Sponsorship Agreement: What Is It & Do I Need One?

What is a Sponsorship Agreement?

What is a Sponsorship Agreement?

A sponsorship agreement is an agreement for a particular party to sponsor an event that will be organized by another party. A successful sponsorship will benefit both the charitable nonprofit and the corporation that is offering the sponsorship.

Sponsorships most of the time attract for-profit businesses because the sponsorships offer public recognition for the corporations connection with a certain charitable cause, and in the long run, it will help the business attract new customers and bolster the businesses reputation due to the ‘halo effect’ of the nonprofit good will it has offered.

These particular agreements vary in their length and complexity that will depend on various factors that might arise. Some of the factors include;

  • The type of event to be sponsored
  • The number of types of promotional rights that will be granted to the sponsor
  • Forms of the sponsorship fees

These sponsorship agreements will need to be tailored to be able to suit the circumstances that are likely to occur during the transaction. A standard document will have to be drafted with the help of your attorney in the favor of the sponsor.

However, it will aim to be reasonable and to include the provisions that are usually common to these kinds of negotiated sponsorship agreements. The final standard document will have to the integral notes with the important explanations and the negotiation tips.

 

Why you need a sponsorship agreement

In case you are a small business just looking to sponsor your local soccer team in good faith, then often a small agreement is drafted and it’s usually agreed on an informal basis without a sponsorship agreement.

However, in case you are a large corporation that is sponsoring a nonprofit organization a significant amount of money while in return expecting to get advertising and promotional returns of their products and services, then it would be advisable to get a lawyer and enter into a legally binding sponsorship agreement.

 

Why is it important to have a Sponsorship Agreement?

The sponsorship agreement will highlight some specific key factors that are crucial to the partnership between your business and the nonprofit organization or event.

The sponsorship term

This is the length of the sponsorship; the agreement can highlight this legally. Whether the sponsorship will run for a year, or it will be a one-off payment. In case the sponsorship is a fixed term then the agreement can highlight if either of the parties can renew.

As much as these might seem as commercial issues, what is agreed upon should be clearly set out in the agreement.

Exclusivity

Most of the time, event managers seek multiple sponsors, your business might or might not be comfortable with this arrangement, especially if a competitor is involved. The sponsorship agreement can determine your exclusivity during the event, for example, a clause may be set to ensure that your business is the only sponsor on the athletic gear.

Payments

Payments are the most common reasons for disputes in most commercial agreements. Therefore, the sponsorship agreement will clearly set out the fees that the sponsor will pay, and what particular time the organization that is being sponsored will expect to receive these fees. The mode of payment will also be highlighted, whether, in a lump sum or payment.

Sponsorship benefits

The fact that you are making sponsorship payments to a particular event or organization, then you will clearly want to know what kind of benefits you will be receiving, or at the very least what is being done with your money. Therefore, if you will be provided with tangible benefits like the promotion of your logo, then all these will be highlighted in your agreement with the help of your attorney to ensure that it’s implemented.

Termination

In case, the relationship falls apart, and then the last thing you will want to deal with is a dispute of how to end this particular relationship. The sponsorship agreement often has the terms of termination clearly highlighted including the period of notice each party is required to give before the termination.

 

Lastly, having a detailed well-drafted sponsorship agreement will assist you and your business avoid disputes and in the end will help both parties to obtain maximum benefit from the relationship.

 

Need a Sponsorship Agreement? Contact Sam Mollaei, Esq., business lawyer, via email at sam@mollaeilaw.com or via phone (818) 925-0002.