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Assignment Clause Competitor

When acquiring a business, often a key component is the contracts to which the company is a party to. Whether they are contracts with customers and the source of a company's revenue, contracts with service providers or various licensing agreements that allow the company to operate, or a lease for a particularly favourable location or on particularly favourable terms, a company's contracts are often an important part of a business, adding substantial value. Ensuring the transfer of any such contracts can significantly impact the structure and timing of the acquisition of a business. The following article outlines the rules and exceptions with respect to transferring contracts and the effects of such rules and exceptions in the context of the purchase and sale of a business.

The General Rule and Exceptions

The general rule with respect to contracts is that they are freely assignable. Like other types of property, agreements and the rights under those agreements can be transferred from one party to another. There are, however, exceptions to this general rule. Legislation can restrict the assignability of certain types of contracts, as can public policy (as is the case with agreements dealing with spousal support). Contracts that are personal in nature, involving personal relations or personal skills, are not assignable. An assignment of a contract cannot result in an increase of the burden on the remaining third party to the contract. Finally, contracts may also include anti-assignment provisions, which outright prohibit assignment of the contract, or provide that such assignment can only occur under certain conditions. In the context of most purchase and sale transactions, the relevant exception will be the inclusion in the contracts of anti-assignment provisions; the remainder of this article will focus on such clauses and their implications.

Anti-Assignment Provisions

A standard anti-assignment clause, typically referred to as an assignment clause, will prohibit the transfer of a contract without consent. Such a clause will state that the agreement will not be assigned by any party without the prior written consent of the other party. Such a clause may also go on to specify that a party's consent can or cannot be unreasonably withheld. These provisions are typically included in contracts to ensure that each of the parties have control over who they engage in commercial arrangements and continue to do business with.

The above noted standard assignment clause, however, does not address all forms of business acquisitions. In order to guard against becoming involved with unintended parties through the sale of a company and not just its assets, anti-assignment provisions are often broadened to include language that addresses the transfer of ownership or sale of the shares of a company. This expanded language prohibits the change of control of a party, stating that the sale of the majority of the voting shares of either party to the contract will require the prior written consent of the other party. Sometimes these change of control provisions can deem that a change of control is an assignment for the purposes of the agreement, thereby triggering the same assignment requirements, including whether consent can or cannot be unreasonably withheld.

Asset Purchases

In an asset purchase transaction, the vendor is the company that owns the assets. The vendor sells some or all of its assets to the purchaser resulting in a transfer of such assets, including those desired contracts to which the company is a party to. Such transfer of the contracts will be done by way of an assignment. The need to obtain consent in the above noted anti-assignment clause would therefore arise in the context of an asset purchase transaction.

Share Purchases

In a share purchase transaction, the vendor is the shareholder or shareholders of the target company. The vendor sells the shares to the purchaser, which does not result in any transfer of assets as all assets of the target company, including any desired contracts to which the company is a party to, remain the assets of the target company. In this context, an assignment of a contract is not needed, as the parties to the contract remain the same, only the ownership of one of the parties changes. The need to obtain consent in the above noted anti-assignment clause would not arise in the context of a share purchase transaction, but the need to obtain consent in the change of control clause would arise.

Seeking Consent

When proceeding with either an asset purchase or a share purchase where the consent of third parties is required, the timing of obtaining such consents must be considered. The contracts themselves may stipulate when consent must be obtained, in some cases requiring several weeks, allowing the remaining party to assess whether they want to provide consent or not. There can also be costs associated with obtaining consents from third parties, as is often the case in leases where landlords will want to review, among other things, the financial strength of the purchaser. Being required to obtain consent of third parties also raises issues with respect to the confidentiality of such a transaction. Either, or both, the vendor and purchaser may want the proposed transaction to be kept confidential from their respective employees, customers, suppliers and competitors. Both parties will also want to consider the impact of any consents not being obtained, especially if such contracts are material to the business. Because of these various issues, it is important to review any contracts that will be transferred or remain with the target company early in the process and discuss how any required consents will be obtained.

