The importance of a good sponsorship agreement

A good sponsorship agreement sets out what the sponsor and the club can expect from each other — including agreements regarding payment, exclusivity, duration, and unforeseen situations such as cancellations, promotion, or relegation. The standard templates used by many sports clubs fall short in this regard and are a source of contention. Below, you can read about the most common problems and how to prevent them with a watertight agreement.

What is a sponsorship agreement?

A sponsorship agreement formalizes the arrangements between a sponsor and a club, association, or organization. The sponsor provides financial (or material) support and receives something in return, usually in the form of advertising, exposure, or other benefits. In the sports sector, many clubs cannot do without sponsors. A clear agreement ensures that both parties know where they stand — and prevents conflicts when things go wrong.

Many associations work with a standard template. That is a start, but such templates rarely take unexpected events into account, which often leads to discussion in practice.

What problems arise in sponsorship relationships?

• The sponsor does not pay (on time). For example, due to their own financial problems. The club must then be able to withdraw from an exclusive agreement in order to partner with another sponsor who does pay.
• Less exposure than expected. If matches or competitions are cancelled due to, for example, a pandemic or natural disaster, the sponsor may want compensation.
• Promotion or relegation. In the event of relegation, the sponsor receives less attention and is often dissatisfied; in the event of promotion, the club sometimes actually wants a higher fee. This is annoying with a long-term contract that does not include a provision for this.
• Reputational damage. An incident involving the club or the sponsor can affect the other party — define when this has consequences.

What belongs in a strong sponsorship agreement?

A good contract concretely describes the rights and obligations of both parties. In any case, include:

• Consideration: exactly which advertising materials and benefits the sponsor receives.
• Payment terms: amount, installments, and consequences of non-payment (or late payment).
• Term and termination: duration, renewal and early termination.
• Exclusivity: whether the sponsor is the only one in their industry, and what applies in the event of non-payment.
• Promotion/relegation: how compensation fluctuates with sporting results.
• Force majeure: a force majeure clause that governs how parties deal with cancellations and unforeseen situations.

Conflict with a sponsor? Mediation as a solution

Should a dispute arise nonetheless, mediation often a good route. It promotes a joint solution and maintains the relationship between sponsor and club — important, because sponsorship relationships are often long-standing and locally intertwined. Legal proceedings, on the other hand, put that relationship under strain.

Frequently asked questions about the sponsorship agreement

Can I terminate a sponsorship agreement early?

That depends on what you have agreed. Without a termination or dissolution clause, you are in principle bound by the term. Therefore, it is important to arrange in advance under what conditions — such as non-payment — early termination is possible.

Does the sponsor have to continue paying if matches are cancelled?

That is determined by the agreement and any force majeure clause. Without a clear arrangement, disputes tend to arise, as became apparent during suspensions of competitions. A good clause prevents that.

Is our association's standard template sufficient?

Often not. Such a template rarely covers your club's specific situation and does not sufficiently take into account scenarios such as relegation, cancellation, or non-payment. Therefore, have the template adapted to your situation.

Have a sponsorship agreement drawn up

The legal experts at MKB Juristen draft a sponsorship agreement that takes all relevant scenarios into account and protects the interests of both parties. We also assist you in the event of a conflict and, if necessary, facilitate mediation. View our expertise in contract law or schedule a no-obligation intake.