A good endorsement deal needs an even better morality clause

In the world of digital marketing, high profile individuals with a social media following can increase a brand’s exposure and ultimately their sales through a personal endorsement.

You only need to look as far as Emma Raducanu’s recent tennis triumph in the US Open to understand the lengths brands are willing to go to, to ensure that high profile individuals will endorse their products and services.  It is understood that the teenage sensation has already entered into various endorsement agreements, most notably becoming Tiffany & Co’ s brand ambassador. Read our article Naomi Osaka – Game. Set. (post) Match! Are we improving?

However, whilst personal endorsements can increase sales and exposure for a brand, they can also tarnish the reputation of that brand, if the right individual is not chosen. For example, it is reported that Jamie Oliver’s contract to advertise Sainsbury’s made the supermarket chain an extra £100 million per year during 2000-2009. On the other side of the scale, allegations of infidelity surrounding Tiger Woods in 2009 wiped an estimated £3 billion off the market value of his leading corporate sponsors.

What is a morality clause?

A morality clause is a provision contained within a contract which curtails, restrains or proscribes certain behaviours of individuals or parties to that contract.

The clause often describes activities an individual is prohibited from doing – such as committing criminal offences, taking part in anti-religious activities, or taking illegal drugs. This approach ensures that there is a degree of certainty to both the individual and the brand owner because it is clearer as to whether or not particular behaviour is permitted.

With the rapid rise in forms of social media platforms as well as forms of engagements, the speed of information distribution has imposed a much more strict and enhanced scrutiny on the personal life and views of the high-profile individuals, be it an actor/actress, celebrity or sports figure, thereby making morality clauses more common.

Are morality clauses worth the paper they’re written on?

As with all contractual clauses, the drafting of the clause is crucial in determining whether or not you can rely on it. A vague, open-ended clause can lead to ambiguity in its interpretation. But a strict, neatly defined clause, could restrict the circumstances under which you are able to rely on it.

One difficulty with drafting a morality clause is the question of timing. A story that an individual has been involved in a criminal offence might do damage to a brand or campaign long before the individual is convicted of the offence in question, but the individual is likely to want the contract to treat them as innocent until proven guilty (and so, they will want paying for their endorsements during the trial period).

Another issue with drafting morality clauses is that it is impossible to predict all the ways in which a person’s behaviour may negatively impact a brand. It has therefore becoming increasingly common for parties to refer to specific behaviours with wider, more general clauses that prevent the individual from acting in a way which reflects (or could reflect) negatively on a brand.  Brand owners often incorporate broad concepts, such as actions which will ‘devalue the brand’ but this, sometimes is difficult to prove in practice due to the subjectivity of determining whether an act is moral or not.

How to draft a suitable clause

When contemplating the scope a morality clause it is of paramount importance for clarity to be sought.  For the individual, the concern is that a brand owner might make opportunistic use of a widely drafted clause to exit a contract that, for reasons unconnected with the individual’s behaviour, the brand owner no longer sees as advantageous.  On the flip side, the brand owner wants to protect its interests should an individual’s behaviour fall foul of the standard held in the agreement.

A good morality clause will cover the following:

• list of prohibited behaviours;
• clear timings on when the behaviour is deemed as breach of contract (e.g. at the moment it first becomes public knowledge or, once the individual is proven guilty);
• an option to withhold or suspend endorsement payments during trial periods;
• an option to terminate the agreement, on immediate notice, in the event that it is suspected or proven that the individual has taken part in a prohibited activity; and
• (depending in who’s favour the clause is drafted) a threshold before the right to terminate is triggered – for example material damage to reputation or material effect on the value of the rights granted under the agreement.

Ultimately, the bargaining power of the parties will often determine the scope of the morality clause in an endorsement agreement and typically, individuals in a strong bargaining position are often successful in obtaining very narrow clauses.

Should you require any assistance with reviewing or drafting endorsement agreements and/or morality clauses, please get in touch with the Commercial Team.