What is a Sponsorship Agreement?
A sponsorship agreement is a contract, often in writing, between the sponsor and the event owner or beneficiary. This agreement sets forth the terms relating to the amount of money or other consideration provided by the sponsor to the beneficiary and what the sponsor receives in return for its money. Typically, a sponsorship agreement is used to establish the rights and responsibilities of the sponsor (which may be a business, individual, or club) and the beneficiary (which may be an individual, group, or corporation) in connection with the sponsorship relationship. A sponsorship agreement generally defines the sponsorship period, payment terms, benefits to be afforded the sponsor, any performance standards, and termination rights, among other matters.
The purpose of a sponsorship agreement is to provide legal certainty for the parties to it—the result of any negotiation and drafting, and the consent of the parties to its terms and conditions. In addition , it protects the sponsor’s investment in pursuing sponsorship and gives the party benefitting from the sponsorship the certainty and confidence that the sponsor’s contribution will be forthcoming.
Sponsorship agreements are used in many industries, such as sports, fine art, the arts, charitable, and intellectual property. Sponsorships of sporting competitions, e.g., cycling events, marathons, and motor sports events, are generally defined by detailed agreements among the sponsors and the beneficiary in the field of sports, i.e., a professional team, organization, or league, and the sports organization. Sponsorship of sporting competitions and events, e.g., marathons, cycling events, and motor sports events, can be understood as a distinct form of sponsorship. And the sponsorship of certain intellectual property, such as celebrities, may well be seen as intellectual property licensing.
Key Elements in a Sponsorship Agreement
Parties Involved: The agreement should identify the people or entities involved in the sponsorship, including the sponsor and the one being sponsored.
Scope of Sponsorship: This part outlines what the sponsor is getting in return for their investment, such as brand placements or advertising at an event.
Financial Considerations: This section states how much money is changing hands, the payment schedule, and any additional financial obligations for either party.
Obligations and Responsibilities: What exactly both parties are responsible for before, during, and after the sponsorship is critical to include.
Term: The sponsored event or activity should have a specific duration.
Termination and Extensions: Under what circumstances can the deal be terminated early? Conversely, how can the deal be extended?
Working With Sponsorship Agreements: Things to Keep In Mind
Given the extent to which sponsorship agreements govern the relationship between the parties, including pricing and performance, they should be drafted with care and attention, particularly with respect to: Mutuality of obligations. Both parties should be made equally responsible for the implementation of the sponsorship agreement. This will include establishing obligations of the sponsor as well as obligations of the sponsored party. Common pitfalls of sponsorship agreements include (with examples): Technical terms. Even though generally understood in the sports and entertainment industries, technical terms such as "exclusive," "signage," "print," "broadcast" and/or the use of a trademark require appropriate definition in the agreement. One-sided indemnification. Although such indemnities are not uncommon in sponsorship agreements, the indemnification obligations running from the sponsor to the sponsored party are often one-sided when these agreements should allocate similar obligations to both parties to indemnify the other. Ambiguous time periods. It is important to make the timing obligations of the parties clear and precise so as to avoid disputes over material terms of the agreement as well as unintentional termination rights of the sponsor. These and other drafting tips should be taken into account when preparing a sponsorship agreement in order be clear and enforceable.
Sample Sponsorship Agreement Templates
Sponsorship agreement templates are readily available for any type of sponsorship need. When you search for a free sponsorship agreement, you’re often given a template to help you draft the agreement. Some of these templates even include commentary to help you understand the purpose of each clause in the agreement.
Intermediaries have taken sponsorship agreements – all variations – and posted them online for mass use. Some of these agreement templates have blank spaces between sections. Intermediaries suggest that you fill in the blank spaces with details about the sponsorship deal. In fact, the intermediary’s revenue model depends on you using a template from their website and posting ads. After all, the intermediary does not post advertisements on their website for free without a revenue model in place.
The easiest way to find a free sponsorship agreement template is to search for a free sponsorship example . With this type of search, you will be offered dozens of examples for every imaginable type of sponsorship relationship. For instance, one example of a sponsorship agreement template is a sponsorship agreement for sponsorship of a ski hill. Another example is how to set up a sponsorship agreement with your academic institution.
