A Brief Introduction About the Endorsement Contract
Endorsement agreement is a contract that allows the organization to use a celebrity’s name, likeness, and reputation to promote a product or service. Such a celebrity or endorser is a well-known personality within a given field. To promote the company’s product or service, an endorser gets compensation or fee. A celebrity endorsement contract explains the terms and conditions of the endorsement, including how an endorser can advertise or use the product or service. It even mentions other duties of the endorser like wearing clothes related to promoting the product, attending press releases, and acting in advertisements, etc. to promote the product or service in the right way.
Who Takes the Endorsement Contract?
People involved in an endorsement contract include the company that owns the product and the endorser or celebrity who promotes that product. The warranties or guarantees of both the company and the endorser are also clearly mentioned for future reference. During the term of the contract, the company agrees to provide the products as per the request of the endorser freely, as a part of the compensation.
Purpose of the Endorsement Contract
The primary purpose of the endorsement contract is to promote the company’s product or service using the famous figures in the industry. Such an endorsement agreement comes with a moral clause to control the harmful activity of the endorser, which will reflect the adverse effects on the brand or product. Such an ethical provision will strictly prohibit some of the negative behaviors in the personal life of the endorser, such as sexual acts, drug use, scandal, or public disgrace. Moral clauses are used when the endorser is an actor, actress, celebrity figure, or sports figure. Thus basically, the endorsement deals are either to be sports endorsement contracts or celebrity endorsement contracts.
Contents of the Endorsement Contract
When you look at any endorsement contract sample, it is either to sports or celebrities, here we will see briefly about them. When it comes to sports endorsement, the contract covers the significant elements to be agreed upon by the brand or company, athlete, and their counsel. Sports endorsement contratct includes the various clauses such as public appearance clause, exclusivity clause, and compensation clause. All such provisions expect certain activities of the athletes till the contract terminates.
When the company is related to the sport’s products or services, then they will use famous sports figures to promote such a product. For which the company provides various compensations to the celebrity like base compensation, bonus compensation, etc. Sometimes the company will select a particular sports team of having more winning chances and provides sponsorship, for which the organization signs the sports sponsorship agreement. Similarly, there are many other categories of endorsement.
The next thing is the celebrity endorsement. One of the most successful ways of promoting a product or service is celebrity endorsement. Because the company chooses a famous figure or celebrity, who has an established fan following or fan clubs etc. Sometimes social media influencers degrade your promotion. To solve such hassle, the company also looks at whether the celebrity is famous in social media too. With the popularity of social media, other mediums such as television and print media are not much capable of promoting any product. Because of this, a famous social media celebrity is used to promote any product through his/her tweets and posts. While contracting with stars to endorse a company’s brand, celebrities will consult the lawyer to get some assistance about the agreement related to his/her restrictions pointed in the contract.
Points to Consider Before Signing the Endorsement Contract
When an athlete agrees to sign the athlete endorsement agreement, he/she should understand certain factors before signing the contract. The first thing is to make sure that you know the given compensation plan by the company or brand, such as fixed fees, royalties, and additional incentives. The next important thing is to look at the moral clauses to know about your restrictions. It is always better to consult an experienced attorney to eliminate any issues in endorsement contracts. When it comes to celebrity contracts, the celebrity should check the various facts. The first thing that the celebrity should understand is about the obligations which need the celebrity not to wear, promote, or use competitor products or services. The next point is related to your termination rights when the celebrity finds damaging his/her image due to the product’s promotion. Likewise, the endorser has to check many things before signing the endorsement agreement. Another crucial thing to note for athletes is that the agreement involves some active promotional activity requiring insurance. In such a situation, athletes should understand the insurance endorsement definition and can ask the brand for additional pay or insurance.
Negotiation Strategy
When it comes to athlete endorsement contracts, the athlete can try to negotiate bonuses or higher fees due to his/her popularity factors. Athletes can also negotiate the company or brand to use for other third-parties products for personal use when his/her sponsorship products don’t meet his requirements.
Benefits & Drawbacks of the Endorsement Contract
Pros:
- A product endorsement using famous figures will help your brand to stand out from others.
- Such an agreement gives you the opportunity for new markets to your business.
- A product endorsement helps to build brand credibility.
- A product endorsement acts like a trigger for customers to buy your product.
Cons:
- It is expensive to hire an endorser to promote your product.
- A good endorsement never fixes the fault of bad products.
[Also Read: Influencer Contract]
What Happens in Case of Violation?
Both parties have mutual rights to terminate the agreement. When the company fails to meet the contract terms, the endorser has the right to terminate the agreement or even file a case against the company. Similarly, the company can impose laws on an endorser when he/she violates the terms of the contract.
When you are dealing with the endorsement contarct, it is recommended to hire an attorney by both parties to avoid any disputes in the future due to a violation of terms of the contract. An endorser needs to read and understand the terms and conditions mentioned in the agreement clearly before signing the contract. Get the assistance of an experienced attorney to decide whether to enter the endorsement contract or not.