Jun 19, 2009
I was reading a great post by Darren Heitner over at SportsAgentBlog regarding being against the use of social media to leverage contract terms in negotiations. It was in direct opposition to my post on Social Media Sports Contracts, which led to some good comment discussion over on his blog.
All of that aside though, I’ve been caught up with one of the things mentioned in Darren’s post ever since I read it,
By alienating ownership and getting the fans involved through a social media tactic, the athlete/agent is making it more of a battle between the player and management…Also, sponsors will be hesitant to come forth and [sic] many deals to the athlete. Why take the chance when the athlete could go behind the sponsor’s back and post something derogatory on a social network, which can spread like wildfire? My emphasis added
Yeah, why would anyone sponsor any athlete if there was a chance that the athlete could turn on them, tweet about it, and run the risk of having the tweet read by millions of people?
Jumping back to that in a minute, I also read a great post by Stephanie Stradley over at regarding Terrell Owens and “defamation by twitter”. In that post, Stradley talks about T.O. tweeting about blaming his real estate problems on a particular person and how that could potentially lead to a defamation suit. Their tweets below,
W/THE RELEASE OF MY POTENTIAL RENTAL @ 34 WOODTHRUSH TR, I WILL NOT B RENTING DUE 2 THE UNPROFESSIONALISM OF MAUREEN FLAVIN!!
@ Not legal advice but rich guys need to worry about Twitter defamation re: your rental. Ask Courtney Love.
Could Terrell Owens be in trouble for defamation? As Bagley points out, , but this situation does again raise the larger issue of an athlete using social media with what could be disadvantageous results to a sponsor or potential sponsor (sponsors aren’t usually a big fan of athletes and lawsuits, regardless of their subject matter).
So, how do you reconcile these two situations? Morals and Liquidated Damages Clauses.
Morals or “behavioral” clauses are contract clauses that allow a party to terminate an agreement based upon a variety of agreed upon reasons, including some sort of morally offensive action (i.e. posing in Playboy) or an action that causes brand diminution (i.e. being seen wearing competitors products). The morals clause is the best defense for sponsors to combat potential issues with athletes and social media. The challenge? Sponsor companies need to make sure that their language is written narrowly enough to ensure that social media communications are covered. This may become especially difficult in today’s climate, as many “morals” clauses are no longer based on morals; they’re based merely on behaivor, hence the “behavioral clause” moniker. Even with the seemingly lax morality in endorsement contracts, its still important for sponsors to really push to specifically include communication via social media. Why? because even if a person has 20,000 followers on twitter, it may prove difficult to show that the tweet actually caused brand diminution, meaning that it may be hard to terminate the contract (compare that to television, a medium which basically guarantees that at least someone has seen the story…every tweet is not seen yet the way that every television story is seen).
Accompanying any good morals clause is a liquidated damages clause. If a client does breach a contract with a sponsor, the sponsor not only needs to have the ability to terminate the relationship but to recover monies for the damage to their brand. The recovering of those monies, how much? paid out when?, etc., are covered in a liquidated damages clause. Liquidated damages clauses must be reasonable (cant ask for $1 billion dollars on a business doing less than $1 million a year) or else a court will not find them to be enforceable. They also need to specifically spell out the particular damages depending on the harm. Maybe the harm for wearing competitors products is more detrimental than an athlete who tweets about competitors products? Or vice versa? Sponsor companies need to really sit down and spell everything out so as ot make sure that they are protected as much as possible if a breach is to occur.
As social media communication expands and more higher profile athletes and celebrities begin to utilize its features, sponsor companies need to make sure they’re taking all the steps necessary to ensure that their brand is being protected (maybe monitoring the tweets of the celebrities with which your involved isn’t a bad idea either). A strong behavior clause (with a strong lean towards a traditional morals clause) including references to social media communication and a liquidated damages clause spelling out the damages to be paid if a breach occurs is definitely a step in the right direction. Will every athlete/entertainer agree to such terms, probably not. But at the end of the day, isn’t it worth it to know that you can’t do business with X and that your brand is protected because Y agreed to your terms?
SportsAgentBlog — Keep the Contract Away from Social Media
2 comments
A sponsor using a moral/liquidated damages clause against one of its endorsers, is a reactionary measure. Often times, you cannot erase the damage that has been done with monetary compensation, and it is very hard for any court/arbitrator to place a value on a tweet. What needs to be realized is that many companies will see TO’s tweeting behavior and use that as a warning not to get involved with the celebrity/athlete. Moral and liquidated damage clauses can only go so far in protection of a brand. These clauses are last ditch safeties that no one ever wants to have to use.
I agree, no sponsor ever wants to use any sort of morals clause, but I think they need to be in every agreement, not just the agreements with athletes who have had trouble in the past. Just because you never know when even the squeaky clean athlete will make a misstep (ala Michael Phelps). Will the money you get make up for the damage to your reputation? highly unlikely. You hope that the liquidated damages clause acts as a deterrent to the athlete in the first place, and if its not, then you know that you at least get some sort of compensation, even if its nominal.
Hopefully, you argue “arms length dealings” in any court/arbitrator over the liquidated damages amount. Of course, like you implied, its all going to be up to the courts discretion. Definitely a something, even if a little, is better than nothing argument.
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