In both cases, you are offered a simple template for a legal agreement. The template looks exactly like any other contract or agreement. You will be shown a series of numbered paragraphs covering all aspects of a typical agreement of that kind. You are not left to create your own agreement from scratch.
Regardless of the type of sponsorship agreement you need, some form of agreement will be available online for you. It does take some research, but finding a good sponsorship agreement template is simple enough.
Other Legal Issues Related to Sponsorship Agreements
Beyond the sponsorship fees, there are several legal considerations that must be kept in mind when entering into a sponsorship agreement. For instance, one of the most contentious issues between sponsors and sponsored entities is intellectual property rights. For sponsored entities, the sale of sponsorship rights may often be their most lucrative or only source of revenue. On the other hand, sponsors may wish to secure their own intellectual property rights for promotional and marketing purposes, such as clothing, cups, caps, equipment, bags, lunch boxes, key chains, lapel pins, tote bags, and other merchandise related to the sponsorship rights they have purchased. However, in the event the sponsored entity has licensed its own intellectual property or third parties have acquired exclusive licensable intellectual property rights, it could be problematic for the sponsor to exploit its own derivative products based upon third party’s intellectual property, which the sponsor may not have been aware it was acquired under the sponsored entity’s agreement with third parties at the time of the sponsorship agreement.
Termination clauses are often points of contention in sponsorship agreements. Some agreements never sufficiently address what events would give rise to a sponsor’s ability to terminate an agreement or what events would exclude a sponsor’s right to terminate an agreement. A sponsor may wish to terminate an agreement if, for instance, the sponsored entity become insolvent, files for bankruptcy, suffers a loss of revenues, commits a material breach of the sponsorship agreement, the sponsored entity commits an act or default that will materially and substantially impair the reputation or goodwill of the sponsor, or the sponsored entity does not obtain professional liability insurance.
Dispute resolution clauses should be clearly addressed, particularly the venue for any potential litigation. Either party may desire to keep potential claims related to the agreement outside the court system. Dispute resolution clauses often address which party has the legal right to initiate a declaratory judgment action to resolve the narrow question of whether one party has breached the contract or simply make an argument that the sponsor’s materials do not infringe on one or more trademarks owned by the sponsored entity. Dispute resolution clauses may specify that the resolution of any potential action, dispute or controversy arising out of or relating to any aspects of the sponsorship agreement shall be governed by the laws of the state where the sponsored event is located. Another dispute resolution clause may provide, "the Sponsor and the Sponsored Event Organizer agree that any dispute arising out of this Agreement in any manner related to the subject matter or a breach of this Agreement shall be submitted exclusively and finally to the American Arbitration Association’s resolution dispute process.
Sponsorship Agreement Case Studies
To better illustrate how sponsorship agreements work in practice, consider the following case studies.
Case Study 1: Charity-Attorney Sponsorship
A county bar association sought to increase its pro bono opportunities for its members. To do so, it co-sponsored a local charity’s annual event. The agreement between the bar association and the charity outlined each group’s roles, responsibilities, and benefit in the sponsorship. As a result, the bar association had greater visibility, the charity had increased awareness of pro bono services, and more attorneys signed up to offer their services.
Case Study 2: Business-Nonprofit Sponsorship
A local restaurant offered to host a charity fundraiser. Not only did the restaurant agree to host the event, but they also provided food and decorations, and offered sponsorship of the charity’s marketing materials. As part of the sponsorship agreement , the charity agreed to publicize the restaurant’s involvement in their social media channels and in all event-related media. This created a win-win situation for both parties; the charity had an easy venue to host their event and the restaurant was able to benefit from the publicity.
Case Study 3: Youth Sports Organization-Corporate Sponsorship
A local youth soccer organization was searching for ways to increase sponsorship dollars to keep the program running. A local bank agreed to sponsor the organization, offering signage on the soccer fields, advertisement in the program booklet at games, and a table at their annual banquet. In exchange, the youth soccer organization would include the bank’s commercials in the soccer fields’ digital video boards and allow them to place marketing brochures in all of their correspondence. The youth soccer organization did not have to pay their players to sign up, as these sponsors underwrote their program costs.
What all of these case studies have in common is that they all had a solid foundation built on a well-written sponsorship agreement. By ensuring that the details are agreed upon and followed, everyone walks away happy. This is the key to drafting a great sponsorship agreement.