Legal Articles
adverse conduct in sports and sponsorship
15 Feb

Adverse Conduct in Sports and Sponsorship – The Non-Disclosure of Past Misconduct

Sports and sponsorship have always gone hand in hand – modern athletes continue to make eye-watering amounts of money from sponsorships and endorsements, in some cases more than they’re being paid by their teams to play. While there is serious money being paid to athletes for their endorsements, there is also serious financial and reputational implications for companies when the athlete endorsing them brings their brand into disrepute through adverse conduct.

It is no surprise then that companies like to draft their agreements with athletes on their terms. They need the ability to seamlessly cut ties with an athlete that has demeaned his or her reputation, or risk being similarly demeaned themselves. Morality clauses, as they are widely referred to, operate like life rafts for sponsors – they sit dormant in the contract, an afterthought that all parties hope are never used. But when they are needed, for instance when an athlete is charged with a DUI or is found to have assaulted an intimate partner, they can be deployed by the sponsor to successfully escape the sinking ship. In most cases, this can be done without the sponsor needing to pay another cent to the morally impugned athlete.

Morality clauses allowing termination for adverse conduct committed while under the agreement are not new in sports, and there are many notable examples of athletes who have fallen victim to such clauses. In no particular order, consider the indiscretions of: Lance Armstrong (revelation of his doping practices while competing made sponsors drop him like a pariah); Tiger Woods (whose highly publicized cheating scandal and DUI made him a difficult commodity for his sponsors to handle); and with a more Australian focus, Nick D’Arcy (who had his Australian Olympic Team membership terminated for elbowing fellow swimmer Simon Cowley in the face).

However, a less well-known area in sports law is the use of morality clauses with regard to adverse past conduct, wherein sponsors can terminate agreements with athletes for past indiscretions that were not made known to the sponsor before the agreement was entered into, and have since become public knowledge. This is a highly effective but unforgiving tool, in the sense that the athlete need not commit any misconduct while under the agreement and yet can still have their contract torn up, because a morally questionable act they committed before signing the contract has since come to light.

Of course this begs multiple questions: how much need an athlete disclose about their past; if an athlete does have a history of misconduct, will their disclosure of it make the sponsor more likely to abandon a potentially lucrative deal; are athletes better off running the proverbial gauntlet and not disclosing any potential misconduct from their past, in the hopes it never comes to light? These are all relevant questions and it’s hard to find one easy answer that could be applied broadly to all athletes, because many athletes could potentially have skeletons in their closet (although admittedly to varying degrees). Moreover, overt disparities in negotiating power favoring sponsors often forces athletes to simply take what they can get.

Notwithstanding this, athletes should always obtain legal advice in relation to their sponsorship agreements. Ideally, this should be obtained before entering into any binding contracts, so your rights are better able to be secured. However, even if you are already subject to a sponsorship agreement, obtaining independent legal advice can be incredibly beneficial in confirming your rights, and seeing what options might be available to you where a sponsor is seeking to terminate their agreement with you.

ABKJ Lawyers continues to provide sound advice in relation to sports law and sporting contracts, which can assist you in getting the best possible outcomes and most importantly, securing your contractual rights.

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