Assigning Contracts

To effect an assignment in the context of an asset purchase, the vendor and the purchaser should enter into an assignment agreement whereby the vendor assigns the contract and all rights, obligations and benefits thereunder to the purchaser and the purchaser agrees to assume and perform, as applicable, such rights, obligations and benefits. The contract being assigned may stipulate what the vendor's obligations will be under the contract after an assignment. In many cases the vendor will not be released of its obligations, regardless of any assignment. In such instances, if the remaining party to the contract is not willing to release the vendor from its obligations, the vendor and purchaser should address each of their obligations in relation to the contract and the third party going forward. Typically, the purchaser agrees with the vendor to be solely responsible and agrees to indemnify the vendor for any non-performance or breach by the purchaser under the contract from and after the date of assignment.

If consent is required from the remaining party to the assignment, such party can either be made a party to the assignment agreement, or their written consent can be obtained prior to entering into the assignment agreement. If consent is not required, contracts can also require that notice of any assignment be given to the remaining party. Regardless of any such provision, notice should be given to the third party that the assignment has occured or will occur. Again, the contract may specify whether such notice needs to be provided prior to the assignment or not.

To effect an assignment in the context of a share purchase, nothing more than the documents effecting the purchase of sale of shares is needed. Depending on the presence and content of any change of control provisions in each contract the company is a party to, notice to or consent of, the third party to each of the contracts may be necessary.

Conclusion

Although generally contracts are assignable, when contemplating the purchase or sale of a business consideration should be given to any contracts that will be assigned or remain with the company being purchased. Each contract should be carefully reviewed in the context of the specific type of transaction being contemplated so as to determine whether any consents or notices will be required before or after completion of the proposed transaction. Specifically, in the context of an asset purchase, only anti-assignment provisions will necessitate obtaining consent, and in the context of a share purchase, only change of control provisions will necessitate obtaining consent. Each party should also have regard to the timing and confidentiality issues that may arise in obtaining any necessary consents. Finally, when effecting the assignment of contracts, consideration must again be given to the type of transaction contemplated as well as provisions detailing any ongoing obligations.



By Steven B. Smith, Partner, Bryan Cave LLP, and Adam Brezine, Partner, Bryan Cave LLP

With the downturn of the economy in the last several years, not only have we seen a decline in the number of new sports sponsorships and licensing agreements, we have also seen a marked increase in disputes and litigation over existing agreements. Perhaps this is not surprising, as a weak economy often forces sponsors and sports properties to find ways to cut costs, and sponsorships and licensing agreements can be an easy target.

In this article, we examine a handful of key provisions that tend to be the most commonly negotiated, and litigated, items in a sponsorship and/or licensing contract.

1. Definition of Products or Services Category/Licensed Goods/Services.

In any sponsorship or licensing agreement the parties must define the scope of licensed goods and services or the definition of the goods and services with which the sponsor plans to use the sponsorship benefits. This definition impacts many parts of the contract, including the exclusivity provision, the types of advertisements and signage that can be used, and the ability to enter into agreements with other sponsors and licensees, to name just a few. For these reasons, the definition of the goods and services covered by a sponsorship or licensing agreement is often the most important provision in that agreement.

Likewise, in a license agreement, the definition of licensed goods and services becomes a key basis for a number of provisions, including the scope of exclusivity and the ability of the licensor to enter into agreements with other licensees. This can greatly impact the licensor’s bottom line.

For these reasons, there is almost always a tension between the sponsor (or licensee), who wants to define broadly the scope of goods and services to be covered, and the property (or licensor), who wants to define this scope very narrowly. The importance of this definition was on display in recent litigation between the U.S. Tennis Association and Olympus. Olympus is a long time sponsor of the U.S. Open and is the title sponsor of the U.S. Open Series (both USAT properties) for cameras. Under its agreement with the USTA, Olympus was granted sponsorship exclusivity in the “Camera Category, Binocular Category and the Photo Image Storage/Photo Image Printing Category.” The USTA also promised to refrain from granting sponsorship and promotional rights to “Competing Companies” – or companies whose marketing and sales activities are predominantly devoted to products in competition with Olympus in the camera, binocular, or photo image storage/printing category. The agreement included non-exhaustive lists of competing, and non-competing, companies. (The relevant contract sections are quoted in some detail in the complaint in the case – Index No. 28579/10, Supreme Court of the State of New York, Westchester County).

For the 2010 U.S. Open, the USTA also sold sponsorship and promotional rights to Panasonic. Olympus claimed it was not aware of the extent of Panasonic’s competing rights until the Open was underway, when it discovered that Panasonic was engaging in extensive promotion of its products on site, including “cameras and camcorders, which directly compete with Olympus’ products.” By the end of the tournament, Olympus claimed, it was clear that it had not gotten what it paid for – exclusivity in the listed categories. It opted out of the final two years of its deal with the USTA, purported to terminate the 2011 portion of the deal as well, and sought to recoup amounts paid for 2010. The USTA claimed, among other things, that Olympus’ actions were motivated in large part by the recent economic decline.

