When well structured, a sponsorship agreement can be a great arrangement where both parties benefit: visibility for the sponsor, and material or financial support for the sponsored party. To ensure this relationship is fruitful and fair, certain points must be clearly defined in your agreement. Here are five essential elements to address in your sponsorship agreement.
Please note this blog post is for informational purposes only and does not constitute formal legal advice. If you have any questions about sponsorship agreements, feel free to contact us!
1. Visibility Granted to the Sponsor
Visibility is at the heart of every sponsorship agreement. It is therefore crucial to define precisely what this visibility will consist of. For example: on which platforms will the sponsor appear? Posters? Banners? Social media posts? Will the visibility granted be equivalent to that of other sponsors? Will there be additional benefits such as a shout-out in a dedicated podcast segment? How long will that segment be? Precision is key.
2. Exclusivity
Exclusivity is often a major consideration for sponsors seeking to maximize the impact of their involvement. If a sponsor requests exclusivity and you agree to grant it, it’s important to clearly define its scope in the sponsorship agreement. Does it relate to certain services or products? A particular industry? A specific territory? For how long?
If exclusivity is granted, it’s also crucial to review any prior agreements with other sponsors to ensure there’s no overlap.
3. Compensation
How will the sponsor pay for the visibility you’re providing? Will it be a monetary contribution, an exchange of goods or services (in-kind sponsorship), or perhaps a hybrid model? In the case of in-kind sponsorship, it’s essential to detail the goods or services provided and their equivalent market value.
It’s also possible to structure part of the compensation around visibility objectives. In such cases, clearly define the performance indicators and the tools that will be used to measure them.
Once compensation is agreed upon, determine the payment terms. Will it be a lump-sum payment or multiple installments? What are the deadlines and conditions for each payment? If interest fees apply in the event of late payment, they must be explicitly included in the agreement, along with the applicable annual rate.
4. Intellectual Property Rights
A sponsorship agreement may involve each party’s intellectual property rights.
For instance, providing visibility to the sponsor typically involves using their IP assets (name, logo, slogan, etc.). It’s therefore necessary to obtain the rights for such use and outline the related conditions (duration, format requirements, media, territory, etc.).
Conversely, the sponsor may wish to use content created by the sponsored party to promote the sponsorship (event videos, photos, etc.). As with the sponsor’s IP assets, specific terms must be agreed upon.
5. Morality Clauses
Morality clauses are increasingly common in sponsorship contracts. These clauses aim to protect one party from actions by the other party that could harm their public image, by clearly identifying the types of behavior or situations that could justify termination of the agreement.
What kinds of conduct constitute a breach of this clause? Illegal behavior? Discriminatory comments? Media scandals? Criminal convictions? Other actions likely to damage the other party’s reputation? When is such conduct considered problematic — only during the term of the agreement, or does it also include prior actions discovered during the relationship?
What are the consequences of a breach? Immediate termination of the contract? Financial penalties? What steps should be taken if an allegation is made?
Keep in mind that morality clauses can be mutual. A sponsor may want to cut ties with an individual or entity whose reputation is damaged — but the reverse is also true.
If you have questions about sponsorship agreements or need help drafting or reviewing one, don’t hesitate to reach out!
