These days, athletes will often earn more money through sponsorships than prize winnings from competitions. In 2019, Roger Federer earnt $7.4 million from competition winnings and an additional $86 million in sponsorships. If you are an athlete looking to receive sponsorship, it is crucial that you have an understanding of what to look out for in a sponsorship agreement. This article will explain the key things that you need to consider when signing a sponsorship agreement.

What Is a Sponsorship Agreement?

Sponsorship arrangements are used in a range of different fields but are prevalent within the sporting industry.

An example of a sponsorship arrangement is where a golfer is sponsored by a company such as Titleist to wear its apparel when competing in tournaments.

A sponsorship differs slightly from an endorsement. An endorsement is where a company engages someone to endorse their products or services. 

For example, George Clooney is an endorser of Nespresso as he actively promotes their products. 

Under a sponsorship agreement, you will not necessarily be required to endorse the sponsor’s products. Using the above example, while the golfer may be required to wear Titleist branded clothing, they will not need to upload posts on social media recommending Titleist’s clothing.

Rights and Obligations Under a Sponsorship Agreement 

A sponsorship agreement is a contract that sets out the rights and obligations of a sportsperson and their sponsor. 

This table sets out what your rights and obligations will generally be under this agreement.

 

Right/Obligation

Meaning

Sponsorship Fee

You will usually be entitled to receive payment for the sponsorship.

Use of the Products

You will generally be entitled to use specific products provided by the sponsor, free of charge. 

Appearances at Events

You may have to appear at promotional events, like product launches and advertisements. 

Promotion 

You will generally have to promote the sponsor’s products not to do anything that could affect the sponsor’s brand or reputation.

Other Benefits 

You may be entitled to other benefits, like bonuses or commissions on sales.

Key Clauses to Be Aware Of

We have set out below some of the key clauses to be conscious of when considering a sponsorship agreement that you may have received from a sponsor.

Exclusivity

Exclusivity is an important consideration in these agreements. Under exclusivity clauses, you may not be able to sponsor any competitors of the brand.

Using the earlier example, Titleist may want to be the only sponsor of golfing apparel for a particular golfer. Here, an exclusivity clause would prevent the golfer from working with another brand, like Nike.

Obligations 

It is crucial for you to properly understand what you are required to do under the sponsorship agreement. When reading over the agreement, consider whether you:

  • will have to use the sponsor’s products at particular events or tournaments;
  • are prevented from using a competitor’s products; and
  • have an obligation not to say anything that could damage the reputation of your sponsor.

Termination

It is important to review the sponsorship agreement to see if the sponsor has the right to terminate the agreement if you breach any of the clauses.

If you are misusing the sponsor’s product or engaging in conduct that could steer customers away from the sponsor’s products, sponsors may want to end the business relationship.

Similarly, you should check to see if you have any rights to terminate the sponsorship agreement if the sponsor breaches agreement or you no longer want to be associated with the brand.

Sponsorship Fee

If the sponsor has agreed to pay a fee to you, you will need to check how the fee is calculated and when they need to pay it. 

You should also check if there are any other perks or benefits of the sponsorship. Ideally, the sponsor would have obligations to provide you with their products at various times. But, you may also be entitled to discounts on the sponsor’s other products or services.

Term

You will also need to consider how long the sponsorship runs. 

If you are an emerging talent, the sponsor may want to lock you into a long term sponsorship. While this may seem beneficial for you, you should check if you can increase the sponsorship fee down the line.

Intellectual Property

If you are required to post on social media about the sponsor’s products or services, you will want to ensure you are granted a licence to use the sponsor’s intellectual property for these purposes.

Key Takeaways

Being offered a sponsorship is an exciting prospect and a great way of boosting your career and income. A properly drafted and reasonable sponsorship agreement should benefit both you and your sponsor. It is important, however, that you properly understand the rights and obligations that you and the sponsor have under the agreement. If you have any questions or if you would like a lawyer to review a sponsorship agreement for you, get in touch with LegalVision’s contracts lawyers on 1300 544 755 or fill out the form on this page.

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.
Robert Nay

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