Sponsorship Arrangements

What should be included in a sponsorship agreement?

• Parties to the agreement - The parties to a sponsorship agreement must include the sponsor and the sponsored person or property (recipient). However, the agreement may also need to include agents or brokers (acting for either or both of the sponsor and the recipient) and persons wh have existing rights (eg, organisations who are entitled to produce licensed merchandise or organisations that have pre-existing rights over the recipient). If an arrangement involves persons in addition to the sponsor and recipient, it may be more manageable to have two or more agreements dealing with separate aspects of the arrangement.
• Nature of the property being sponsored - This can be an individual, organisation, event, series of events, team, venue, function or other property. If the property is an individual, include events in which the individual must participate and expected performance standards. If the property is a team or a sporting championship or a sport governed a set of rules, details of the applicable governing body and any applicable rules should be included as well as requirements about season duration, competitions to be entered or held and other requirements in relation to participating in or organising and undertaking the event. If the property is an event, describe the nature of the event and requirements in relation to media exposure, attendance level and (depending on the event) include a requirement that specified persons such as celebreties or sportsmen and sportswomen attend.
• Initial term of the arrangement and any options for renewal - The period could be a number of years or a single event (including a period before and after the event). Describe whether the sponsor have a right to renew the sponsorship and, if so, the mechanism for exercising the renewal right.
• Rights and benefits that the sponsor will enjoy - Examples of benefits include personal appearances at sponsor events by an individual or team; a specified number of tickets to an event; advertising rights in any publications issued by the property; advertising rights at venues.
• Exclusivity - Describe the level of exclusivity assigned to the sponsor. This requires a description of the sponsor's individual's rights and description of the sponsor's position in relation to other sponsors. Examples of exclusivity include:
  * Naming rights/title rights - The sponsor is the principal sponsor and has the right to have the sponsor's name (or the name of one of its products or service offerings) included in the title of the sponsorship.
  * Sole - This generally means that the sponsor is entitled to be the only sponsor of the property.
  * Principal - This generally means that the sponsor has the right to exclusivity in a category.
  * Major - Generally there will only be one major sponsor but in large projects there may be several major sponsors each of whom has exclusivity in a category.
• Hospitality rights - The agreement should include details of all hospitality and ticketing rights.
• Personalities - The agreement should describe the activities a person who is sponsored is sponsored or a team (both as a collective and as individuals) is required to undertake. This can include endorsing the sponsor or its products or services in advertisments or in person. The agreement should also specify whether the property is permitted to accept other sponosorships.
• Merchandising - The agreement should specify whether the sponsor, property or even a third party such as a merchandising agent owns the merchandising and licensing rights; the types of merchandise that can be produced; whether a particular supplier must be used; the payments that are to be made; and whether any approvals are required (eg, consider whether approval is required to use a name or logo or whether sample products must be approved).
• Payment - The agreement should specify to whom payment should be made (eg, the property may have an agent who will accept payments or may have set up other operations which have an impact on the person to whom payment should be made); the payment terms; any contra that the sponsor will provide; and whether the sponsorship fee is to be reviewed during the term.
• Termination - The agreement should specify the circumstances which entite each party to terminate the agreement and the consequences of termination. Generally, a sponsorship agreement will allow either party to terminate if the other party has breached the agreement or is bankrupt. The agreement may also allow the sponsor to terminate the agreement if the property does something which damages the reputation of the sponsor or if the property does not meet performance critera.