The dispute settled about two months after the USTA initially filed a complaint, and Olympus remains a USTA partner for 2011. The specific terms of the settlement are not known, but the dispute clearly damaged the relationship, and resulted in an abundance of negative publicity for both parties.

Practice Tip:Pay close attention to the definition of goods and services and understand all elements that are included and not included. If you are a sponsor or licensee, make sure you fully understand what you need to encompass to fully protect your domain, and keep in mind that this needs to cover anticipated areas of expansion during the term of the agreement. If you are a property, be very careful to understand the scope of this definition. Sometimes, areas that the sponsor insists be included could prevent you from being able to enter into an agreement with another sponsor. You will also need to become more familiar with the sponsor’s business so you can fully appreciate what you are being asked to include in the sponsorship or licensing agreement. In the Olympus/USTA dispute, it appears that what angered Olympus the most was the promotion by Panasonic of competing products at the U.S. Open, even though Panasonic itself was not a “competing company.” In retrospect the parties might have considered adding more language about what specific activities a different sponsor – which might sell competing products as only a small part of its business – would be allowed to engage in during and surrounding the sponsored event.

2. Definition of a Competitor.

Often in sponsorship agreements, in order to help define more clearly what is and is not ambush marketing, the parties will attempt to define just who are the “competitors” of the sponsor/licensee. This is usually tied very closely to the definition of goods and services/licensed products and services. It also corresponds closely to the scope of exclusivity in an agreement, as a property/licensor is, under most circumstances, prohibited from entering into an agreement with a “competitor” of the sponsor/licensee.

In our world of corporate mergers and acquisitions, and with the pressure on businesses to diversify, someone who may not, as first glance, seem like a competitor could actually be, or become, one. For example, in the USTA-Olympus dispute, Olympus, a manufacturer and distributor of cameras, found itself upset about the presence of Panasonic, which primarily used the sponsorship to promote its televisions. However, Panasonic also has a strong presence in the camera industry, which caused Olympus to contend that the USTA deal with Panasonic ultimately violated Olympus’ sponsorship rights. According to the pleadings, Panasonic was actually listed as a “non-competing company” in the Olympus agreement, but the manner in which Panasonic activated its sponsorship still created a dispute.

Practice Tip:It is extremely important to focus on and understand what constitutes a competitor of a sponsor. For a property/licensor, this means you may have to become rather knowledgeable about the sponsor’s/licensee’s business, as well as the businesses of other prospective sponsors or licensees. Clearly, properties will want to define a competitor as narrowly as possible, while a sponsor/licensee will try to define this as broadly as possible. As an example, we often define a competitor as a party that is “known primarily” as producing the goods and services of a sponsor; this allows for a property/licensor to enter into agreements with companies that may do business in an area that overlaps with a sponsor/licensee, as long as the new sponsor/licensee’s primary business does not compete with the existing sponsor/licensee. Alternatively, you may want to define a competitor as the particular division in competition with the sponsor. For example, USTA could do business with Panasonic for televisions but not for cameras or related equipment. Perhaps in an era of companies with ever-increasing product lines, it is at least as important to focus on specific products and services that can (and cannot) be promoted, as the names of the sponsors themselves.

3. Scope of Exclusivity.

In many sponsorship and licensing agreements, the scope of the exclusivity rights granted often becomes a fertile source for disputes. Surprisingly, this provision frequently is not heavily negotiated, but it can lead to hard feelings and litigation.

Many sports organizations and licensors have multiple events or multiple properties. When entering into a sponsorship, a sponsor may think it is receiving exclusive rights to all of those events and properties, when, in fact, it may be receiving rights to a specific few events and properties. Sponsors and licensees often find themselves angry and disappointed when it finds, some months later, that a competitor is sponsoring a different event owned by the same sports organization. 

Alternatively, some sports organizations have multiple layers of rights that are not covered in every agreement. NASCAR is a great example of this. Just because a sponsor enters into an exclusive deal with NASCAR does not mean that other parties, such as cars, drivers and tracks, are covered by that arrangement.

