Are you a small business looking to sponsor your local junior soccer team? Are you a wealthy business person looking to help out a small local charity? Often such small arrangements done in good faith are agreed on an informal basis without a Sponsorship Agreement in place.

For larger sponsorships, where one corporation might be sponsoring a not-for-profit organisation a significant sum of money in return for advertising or promotion of their products/services, it is generally better to enter into a legally binding Sponsorship Agreement.

A well-drafted Sponsorship Agreement should address each of the matters set out below.

Sponsorship term

One of the first things that the Sponsorship Agreement should address is the length of the sponsorship. Will this be for a fixed term of one year or will it be a one-off payment? If it is for a fixed-term, does either party have the right to renew the agreement prior to expiration? If so, how does a party provide notice to renew? These are all commercial issues to be agreed between the parties, but whatever is agreed should be set out in the agreement.

Exclusivity

If you are sponsoring a team, do you want to be their only sponsor? Some Sponsorship Agreements have exclusivity clauses which set out what other businesses a particular team or organisation can accept sponsorship from. For example, if you sell athletic gear, you may wish to be the only clothing company that sponsors the local soccer team.

Sponsorship payments 

Fees and payments are one of the most common causes of disputes in any commercial agreement. It is very important that your Sponsorship Agreement clearly sets out what you will pay as sponsorship fees, and when the organisation that you are sponsoring can expect to receive such fees. Will you pay the agreed amount instalments or will you be providing a lump sum payment?

Sponsor benefits 

As you could be making significant sponsorship payments to a particular organisation, you will want to know what benefits you will be receiving, or at the very least, what is being done with your money. If you are to be provided with tangible benefits, such as copies of a book, or the printing of your logo on their advertising material, this all needs to be set out clearly in the Sponsorship Agreement. It is important that both parties are aware of what they will receive under the Sponsorship Agreement. 

Termination

If the relationship has fallen apart, the last thing you need to have is a dispute about how to end the relationship. Accordingly, the Sponsorship Agreement should set out how the agreement can be terminated and how much notice each party is required to give to terminate the agreement. The consequences of termination should also be set out. For example, if you have provided an organisation with $10,000 sponsorship money and they have only provided half the benefits that were agreed, you may wish to explicitly state in the agreement that the remainder of the funds must be refunded.

Intellectual property

It is likely that both parties will be using each other’s intellectual property and branding to promote the sponsorship, and both parties will want to ensure that they are each able to retain ownership in their intellectual property. To avoid any disputes, the agreement should have detailed intellectual property clauses dealing with who owns what intellectual property and the rights of one party to use the other party’s intellectual property.

Conclusion

Having a detailed and well drafted Sponsorship Agreement can help the parties avoid disputes in the future and helps both parties to obtain maximum benefit from the relationship. At LegalVision, we have experienced commercial lawyers who have had extensive experience in drafting and reviewing Sponsorship Agreements. If you are looking to enter into a business arrangement, contact us on 1300 544 755 today!

Priscilla Ng

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