Sponsorship Agreement: When Is It Used And What Are The Key Terms To Include?
If you are organising an event, you may want to consider having a sponsorship agreement. Sponsorship agreements can offer an additional revenue stream and may assist in increasing your business exposure by allowing you to partner with well-known businesses.
On this page we’ll consider: what a sponsorship agreement is; what situations its used in; why you should have a sponsorship agreement; and the key terms to include in it.
What is a sponsorship agreement?
A sponsorship agreement is essentially a contract between the organiser of an event, brand or business, and the person/ entity promoting the event, brand or business.
What situations are sponsorship agreements used in?
Traditionally, sponsorship agreements were limited to circumstances when an event was taking place. With the rapid proliferation of social media, sponsorship agreements now cover the promotion of products beyond traditional media outlets (i.e. on Instagram, Tiktok etc).
Why have a sponsorship agreement?
A sponsorship agreement serves as your terms and conditions and outlines the rights and obligations of the contracting parties.
Having a sponsorship agreement will also serve to mitigate and manage risks that may arise with the sponsor. As such, it is important that all parties understand the nature of their legal obligations under the agreement.
What are some key terms of a sponsorship agreement?
Term
Your sponsorship agreement should outline the length of the agreement including whether there are any options for renewal and or applicable notice periods. The timeline of the agreement must be clear and transparent from the outset.
Exclusivity
You may also elect to place an exclusivity clause in the sponsorship agreement. Generally speaking, exclusivity clauses will favour the sponsor. Therefore, if you are the organiser, it is in your best interest to have non-exclusivity clauses to permit yourself under the agreement to have multiple sponsors.
Payment
It is important to clearly set out the sponsorship fee, including how payments will be made to the sponsor (i.e. whether in a lump sum or via instalments). Ensuring payment terms are clear is important to ensure the prevention of disputes arising in the future pertaining to payment.
Obligations / Benefits+
The obligations and benefits should be clearly written out in a sponsorship agreement.
This can include:
- placement of the sponsors logo on merchandise, signage etc;
- that the organiser agrees to promote the sponsor where it can;
- that the organiser agrees not to disparage the sponsor;
- that the organiser agrees to use the sponsors logos in certain ways; and
- that the sponsor agrees to promote the brand, event etc.
Some other benefits may include access to certain events or online portals.
Intellectual Property (“IP”)
It is generally the case that sponsorship agreements require the use of certain intellectual property by another party. Generally, this can include the use of unregistered/registered trade marks and copyrighted material.
It is vital that the agreement include terms about the use of such material, and that the organiser or sponsor is only providing the other party with a licence to use that IP for a specific purpose. It is also important to note that the owner of the IP remains the owner, and that no assignment or transfer in ownership occurs by reason of entering into the sponsorship agreement.
Termination
As with any contract, it is important to cover situations regarding termination and the obligations of either party flowing from termination. This can include payment of any money and return of any property. Termination clauses will also state the grounds for termination, the timeframes for termination, and the consequences of unilateral termination.
Liability
If there are events taking place pursuant to the sponsorship agreement, it is a good idea to have clauses in place to limit your liability. This is especially true if you are the organiser of the event, or if the event has potentially dangerous activities.
Key Takeaways
Sponsorship agreements can be a great resource for your business to gain additional revenue and publicity for your events.
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