Endorsement Deals- What is a Morals clause?

It is an ongoing newsworthy story when scandals relating to stars, such as Paula Deen, Lance Armstrong, and Tiger Woods, who make high amounts of money in endorsement deals simply by being public figures, are ripped away from their endorsement deals in the blink of an eye. Many of you may wonder how it is so easy for product placement companies to legally bid "adieu" to endorsement deals with their celebrities.  

Endorsement agreements between companies (such as Walmart, Macy's, Verizon, and Nike) and celebrities can be high profit, high volume business ventures.  These companies rely on the persona and high profile image of their endorsers to positively attract attention to their products.  This could be either endorsements of a particular product, say, Taylor Swift for Diet Coke, or for an entire company such as Adam Levine for Proactiv. 

One of the most important tools for any company to have is the ability to protect their brands and intellectual property.  In order to achieve this protection, companies include very specific clauses in any endorsement contract which are intended to give companies the ability to terminate the endorsement and even possibly recoup payments previously rendered to the celebrities.  Morality clauses are deeply negotiated because, on one hand, the celebrity wants as much specificity as possible when having their behavior judged while companies want to judge and interpret the contract in a fluid, sole discretion manner.  A well drafted morals clause clearly delineates the standards of conduct and what the repercussions will be if the endorser's actions are out of line.  Clear trigger points and adherence to the company's code of conduct and/or company policy is a good starting point to drafting the morals clause in an endorsement contract.     

What happens if a company feels that their celebrity endorser breached the morality clause?  A company's course of action not only affects its current business but its societal position. After evaluating the violations that took place, it is up to the company to decipher termination vs. reaction from the public.  It could be as small as doing nothing and letting the incident die off to as much as making a public statement against the celebrity and terminate the agreement. 

An entertainment attorney can play a crucial part in the negotiation and administration of a deal.  The deal making process needs to be understood by knowing what the company needs from an endorser and having a practical handle on what a celebrity can deliver.  

Marketing is an integral piece of both a celebrity and company's success.  It is in the interests of both parties to maximize their brands and add value in order to gain a high presence in public commerce.  Neither party wishes to have the morality clause triggered, but if it does, the clause should be specific, clear and encompass the company's best business practices and protect the celebrity's persona. 

COPYRIGHT and DISCLAIMER

Tifanie Jodeh is Partner at Entertainment Law Partners dedicated to corporate, business and entertainment affairs.  You may contact her at asst@entlawpartners.com.

Tifanie Jodeh grants column recipients permission to copy and distribute this column and distribute it free of charge, provided that copies are distributed for educational and non-profit use, no changes or revisions are made, all copies clearly attribute the article to its author and include its copyright notice.

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