What to consider when signing up a celeb

One of the fringe benefits of my job is the occasional invitation to attend a commercial shoot. And to meet the occasional celebrity. When I get invited, it's usually a thank-you for having drafted the endorsement contract. As it happens, celebrity endorsement contracts are a pleasure to draft. Like pre-nuptial agreements without the acrimony.

One of the fringe benefits of my job is the occasional invitation to attend a commercial shoot. And to meet the occasional celebrity. When I get invited, it’s usually a thank-you for having drafted the endorsement contract. As it happens, celebrity endorsement contracts are a pleasure to draft. Like pre-nuptial agreements without the acrimony.

Every endorsement situation is unique but a number of clauses and concerns are common. Both parties want to ensure that the match is good, that the celebrity is not over-extended (think Wayne Gretzky in his first post-hockey year) and that each has an exit clause in case the relationship falters.

There is a long list of clauses that must be in such contracts. For example, the media where the celebrity will be featured (television, print, radio, personal appearances…); the territory covered; the extent of the exclusivity (as a practical matter, category exclusivity can be taken for granted: Coca-Cola would never hire a Pepsi spokesman); the fee (usually payable in instalments with money withheld until performance is completed); termination rights; so-called morality clauses and assorted boilerplate.

It goes without saying that the celebrity must use the products in question and that the opinions he/she expresses must be true. For example, a celebrity cannot claim that ginseng lowers blood cholesterol if this is not the case. Even if the celebrity believes the statement. If the celebrity is claiming to use a product exclusively, the contract should ensure that this is true or at least appears to be true. The celebrity should be prohibited from buying or using/consuming a competitive product in public.

Endorsement contracts generally have a one-year term. It takes months to measure the appeal of a spokesman. If the endorsement meets or exceeds expectations, it is good to have at least one renewal option in place at a predetermined price.

Typically, renewals are based on a 10% step-up in the contract fee. If the celebrity becomes invaluable to the brand – like Claude Meunier, who has fronted Pepsi’s extraordinary success in Quebec for more than 15 years – the celebrity has enormous leverage in renegotiating his price. Renewal options buy a temporary reprieve.

Canadian endorsement fees are usually 10% of the U.S. price. This is directly related to the relative size of the Canadian market. There are, of course, exceptions. Celebrities with specific Canadian appeal – Gordie Howe or Christopher Plummer, for example – may command a premium in Canada. Quebec celebrities are often paid more, on a proportionate basis, than their English Canadian counterparts because their cultural impact is greater. In fact, it is rare for a celebrity to be equally viable in both Canadas. Typically, there are parallel and distinct campaigns. For example, several years ago, the Bay used Anne Murray in English Canada and in Quebec, Céline Dion.

Endorsement contracts always include warranties regarding the celebrity’s ability to perform: that is, that there are no existing contracts that might interfere with the endorsement contract; that the celebrity is a member in good standing of any applicable union and that (if possible) the proposed creative has already been approved. If production is scheduled for Canada and the celebrity is not a Canadian resident, prepare for a battle with ACTRA and/or UDA unless you are dealing with a Major Celebrity.

A ‘morality’ clause is critical. O.J. Simpson and Hertz is a worst-case scenario. The ‘morality’ clause should allow the advertiser to terminate the contract if the celebrity does anything which damages his reputation.

If the endorsement is premised on certain facts – for example, that the celebrity is an Olympic skier or a successful adherent to a weight loss plan – the contract should allow the advertiser to immediately terminate the contract if the critical facts change. This would cover a Ben Johnson-type situation.

As between the advertiser and the celebrity, the advertiser owns the copyright and all other rights in the creative materials. The only exceptions involve celebrities who contribute unique characterizations like Lily Tomlin’s Edith Ann or Charlie Chaplin’s Little Tramp. If the celebrity is involved in developing the creative, it is critical to obtain a waiver of his/her moral rights.

The remaining clauses are boilerplate, albeit important boilerplate: mutual indemnity clauses, confidentiality and notice provisions, jurisdiction and arbitration clauses.

The first draft of a endorsement contract should be reviewed dispassionately to ensure that it covers the key provisions of any licence. It should then be reviewed again to ensure that it covers the contingencies that arise when the licensed product is a person and the person is a celebrity. Finally, the draft agreement will be ready for the celebrity’s lawyers and the next round of negotiations begins.

Susan Vogt practises marketing and trademark law at the Toronto offices of Gowling Lafleur Henderson LLP. She can be reached by phone at 416-862-5439 or by e-mail at susan.vogt. @gowlings.com.