Sponsorship – Potential Pitfalls

Sponsorship – Potential Pitfalls

Whether you are a sponsor or an event organiser, the importance of a comprehensive and bespoke Sponsorship Agreement cannot be overstated.  While a successful sponsorship arrangement will be a win-win arrangement for the parties, it is essential that both parties know where they stand and what is expected of them from the outset.

There are many issues to consider when contemplating a sponsorship deal. Set out below some essential items for consideration and negotiation in any sponsorship contract.

The competing interests of the organisers — to keep their options open as to other possible sponsors, and the competing interest of the sponsor — to maintain exclusivity for the particular event; will always subsist. Therefore the issue of exclusivity needs to be carefully considered with regard to each element of the event or organisers activities to which exclusivity will apply, and to the definition of the sponsors brand sector or market within which it will pertain.

Ambush Marketing
Through Ambush Marketing competitors may seek to establish an association that the parties to the sponsorship agreement have not authorised and which will dilute the value of the contract and the exclusivity of the sponsor.  Accordingly, it is important to agree from the outset the approach to be adopted in dealing with any ambush marketing attempts and if appropriate to incorporate an ambush marketing strategy as part of the sponsorship agreement.

Duration and Renewal
The value of sponsorship is derived from an association between the sponsor and the event; the more established the association, the more valuable the relationship.  Therefore the agreement should set out a mechanism for extension or renewal of the term of the agreement and a means by which the association between the parties will be re-valued at that renewal date.

Intellectual Property
Sponsorship will usually involve the use of names, logos, trademarks and other intellectual property of one or both parties.  It is vital to regulate the permitted use of any intellectual property in order to protect the brand in question and to avoid any dispute between the parties in the future.

Where and when will signage be displayed?  What naming rights are being given?  What advertising or broadcast rights are being granted?  In order to avoid dispute both parties must be clear as to their respective obligations and the benefits they are to receive.

Performance Benchmarks
Much of the value attributable to a sponsorship arrangement derives from the intangible association with the event.  Therefore, if a mechanism for setting performance benchmarks or a valuation of the various deliverables, can be agreed it serves as a useful means for the sponsor to asses the value of their association with an event and acts as a useful reference point by which disputes with a dissatisfied sponsor may be resolved.

Termination and exit strategies
Not all relationships will work nor can all circumstances be foreseen in advance.  Where the relationship is not working-for one or both parties, they will not want to be tied into the agreement for a long period.  Therefore the sponsorship contract must provide for circumstances where situations change or the relationship sours and one party or the other wishes to terminate the agreement.

If you require any further information on this matter please contact Elaine McGrath on 01 6619500 or emcgrath@reddycharlton.ie


This information is for guidance purposes only. It does not constitute legal or professional advice. Professional or legal advice should be obtained before taking or refraining from any action as a result of the contents of this publication. No liability is accepted by Reddy Charlton for any action taken in reliance on the information contained herein. Any and all information is subject to change.

Elaine McGrath
Author: Elaine McGrath