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Whether you are looking at sponsoring your local junior sports club or an event, a sponsorship arrangement with a formal sponsorship agreement can be an exciting prospect. It can also be a great marketing tool for your business. A sponsorship arrangement can: 

  • develop your brand awareness; 
  • allow you to engage directly with potential customers; and
  • increase your sales. 

It is best practice to formalise any sponsorship arrangement between your business or company as the sponsor and the sponsored party (the sponsee). This should be done by having a well-drafted sponsorship agreement. This article will outline what a sponsorship arrangement is and some key terms to include in your sponsorship agreement. 

What is a Sponsorship Arrangement?

A sponsorship arrangement can be used in various industries but is common in the sporting industry. For many sports clubs, sponsorship can be the main source of financial support. Further, sponsors can significantly help clubs reach their goals. 

A sponsorship arrangement is a mutually beneficial business relationship between your business and the sports club. It can involve your business providing funds, resources or services to a sports club. In exchange, you receive rights and benefits with the club that can commercially assist your business. 

These rights and benefits may be in the form of: 

  • your business logo on the sports club’s jerseys; 
  • a sign of your business at their home ground field; or 
  • free advertising in newsletters and media coverage.

Key Clauses in a Sponsorship Agreement

Having a sponsorship agreement is important to outline the rights and obligations between both parties, clearly confirming any commitments. It can also help to manage your risk and mitigate future disputes with the sponsored party. 

It’s important to consider the below aspects when discussing the arrangement with the sponsored party. Then ensure that your sponsorship agreement reflects this. 

Term of Sponsorship Agreement

Your sponsorship agreement should outline the length of your sponsorship. You should consider whether you would like the sponsorship to be for a fixed period or a one-off payment. Further, if the sponsorship arrangement is for a fixed term, you should consider whether either party can extend the term. Additionally, when and how they need to provide notice to extend.

For example, you may agree to sponsor a sports club for 12 months and either you or the club may have an option to extend the sponsorship agreement for another 12 months.

Exclusivity

Having an exclusivity clause in your sponsorship agreement can provide you with a commercial advantage. An exclusivity clause can outline whether the sponsored party can accept sponsorships from other businesses. And, if so, what other businesses. 

For example, if your business sells athletic jerseys, you should consider whether you want to be the only clothing business that sponsors the sports club.

Payment

When negotiating a sponsorship arrangement, you should consider how you will calculate the sponsorship fee. In addition, you should note how you will pay the sponsored party. 

For example, your sponsorship agreement should outline whether you will pay the sports club a lump sum or whether you will pay the fee in instalments. 

You should also consider whether you may provide the sponsored party with any other benefit. For example, products or discounts on your other products or services.

Sponsorship Agreement Benefits

Your sponsorship agreement should also set out the benefits you will receive as a sponsor. 

For example, the benefits may include your printed logo on the sports clubs’ jerseys and your logo on any marketing material and social media posts the club creates. 

It is crucial to ensure that both you and the sponsored party are on the same page about these benefits in exchange for payment. You should ensure your sponsorship agreement is as specific as possible about these benefits to reduce the risk of any issues arising with the benefits you agreed upon. 

Intellectual Property

If you provide your logo or any other intellectual property of your business to the sponsored party to use, your sponsorship agreement should detail: 

  • who owns the intellectual property; and 
  • when and how the sponsored party may use it. 

For example, you may provide the sports club with a non-exclusive licence to use your intellectual property for purposes, and the term set out in the sponsorship agreement.

Termination

You should consider why either party may want to terminate the agreement and outline: 

  • how the agreement may be terminated; 
  • how much notice each party should give the other; and
  • the consequences for termination. 

For example, the sponsored party stops providing you with the benefits as per the agreement or engages another similar business as a sponsor, and you may require them to refund you part of the payment. 

Key Takeaways

Sponsoring another party is a great marketing opportunity to boost your business profile and income. When negotiating a sponsorship arrangement, you should ensure that the negotiations are accurately reflected in a properly drafted sponsorship agreement. A well-drafted agreement can assist both you and the sponsored party to benefit from the arrangement and mitigate any future disputes by ensuring everything is clearly set out. If you have any questions or need assistance with drafting or reviewing a sponsorship agreement, get in touch with LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.

Frequently Asked Questions

What is a sponsorship agreement?

A sponsorship arrangement is a mutually beneficial business relationship. It is common in the sporting industry, where a business may provide funds, resources or services to a sports club in exchange for benefits or rights for their business. 

What are the benefits of a sponsorship arrangement?

A sponsorship arrangement can be beneficial to your business by developing your brand awareness, allowing you to engage directly with potential customers; and increasing your sales.

What should be included in my sponsorship agreement? 

A sponsorship agreement should include the length of the agreement, an exclusivity clause, payment calculation and method, the sponsor benefits, intellectual property rights and termination conditions. 

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