We are currently involved in just such a dispute for one of our clients. A sporting goods supplier entered into an exclusive deal to supply equipment to a sports governing body at certain, specified events. The sports property operated additional events not covered by the agreement. Some months later, the sponsor became upset when the sports property did not require an organizing committee to use the sponsor’s equipment at an event sanctioned by the governing body, but not covered by the sponsorship agreement. This led the sponsor to try to terminate the contract. No matter how this turns out, the sports property has a problem on its hands, as nobody wants to have an angry or disappointed partner.

And while it is beyond the scope of this outline, it should also be noted that exclusivity is usually the starting point for an antitrust challenge to a licensing or sponsorship agreement, since by its very nature the agreement purports to lock certain competitors out of valuable rights. This was the case in the recent American Needle, Inc. v. National Football League dispute involving the NFL teams’ joint licensing of the use of trademarks on clothing and other consumer goods.

Practice Tip: For sponsors and licensees, it is very important to understand up front what exactly you are, and are not, receiving as part of an agreement. Do not assume that you will be receiving exclusivity with respect to all events and properties owned by a property/licensor. Take the time to understand the organization’s structure to understand fully those items to which you may not be receiving exclusivity. For sports properties and licensors, take the time to explain to the sponsor/licensee exactly what is and is not being provided from your inventory. Although this may make for a somewhat uneasy discussion up front, this will help avoid disputes, hard feelings and terminated contracts down the road.

4. Renewal Rights/Right of First Negotiation/Right of First Refusal.

Most sponsorship agreements include some sort of ability for the contract to be extended. However, those rights vary quite a bit. Further, many sponsors and properties view these provisions as “legal boilerplate” and, thus, do not pay adequate attention to their impact.

The most common provisions in sponsorship and licensing agreements are broadly referred to as renewals, rights of first negotiation, and rights of first refusal. There are many variations of these provisions, of course, but they each carry some common characteristics.

Renewals – renewal provisions can vary widely, but they usually include the ability of one or both of the parties to renew the agreement for a period of time with relatively few items to be renegotiated. Unfortunately, many renewal provisions do not adequately address the issues that will need to be renegotiated at the end of the term. For example, some renewal provisions will simply state that the parties may renew the agreement on the same terms and conditions as set forth in the existing contract. However, the amount of money to be paid and the length of the renewal period are very likely to be different in a renewed agreement. If this is not adequately anticipated up front, then the renewal provision could either be almost meaningless or, at the other extreme, very onerous to one of the parties.

Rights of First Negotiation – Rights of First Negotiation (“ROFN”) provisions typically involve a requirement that the sports property/licensor negotiate in good faith with the sponsor/licensee about renewing or extending the agreement before the property/licensor can offering the same sponsorship or licensing rights on the open market. This is usually considered the least restrictive to the sports property/licensor. However, a ROFN is not without risk or burden. It is very important for the sports property/licensor to make sure that the ROFN period expires far enough before the expiration of the agreement to allow the property/licensor to negotiate an agreement with a new sponsor or licensee.

Right of First Refusal – A Right of First Refusal (“ROFR”) usually gives the sponsor/licensee the right to match the terms of any deal that the sports property/licensor is able to negotiate with a competitor of the sponsor/licensee. Sometimes, a ROFR can extend to any agreement the sports property/licensor may negotiate with any party, even non-competitors. ROFRs are usually considered the most restrictive to the sports property/licensor because ROFRs often will chill the marketplace for the property’s/licensor’s benefits. For example, if a sports property discloses to a prospective sponsor that, once they negotiate a deal, the sports property must offer the same terms to a competitor before entering into the agreement, then the prospective sponsor likely will not want to negotiate with the sports property.

The main problem with these types of provisions is they often lack sufficient specificity, which can lead to disputes and litigation in the future. For example, renewal provisions often do not define how the parties are to determine compensation and other key provisions in a renewed agreement. ROFNs often fail to specify the time frame or the scope of negotiations. ROFRs sometimes do not set forth the time frame for the right to match to be exercises and whether the ROFR extends only to agreements with competitors or to all prospective sponsors/licensees.

