A sponsorship arrangement can bring much-needed exposure for a sponsor company and a timely infusion of funds for a promoter. But having a solid sponsorship agreement will be key to unlocking full value from the arrangement. 

Sponsorship agreements can run in either of two ways. First, a sponsor company may enjoy visibility through a promoter business or individual in exchange for a sponsorship fee over a defined period. This type of agreement is known as corporate sponsorship. An example of this arrangement is an apparel sponsorship between a sports team or player and a sponsor. 

The second popular type is a fiscal or project sponsorship where the promoter endorses the sponsor, but for a specific project. You can often find this type of arrangement in event sponsorship, paid ads with a YouTuber or influencer, and product placement. 

Drafting a sponsorship agreement

Sponsorship agreements help clarify the parties’ intentions, rights, and obligations, ensuring that they can reach their common goal. Here’s how you can go about drafting a standard sponsorship agreement. 

1.    Identify the parties and effective date of the contract 

Specify the full legal names and addresses of the parties to the agreement and the date on which it is to commence. Keep in mind that the appropriate parties should have the legal capacity to carry out the contract. Be certain to include the corporate status of any company or organization involved. If a non-profit is a party, also include their tax-exempt status. 

2.    State the purpose of the agreement 

A sponsorship agreement should have concrete (and measurable) objectives other than just promoting the sponsor’s brand. Start by considering what outcomes you would want from the arrangement and how each party might contribute. 

3.    Describe the rights and obligations of the parties 

This is a laundry list of every material thing each party must do to fulfill its side of the agreement. It would be best if you were as detailed as possible when describing these rights and obligations. 

Typically, the sponsor will pay a sponsorship fee to the promoter in exchange for the exposure they provide through their platform. The sponsor may also perform other obligations, such as providing merchandise, technical expertise, or other agreed items. 

The promoter will also have specific obligations that they must perform. For example, the promoter may be required to display a short video from the sponsor at particular intervals or a certain number of times during their event. 

4.    Clarify details about the sponsorship fee 

Depending on the fee size, you may need to include details about when and how the sponsor will pay the sponsorship fee. Where payment will be made in regular installments, specify the size of each installment, the due date, and the medium of payment. This section may read: “The Sponsorship Fee shall be paid in six equal installments of [fee amount] each, payable on or before [payment date] by wire transfer to [receiving account].” 

Also, include what happens if an installment has become due and unpaid and how this will affect the arrangement. 

5.    Regulate use of intellectual property 

Since both parties will likely be allowing the use of their intellectual property (such as logos or other trademarks), correct usage should be explicitly described in the contract. 

For instance, the sponsor will typically grant a limited license to the promoter to reproduce the sponsor’s logo for specified purposes. These may include showing the logo over their live feed, printing on t-shirts, or use on other items. The contract should specify what use is allowed and what isn’t. 

The sponsor will also usually have the right to identify itself as a sponsor for the promoter’s event or enterprise. For example, a sponsor company may receive the right to identify itself as the official candy of the promoter in its advertising. 

The contract should also define what intellectual property can be used and whether the license is exclusive. 

6.    Insert terms as to duration, renewal, and termination 

For corporate sponsorships especially, managing duration, renewal, and termination are essential. Decide how long the contract will last, what party may request a renewal, and on what terms. 

Contracts of this nature will typically allow renewal once either party gives notice within a specific period before the agreement expires. While this clause enables renewal with minimal effort, it is not recommended to renew the contract without first considering if you need to renegotiate the terms of the agreement. 

Specify how the contract may be terminated and in what circumstances. In fiscal sponsorship, the agreement will typically terminate at the end of the event or product run. 

But for corporate sponsorships, there may be more varied termination scenarios, such as what happens when the promoter receives a higher offer from another company. You may include a Matching Right clause (also called a Right of First Refusal) that allows the current sponsor to match any higher offer the promoter receives. 

7.    Include final and miscellaneous provisions 

Warranty and indemnity provisions protect the parties from any loss or claims arising out of the acts of the other party or its employees. The warranty clause includes a declaration that all representations made in the contract are valid and made in good faith. Under the indemnity clause, a party agrees to hold the other blameless in the event of any loss caused to a third party arising from its acts or those of its employees. 

Insert a disclaimer clause to clarify the relationship between the parties and establish that the arrangement is neither a partnership, employment, or joint venture. 

An integration clause established that the written and signed sponsorship contract is the whole agreement between the parties. This helps preclude verbal communications and other extraneous materials not expressly included in the agreement. 

Include a dispute resolution clause to cater to potential disputes. For example, an operative clause will typically include provisions for resolution by mediation, arbitration, or negotiation in the first instance and then litigation if all else fails. 

A governing law clause establishes the law under which the agreement is governed. This provides a basis for the contract’s legality and the law under which any disputes arising from the agreement may be resolved. 

Finally, both parties must sign the agreement before it can be legally binding. Where either party is a company, a company representative, such as a director or other principal officer, may sign on behalf of the company. 

List of recommended supplements

Supplements, also called attachments, are documents that are annexed to a contract. They are not always needed in a sponsorship contract, however. Examples of where they may be necessary include where the new agreement is a renewal of an older agreement, where the current agreement is contingent on a parallel agreement between the parties, or to include extra details about the content of the agreement.  

Supplements that may be included with a sponsorship contract include:  

• Notices of previous renewals 

• List of locations where sponsor’s products will be promoted 

• Power of attorney authorising either party to act on behalf of the other in limited instances 

• Previous sponsorship agreement between the parties 

• Detailed list of the parties intellectual property