Morals Clauses: 3 Things You Should Know Before Signing Your Next Endorsement Deal
If you’re an online influencer actively engaged in representing other brands, chances are you’ve read your fair share of endorsement deals.
In these contracts, you’ve probably noticed a good amount of detail as it relates to social media. For instance, when to post, what to post, how often to post, which hashtags to use, and the list goes on…..
Well, believe it or not, the list is about to get even longer.
Companies are starting to enhance their contracts to address social media in ways that will allow them to easily terminate influencer contracts. Specifically, for influencers personal online behavior and social media use.
How are companies doing this? Through strategically drafted morals clauses.
A morals clause is a contractual provision that allows a Company to single-handedly terminate a contract, or take action against an influencer, for engaging in conduct that may negatively impact the influencer’s personal image, and as a consequence, the public image of the Company.
Morals clauses have been used for many years and traditionally seen in entertainment industry contracts. However, they have become more prevalent in the online world, thanks to the quick dissemination of information (both good and bad) that the internet, particularly, social media allows.
Companies have always been protective of their brand's reputation and for a good reason. The consequences of undesirable conduct from a brand representative can be devastating to a company’s bottom line.
But what about YOUR bottom line as an influencer?
With increased censorship of influencer social media use, you’ll now need to be aware, not only of posting requirements, but also the limitations imposed on social media use by morals clauses.
Here are 3 things you should know about morals clauses before signing your next endorsement deal:
#1: Companies like broadly-worded morals clauses.
As a general rule of thumb, companies will always try to include a broadly-worded morals clause. A broad morals clause allows the company to exclusively determine what conduct violates the morals clause and when these violations are triggered.
Here’s an example of a broadly-worded morals clause in an online influencer/blogger endorsement agreement:
“Termination for Cause: Notwithstanding anything set forth herein to the contrary, Company may immediately terminate this Agreement without further liability or obligation to the Endorser if [.....] Endorser engages in behavior (at any time during the Term) that is considered to be patently offensive, immoral, or objectionable to reasonable members of society in general.”
As you can imagine, this wording is not ideal for an influencer/endorser. Primarily because it leaves the influencer guessing as to what specific conduct is considered “immoral” and who will ultimately make this determination. A morals clause that prohibits a broad range of conduct (like the one above) may prohibit conduct that would otherwise seem ok.
Instead, a more narrowly-worded morals clause is preferred. Specifically, one that details the exact conduct considered to be a violation of the clause. However, from a practical standpoint, most companies will be hesitant to include an inclusive list of conduct deemed to violate the morals clause. Generally, a happy medium is to have a neutral third party; such as an arbitrator or mediator, make the ultimate determination.
Regardless of your bargaining power, it is imperative that you raise concerns of a broadly-worded morals clause before signing the contract. Specifically:
What specific conduct is violative of the morals clause?; and
Who will ultimately make this determination?
#2 Once invoked, a morals clause can be financially detrimental.
In most instances, once the company invokes a morals clause, the contract will be terminated. The financial consequences that come with losing an endorsement contract can be devastating and instant depending on the terms and scope of the agreement.
Beyond termination of the agreement, some companies may even impose financial penalties (such as reimbursement for monies advanced) and payment of damages for breaching the contract.
I think it goes without saying that the loss of one deal that becomes publicized, will ultimately affect your ability make a living, and secure other endorsement deals in the future.
#3 There are non-legal and legal remedies available when a morals clause is invoked.
A company’s decision to enforce a morals clause does not always or necessarily mean that the agreement can or will be terminated. In fact, it is possible to negate the application of a morals clause if it is improperly invoked.
For instance, it is not uncommon for a morals clause to require intentional conduct in order to terminate the contract. If it can be proved that the conduct in question was not intentional, the morals clause cannot be invoked. Of course, companies may still attempt to invoke the clause, especially if you are not represented by an agent or an attorney and have limited bargaining power.
Once a morals clause is invoked and the contract is terminated, it can be more difficult to negate or enforce your legal remedies without the proper representation. However, with the proper representation, you may be able to recover your financial loss on other legal theories such as wrongful termination and constitutional violations like freedom of expression.
As companies continue to enhance their morals clauses to address social media use, it is imperative that you have a clear understanding of how your everyday conduct online, may begin to impact your contractual relationships. It is always best to have an attorney review your contracts before signing on the dotted line.