the party from liability
where something unpredictable or unanticipated event takes place, which was beyond the control
of parties, and which prevents the parties from undertaking the contractual obligations. Even
though this is a standard clause in sponsorship agreements, it is crucial that the parties gain an
understanding on which events would be covered under this clause. For instance, a sponsoring
party had been under contractual obligation to deliver certain merchandise by a particular date.
However, this could not be done owing to the fire at warehouse. One could expect that the force
majeure clause would be applied in this case. Though, where such happens that the delivery
could not take place as the staff had been terminated, would not lead to application of force
majeure clause as this cannot be deemed as an unforeseen event. It is also crucial that this clause
is negotiated to cover all the compliances with the regulatory requirements. One clause which
could be inserted in this clause is to provide extension of time to the other party for fulfilling
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their obligations under the sponsorship agreement. This requires consideration of how long the
extension would be given for.
Liability and Indemnity
There is a need t o be aware of fact that the sponsorship agreement cannot exclude the liability
for personal injury and death. Though, they can work on excluding the liability for loss of profits
or indirect loss on part of sponsor. It is also recommended to cap the liability or to take public
liability insurance.
Exclusivity
It is crucial that the terms related to exclusivity are clear stated. This is both in relation to the
product category and the territory. The event organizer should clear provide that they would not
grant sponsorship to the competitors. They should also specify that they would not grant
sponsorship in a particular territory (Smith, Cave and Brezine, 2011).
Potential Implications
In such case, where it happens that that another drink manufacturer expresses their interest in
sponsoring of the game with Sport England, there is a need for Sport England to decline such
interest. Where this is not done, and the interest of another drink manufacturer is accepted by
Sport England, they can be sued for a breach of contract. This is because the sponsorship
agreement is a contract, and it clearly provided for exclusivity, where the company could be the
only drinks manufacturer who could sponsor the game. Breaching the exclusivity clause by Sport
England would allow a claim to be raised against them for such breach, which would allow for
monetary compensation to be awarded to the company. Where such instance happens, the
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sponsorship agreement could also be terminated, where such a clause had been provided under
the sponsorship agreement in the first place. However, where the exclusivity clause was not
present in the sponsorship agreement, these rights would be difficult to establish, as there would
be a lack of clarity on whether such arrangements could be undertaken or not.
Conclusion
Thus, from the discussion undertaken in the previous segments, it can be concluded that the
aforementioned terms are crucial and these have to be included in the sponsorship agreement in
order to be clear on what the rights of the parties are, along with their obligations. This was
elucidated through the scenario discussed above, where the sponsorship rights were given to
another company. In such a case, where the exclusivity clause is not provided, the company
would not get rights. Thus, it is important that the terms like exclusivity, and to include terms
like force majeure, rights, warranties, sponsorship fees, termination clauses, and the other clauses
highlighted above. Where each and every clause is stated clearly, the chances of a dispute being
raised can be avoided, as the parties can refer to the clause in the agreement to resolve the issue.
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References
EMAP. (2017) Events Sponsorship Terms and Conditions. [Online] Available from:
https://www.emap.com/events-sponsorship-terms-and-conditions [Accessed 01/03/18]
In Brief. (2018) Sponsorship Agreements in Sport. [Online] Available from:
https://www.inbrief.co.uk/sports-law/sponsorship-agreements-in-sport/ [Accessed 01/03/18]
Lindsay, R. (2016) Ad Law: The Essential Guide to Advertising Law and Regulation. London:
Kogan Page Publishers.
Morton Fraser Solicitors. (2018) Sponsorship Agreements – Key points to consider. [Online]
Available from: http://www.rya.org.uk/SiteCollectionDocuments/scotland/representation/FINAL
%20Sponsorship%20Agree%20factsheet.pdf [Accessed 01/03/18]
Rosenbaum, A. (2011) 15 Sep Key Points To Negotiating A Successful Sponsorship Agreement.
[Online] Available from: http://www.rosenbaumlawgrp.com/business/key-points-negotiating-
successful-sponsorship-agreement/ [Accessed 01/03/18]
Sims, B. (2011) Sports Sponsorship. Worcestershire: Icon Publishing Limited.
Smith, S.B., Cave, B., and Brezine, A. (2011) Top Ten Issues in Sponsorship and Licensing
Agreements That Are Most Likely to Lead to Disputes and Litigation. [Online] Available from:
http://www.acc.com/legalresources/publications/topten/sla.cfm [Accessed 01/03/18]
UCL. (2018) Sponsorship Agreements. [Online] Available from:
http://studentsunionucl.org/clubs-societies/resources/clubs-societies-forms/sponsorship-
agreements [Accessed 01/03/18]
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