Elements of an Advertising Agreement: A Practical Approach with Samples

What Is an Advertising Agreement

An advertising contract is essentially a legally-binding agreement between advertisers and clients. Its main purpose is to allow for a mutually beneficial business transaction. Advertising contracts benefit all parties, providing a form of precise communication to create a cohesive bond. There is no room for actionable loopholes, which encourages advertisers and clients alike to further the agreed terms.
There are many components of an advertising contract, with its general form dependent on the specifics of the advertiser and the client. Generally, these important elements are: Scope of Work, Terms, Compensation, Schedule/Milestones, Reimbursements, Expenses, Confidentiality, and Termination.
So what is meant by the scope of work? The scope of work, or SOW, is basically an introduction to the projects that will be performed. An SOW sets the ground for the expectations of services that are to be provided moving forward. Most advertising contracts do not go into great detail, but general information can be included.
Terms, or contract terms , provide valuable information that both parties need to know. Terms provide relevant information on how to best follow the regulations set by the contract. Advertiser contract terms are used to identify the roles and responsibilities once the contract has been agreed upon. The terms also provide a formal explanation as to why the advertiser has proposed specific terms.
Compensation is probably one of the most important components of an advertising contract. Compensation is simply the exchange of money for services provided. If the appropriate compensation is not received, the advertiser is entitled to take the legal route. A solid advertising contract voids any surprises.
Time is money, and this phrase has never rung more true than when a schedule is a part of the contract. Schedules, or milestones, provide valuable information on deadlines for the advertiser. Additionally, schedules are used to keep track of milestones or objectives along the way. Having an advertising schedule helps the advertiser and client to stay in budget throughout the entire process.
Additional elements may be included when dealing with advertisements. Allowances, reimbursements, and expenses can also be elements in advertising contracts. Confidentiality also plays an important role within advertising contracts.

Elements of an Advertising Agreement

Advertising contracts, like any other agreement, serve to clarify the expectations and obligations of the involved parties. As is often the case, a person or company will agree to perform one task for another in exchange for compensation for their service. There are certain department store agreements that are not legally considered contracts because an element of consideration is lacking, but advertising contracts generally do satisfy the conditions necessary to create a reciprocal legal obligation, including consideration. Thus, the advertising contract has become one of the cornerstones of business relationships.
Not all advertising contracts are the same; however, there are some commonalities that can be used to help guide you as you draft your own or evaluate one that has been presented to you. The advertising contract will usually begin with a description of the parties involved. This will typically include at least their names and addresses, as well as what each of the contracted parties does for a living – e.g. graphic artist, web developer, content creator, writer, editor, etc.
Next, the contract should state the scope of work that will be performed. This can include broad strokes and descriptions, or a very detailed accounting of what will be done. This usually includes an accounting of how long the work will take to complete, what deliverables are expected, and when the process will end. The scope of work allows all parties to clearly define the obligations of and expectations for any given project.
Another important aspect of the advertising contract is the termination clause. This tells the parties how the contract may be terminated and who can initiate the process, including what notice they have to provide. The termination clause should also include some discussion of how matters are to be settled if the contract must be terminated prematurely.
Intellectual property rights also need to be addressed in an advertising contract. Copyright law reserves a large number of rights to the parties who develop or produce works of art, and this applies to graphic advertising as well. Unless otherwise stated, the contract may result in the parties’ intellectual property remaining with said parties, unless the property is specifically stated to belong to the company, individual, department or organization that commissioned its creation.

Terms Commonly Included in an Advertising Agreement

No advertising contract is complete without common legal clauses included to help protect performers hired to make or promote these materials. Here are some of the most common legal clauses you may see in your advertising contracts, along with what they mean.
Confidentiality Agreements
Some advertising contracts, particularly where you will be shown multiple advertisements or ads that look similar, require that you sign a confidentiality agreement. This clause means that you cannot disclose, including talking or posting on social media, any of the advertisements you are shown unless you get written permission from the company. It essentially acts as a non-compete agreement for advertising while not working on the ads.
Revision Process
These clauses allow for revisions to be made after the first draft is completed and require you to be given the opportunity to redraft the advertisement several times if need be.
Liability Clauses
If you are using copyrighted materials, creating advertising materials involving any subjects that may be litigious, or doing anything else that you could be potentially sued for, you want to pay attention to these clauses. This section of your advertising contract can be very strict and provide for severe penalties if something goes wrong.

Tips for Tailoring an Advertising Agreement to Suit Your Situation

In order for an advertising contract to be effective, it is important to use a template that is closely related to the specific circumstances and/or purpose of its use. For instance, advertising contracts can be used for different purposes in marketing campaigns: Based on what you would like to contract for, advertising contracts can be customized to fit your needs. Beyond using the templates or samples provided with this guide, you should consider how the following sections may affect the way you write an advertising contract: You may choose to include or omit sections with the template that was provided above in order to better meet your needs. Make sure that before you finally utilize any advertising contract, you have made a review to see that it meets your legal requirements and also suits your business needs. If there are arguments concerning the validity of your contract, it may be questioned if an individual had the opportunity to review it, if enough time was allotted for someone to review it, etc. (This is especially important if the individual is not being compensated for their time.)