Disputes over these types of provisions can impact even the most sophisticated of sponsors and sports properties. By way of example, in 2007 MasterCard sued the Federation Internationale de Football Association (“FIFA”) after FIFA reached a deal with Visa to sponsor the next two World Cups. MasterCard had been the payment card sponsor for FIFA for 16 years, and while FIFA thought the parties had not reached a deal for upcoming tournaments, and that the organization was free to negotiate and cut a deal with Visa, MasterCard obviously disagreed – saying the deal with Visa violated its right of first refusal. The dispute cost FIFA $90 million to resolve – or one-half of the sponsorship amount that had been contemplated in earlier negotiations with MasterCard. A slightly different kind of dispute arose last year between Major League Baseball and longtime beer sponsor Anheuser-Busch. The parties appeared to have struck a deal extending the partnership, and even exchanged what were called “congratulatory messages.” The good feelings diminished, however, when Anheuser-Busch cut a deal with the NFL that involved a substantially higher monetary payment for similar rights. This, MLB said, meant the “market had changed” and the deal cut earlier was no longer satisfactory. A-B sued MLB, and while a settlement was reached, and A-B remains the official MLB sponsor, surely the relationship between the parties has soured.

Practice Tip: Be clear about when a deal begins, and ends, and be specific on the details of how the renewal/ROFN/ROFR works. Add as much detail as possible on how these provisions will work, and walk through various scenarios of how the process will work when the time comes to renew or comply with the terms of the ROFN or ROFR.

5. Default/Breach.

Provisions detailing what constitutes a “default” or a “breach” under a sponsorship or licensing agreement are often given little attention, as the parties often chalk these items up a “legal boilerplate.” Many times, parties will use the same default, breach and terminations provisions in sponsorship and licensing agreements that they use in other contracts. This is often a mistake, as those provisions can prove to be inadequate when a relationship or deal goes bad.

For example, in the case of a breach associated with an event (such as ambush marketing or failure to provide certain benefits), a 30-day cure period, which is standard in many agreements, will not be acceptable to the sponsor who has to endure the ambush marketing or the lack of benefits being provided.

Practice Tip: Carefully think through the most likely scenarios where a deal is likely to run into trouble, and make sure that your default, breach and terminations provisions yield the results that you will need under those scenarios. In addition, make sure the bankruptcy clause has language giving the parties the ability to terminate or take other necessary action in the event a party becomes insolvent or unable to pay its bills. This type of provision is going to be even more important as more and more sports properties struggle financially.

6. Audit Rights

An agreement should include the tools necessary to determine whether a breach has occurred. One good example of this is the right to audit a licensor or sports property. Robust audit rights – including the right to shift fees and costs to the party being audited if the audit uncovers underpayments or other problems - can serve as an effective deterrent to any fraud or other problems and can be critical to discovering whether violations may have occurred.

Practice Tip: Be sure to include robust audit provisions in the sponsorship or license agreement that take into account the financial realities involved in seeking to prove, and recover for, a breach.

7. Assignment.

Like several other provisions discussed above, assignment provisions are almost always viewed as “just legal boilerplate” and do not always receive adequate attention in negotiations. However, assignment provisions can often lead to significant and bitter disputes.

Sponsors often want broad assignment rights without having to obtain the approval of the sports property. Sponsors want and need the ability to enter into bigger deals affecting their businesses, such as mergers, acquisitions and sales, that would require an assignment of a sponsorship or licensing agreement. They do not want to be required to obtain permission from a sports property or run the risk that a crucial deal could be scuttled by one sponsorship or licensing agreement. Sports properties, on the other hand, want those assignment rights without approval to be very narrow or non-existent. They enter into agreements with sponsors and often build strong partnerships with those sponsors. The sports properties want to maintain control over the parties with whom they do business, and a broad assignment provision could force them into a strategic partnership with a party they do not like.

The danger to a sports property of an unwanted assignment was on display in the NASCAR – AT&T dispute that arose in 2007 after Cingular was acquired by AT&T. The Nextel Cup – NASCAR’s premier series – was sponsored by Sprint Nextel Corp., which had exclusive rights as the telecommunications sponsor for the series. Cingular, however, sponsored the No. 31 car in the series prior to Sprint’s series-wide agreement. When AT&T gained control of Cingular, it naturally wanted to change the Cingular logo on the No. 31 car to the AT&T logo. Sprint objected, and NASCAR agreed with Sprint, ruling that the logo could not be changed because the “grandfathering” of Cingular’s right to show a competing telecommunications logo on a car did not apply to Cingular’s successor in this case. A federal court of appeals apparently agreed, finding that AT&T lacked standing to challenge the NASCAR decision – a result that strongly suggests the particular wording of the assignment provision, and the contracts under which AT&T gained control of Cingular, were critical to the decision. Eventually the parties settled the dispute, and AT&T was allowed to display its logo for a brief period (and NASCAR dropped its $100 million counterclaim against AT&T).

Practice Tip: For the sports property/licensor, while you are likely to have to allow some sort of assignment without approval for certain events like mergers and acquisitions, you may want to include some exceptions to ensure that you do not have to accept a business arrangement with a party that you do not like or which could cause undue conflict with an existing sponsor. For the sponsor/licensee, while you no doubt need to have the ability to assign an agreement without approval in certain circumstances, the sports property/licensor is likely to require that it not be forced into a business arrangement with a party that is not a good fit.

8. Professional League Governing Rules and Regulations.

One important aspect in sports sponsorship and licensing deals that can initially be overlooked is the need for approval from the governing league, or the need to include specific provisions required by that league. For example, in licensing deals and naming rights especially, the governing league will usually have strict requirements that must be followed, or else the deal will not be approved and cannot go into effect. It is critically important, especially for the sponsor, to understand this going into the deal, as this requirement can affect negotiations as well as the drafting of the agreement.

We have seen several large deals nearly blow up because the sponsor did not understand the need for league approval and the requirements of the league until late in the negotiation process. For example, in a naming rights deal, the sponsor had specific expectations of putting its name and logo onto the playing surface in a very unique and specific manner. However, the governing league had specific requirements about putting a name on the playing surface – including no corporate logos and relatively few acceptable fonts and scripts. Although the parties were able to recover and complete the deal, this lack of understanding of the rules and requirements of the governing league almost scuttled a very lucrative agreement.

Practice Tip: Understand the governing rules going into the deal. For sponsors and licensees, do not assume that the sports property/licensor fully knows or understands those rules, as they do not arise frequently in day-to-day operations. The leagues may be reluctant to allow sponsors or licensees access to their rules, so you may need to be persistent to see all of the provisions in writing. Most importantly, develop a good working relationship early on with the league – bring league representatives into the process early and keep them informed throughout the process. This will help avoid any surprises at the end.

9. Dominant Sponsor.

In some sponsorship agreements, and especially in naming rights agreements, the sponsor will include a provision that requires the sponsor to have more impressions, or signage, than any other sponsor. This is done to preserve the sponsor’s status as the preeminent sponsor of the facility or the sports property and to avoid any confusion as to whom the major partner of the sports property really is. On the other hand, a sports property will constantly face increasing pressure to add sponsors, and the allure of adding a large sponsor may tempt the sports property into giving a second sponsor enough inventory or exposure to erode the preeminence of the largest sponsor.

Often, the dominant sponsor provision is not defined well enough. We have seen many agreements that use broad principles (“Sponsor will be the most recognized sponsor in the arena” or “Property will provide Sponsor with more impressions than any other sponsor.”). These types of provisions tend to be interpreted differently by the sponsor and the sports property, which leads to dispute. To avoid this, we strongly recommend that the parties go into very minute detail over what is expected. We have seen the dominant sponsor determined by actual size of total signage (down to the square inch), the number of signs in a particular area, or a limit on the size or number of signs that any other sponsor may have in a particular setting. Dominant sponsor provisions can even combine several of these concepts at the same time.

Practice Tip: We recommend that clients be very specific on what is, and is not, expected from a dominant sponsor provision. In most cases, the more detail, the better. This requires a strong working knowledge from the sponsor as to what it needs and a good understanding by the sports property as to what it can, and cannot, afford to give up in this area.

10. The Business Realities.

This last area is less a specific term than a general caution. Several of the disputes we have seen in this area result in large part from a failure by one or both sides to understand fully the business realities of their counterpart, and what each was expecting out of the specific deal. All sponsors and properties are not the same, and consequently all sponsorship agreements are not – and should not be – the same either. Failure to appreciate the expectations of both sides going in can lead to substantial frustration, and ultimately a failure by both sides to get the most out of the sponsorship arrangement.

Practice Tip. Seek to understand the businesses on both sides of the deal, and what each party can and should reasonably expect out of the specific relationship.

Conclusion

These are by no means the only issues that require attention in the negotiation process, or that can lead to litigation. But in most negotiations the parties have only limited time and ability to structure the deal, and when looking for ways to focus your efforts, in our experience these areas deserve the most attention.

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