Sample Advertising Agreement Template

AGREEMENT dated as of the ____ day of ________, 2000, between the undersigned (tags) ("Client") and the Arbitron Company, doing business as Radiate and Media Edge ("Company").
The Parties agree as follows:

1. Client agrees to insert, and posted on a Company Owned and Operated Station the attached []" X []" out of home advertising model multiline "tag" or "spot," attached hereto and made a part hereof as Schedule A (the "Multiline Tag") (collectively, the "Tags"), for the period of _________ (the "Contract Period"). The Client will post a total of _______ Tags, to be posted _____ for __________ ("Posting Rates").
2. Company agrees to:

(a) display the Tags during the Contract Period in accordance with the Posting Rates; and
(b) use reasonable efforts to deliver as many displays of the Tags as are commercially practicable within the Posting Rates.

3. Client agrees to pay Company the amount set forth below (the "Services Fee"), in full consideration for the display of the Tags during the Contract Period.

4. Client agrees to pay a production fee (the "Production Fee") in full and without offset by the following dates set forth below (the "Production Dates"). The Services Fees and the Production Fees are collectively referred to as the "Fees."

Amount Due: $___________
Payment Schedule: 50% of the contract amount due upon signing of this agreement. Remaining balance is due in equal 25% installments weekly at time of production start. Payments may be made by cash, check or credit card. If credit card payment is selected, account will be charged in equal amounts each week at time of production start. Payment processing fees will apply to all credit card payments, which will increase the total cost of the contract by approximately 3%.
5 . If the Client fails to make any installment or other payment required hereunder when due or is in default under any other provision hereof, Company shall have the right, at its option, without notice to the client, to suspend all further services until all delinquent payments have been received. Without limiting any other remedy it may have, Client agrees to pay to Company upon demand any and all reasonable expenses incurred by Company in collecting any delinquent amounts owed hereunder, including without limitation, court costs and reasonable outside attorneys’ fees.

6. Client hereby represents and warrants that the website and content to which the Tags direct consumers (i) are truthful and do not constitute a misleading business practice or false advertising under any applicable state, federal or local laws, regulations or prohibitions, and (ii) do not infringe upon the rights of any third party, including, without limitation, any copyright, trademark, service mark, patent or proprietary rights of any third party. In the event that the website to which the Tags direct customer is not maintained by the Client or thereafter becomes unavailable to consumers for any reason, the Client shall be responsible for promptly replacing the website with a replacement website that fulfills the requirements of this Agreement. If Company determines that the content of the Client’s website is not in compliance with these warranties, Company shall be entitled to terminate this Agreement and the Client shall forfeit any Fees paid to Company hereunder. Notwithstanding anything to the contrary herein, the Client hereby agrees to indemnify, defend and hold the Company harmless from and against any and all claims, liabilities, losses, suits, judgments, orders, damages, costs, expenses, or fees, including attorneys’ fees, of whatsoever nature, in each case arising out of or relating to a breach of Client’s representations, warranties or obligations hereunder, or any claim made against the Company by a third party based on, arising from or relating to an infringement or alleged infringement by the Client of any patent, copyright, trade secret, trademark, service mark, or any other proprietary or privacy right of any third party, or by any claim of defamation, product disparagement, negligence or strict liability.

Legal Issues and Considerations for Advertising Agreements

When creating an advertising contract, there are several legal considerations to keep in mind to ensure that the document is enforceable and protects the interests of both parties. First and foremost, any contract created must have a "meeting of the minds" – meaning that both parties understand and agree to the contract’s terms before signing.
In addition, the scope of the contract should be clearly defined, including what is to be advertised, where, when, and by whom. If the advertising is to be done by a third party, it should also specify any relevant details from the third party’s platform or template, such as image dimensions.
Both parties should also be aware of any applicable regulations or laws that could affect how they conduct their advertising. For example, if the ad will be shown on social media, there are specific guidelines that must be adhered to based on the social media network. If the ad will be shown on television, the Federal Communications Commission (FCC) has certain requirements that must be met. Consulting with an attorney who specializes in advertising, communication and/or intellectual property laws is recommended.
Ensuring that your advertising contract is clear and complete can help avoid litigation and protect both parties’ interests in the event of a dispute. Make sure that all parties involved are on the same page from the outset by taking the time to draft a detailed, transparent contract that takes into account all legal considerations and best practices.

Guidelines to Follow in Negotiating Advertising Agreements

Negotiating the terms of an advertising contract can be a complex process, but the right strategies can yield a favorable agreement. When approaching negotiations, it is important to remember that both parties must feel that they are getting something of value from the deal. This means that you should be prepared to compromise on certain points while standing firm on others.
One strategy for effective negotiation is to fully understand your own needs and what the other party may be looking for from the deal. For example, if you are negotiating with a company to feature their products in your blog , find out about their business goals and what they hope to gain from the collaboration. Use this information to craft an advertising contract that is beneficial to both parties.
Clearly communicating your expectations and being upfront about what you are willing to offer in exchange for advertising support can help keep the negotiations moving forward. Additionally, it is important to anticipate potential conflicts or points of contention, and address them as early in the process as possible. Having a strong, clear contract is vital for a successful advertising relationship, and can save both parties from future headaches.