This article is written by Nirali Shah who is pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from LawSikho.

Introduction

Advertisement is a way of promoting a product and is carried throughout the world in different forms and manner. It is one of the important factors in the success of a product as it helps in reaching the mass. The medium of advertisement may be graphical, audio, multimedia or print. 

An advertising agency agreement is used by an advertiser when retaining the services of an advertising agency. It includes provisions on the scope of advertising and marketing services and ownership of creative work product and intellectual property. Although drafted in favor of the advertiser, this agreement contains integrated drafting notes and negotiating tips that also address the interests of the advertising agency and the broadcaster.

Typically, advertising agreements are used to ensure that the advertiser, the advisor providing advisory services and the person or company hosting the advertising all the parties shall understand their obligations to one another and agree on what they will be receiving from the deal they are making.

Advertising Agency Agreement is a legal document that defines the relationship between an advertiser, its advertising agency and broadcaster. An advertising agency is a person or company that places advertisements in order to target customers. The advertising agency to create advertising work for him. By an advertising agency agreement, all rights to the work created by the broadcaster are assigned to the advertiser for their uses. In return, the advertiser agrees to pay the agency and the broadcaster a certain amount. The agreement covers what services will be rendered, fees and payment structure, and ownership and use of content developed during the term of the agreement.

For example: An Advertising Agreement is a document that is signed and executed between an Individual/ Corporation/Company who wants to promote their products on the one side and the Advertiser, the Company/Corporation/Individual who would advertise their product and help them in reaching the mass on the other side. The term Advertising Agreement is not defined in any statute and the example of the Advertising Agreement is the Contract between a billboard company and a company wanting to rent a billboard for advertising space. 

In simpler terms, the parties involved are:

• The Advertiser who would be engaged in the manufacture, sale, marketing and distribution of goods and services in different categories such as xxx.
• The Ad Agency who would be engaged in the business of providing advisory services, brand communication and solutions, buying and planning of media spots for advertising and other ancillary activities.
• The Broadcaster who would be engaged in the business of broadcasting, phishing operations through its network of TV/ media channels.

While drafting the Advertising Agreement, following important points must be taken care of:

• Under the scope of work – Why agencies always need a contract.
• Names and addresses of agency and client.
• Outline the contract’s duration.
• Payment schedule.
• Conditions to avoid scope slink.
• Wwhen the contract is terminated.
• Outline what happens with a breach of contract.
• Include a confidentiality and indemnity clause.

Key clauses while drafting an Advertising Agreement 

Definitions

There could be terms which are used many times throughout an agreement. Similarly, definitions tend to make interpretation and reading of an agreement simpler and concise and reduce ambiguity. A defined term used anywhere in the agreement refers to the defined person or entity or process.

Duration

This clause specifies the validity of the Agreement. The time period for which the Advertising agreement shall be carried out or stay active. This clause mentions the exact dates of the effectiveness of the agreement and when the agreement is to come to an end or to be terminated.

Termination

The ‘Termination clause’ is an important clause found in any form of legal agreement that allows for the agreement to be ended or terminated, under circumstances specified or breach of duties. The termination clause is typically placed along with the terms & conditions agreement. 

Payment

Payment refers to the action or process of paying someone or something in exchange for goods/services rendered to them. When it comes to advertising agreement here it means the consideration paid by the company to the advertiser for providing the service of advertising.  

Therefore, it is important to set out all the details explicitly in the agreement with regards to the payment such as total consideration that needs to be paid for the service rendered by the advertiser, when the payment needs to be made, when is the payment due, what duties are to be performed before the payment, what is the payment type, whether instalments or lump sum amount needs to be paid, which party will bear any extra expense that might come up in creation and publishing of the advertisements in various media, how will an untimely contract termination affect the payment, etc.

Changes in agency

Set out a clear process if the Advertiser requests a scope of work amendment or to change the agency. Any amendments shall be clearly communicated to other parties of this contract and must specify the effects of changes on the rights and entitlements of each party to the contract.

Confidentiality

Confidentiality with regards to the information, documents, records, etc shared by the company to the advertiser during the scope of this Advertising Agreement or in negotiation thereof shall be maintained and must not be shared with any third party. 

The Advertiser shall undertake that they shall not expose any confidential information except with the prior written consent of the Company or if directed to do so by a competent Court provided always that such information has not previously entered the public domain by other means.

Therefore, it is important to set out all the details explicitly in the agreement with regards to what shall be the consequences in case of breach of confidentiality, etc.

Warranty and Representation

This clause ensures that the parties to the agreement are competent enough to enter into any agreement. This clause includes a declaration by one party i.e. receiving party, that they are authorized to do such acts and have the required permissions, licenses, consents or authority to enter into the agreement.

Reports

The Advertiser should provide a complete report to the company about the response, views, inquiry they receive from the intended buyers towards such advertisements. Such information would be available in certain media like television, internet, etc.

Therefore, it is important to set out all the details explicitly in the agreement with regards to: in what form the report shall be made, at what regular intervals it needs to be submitted, how many reports are required to be made at a time, what shall be the consequences in case of non-submission of the report by the advertiser, etc.

Intellectual Property

Intellectual Property in simple terms refers to the creation of the human mind. The Advertiser has to keep in mind while creating and publishing the advertisement that they are not violating any third party intellectual property rights. Also, in the advertising agreement the parties need to set out who will be the owner of the Intellectual Property if any created during the term of the agreement by the advertiser.

Therefore, it is important to set out all the details explicitly in the agreement with regards to whether any additional remuneration would be payable by the company to the advertiser for creating any Intellectual property, consequences for non-disclosure of intellectual property, whether the advertiser after the termination of the agreement would be allowed to use the intellectual property, etc.

Indemnification

Indemnification refers to the security against legal liability for one’s actions. When it comes to advertising agreement, it means the responsibility of both parties towards indemnifying each other for any losses incurred out of any breach or other act that is expressly provided in the agreement.

The concept of Indemnity is embodied u/s 124 of the Indian Contract Act which states that, “a contract whereby one party promises to save the other from loss caused to him by the conduct of the promisor himself or by the conduct of any other person is called a contract of indemnity.” For example, it may be a violation of trademarks or other Intellectual Property of a third party on part of the advertiser. 

Therefore, it is important to set out all the details explicitly in the agreement with regards to what all actions are covered under indemnification by which party to the agreement.

Governing Laws

‘Governing Law’ clause is a clause used in all legal agreement templates that you intend to declare which type of rules and laws shall govern the agreement if any of the legal issues arise. This clause forms a mandate part of any legal agreement and is consistently included in the contracts between parties to the contract.

These laws state the rules and regulations that to be followed by both of the parties to the contract and make the necessary compliances, if any. This clause also states the punishment in case of breach of any duties by either of the parties. Such punishments are to be declared when the parties to the agreement breach the clauses of the agreement or violate the law.

General Provisions

1. Entire Agreement – This agreement represents the entire understanding between the parties with respect to its subject matter and shall supersede any previous contract or resolution or communication that may exist.
2. Amendment – This agreement can be amended only in written form and signed by both parties.
3. Assignment – This Agreement may not be assigned by either party without the consent of the other party in written form.

Special Requirements

At times in the advertising agreement, all the scope of work might not be covered. Therefore, the drafting of the agreement should be done in such a way that in lieu of the payment by the company, the work should be carried out by the advertiser.

For example, the advertiser might require taking up additional campaigns for special purposes like a product launch, subject to additional payment usually in premium by the company.

Advertisement is one of the most important factors in the success of a product and involves a lot of money to advertise a product. Therefore, to safeguard the interest of all the stakeholders, the company must always try to enter into a written agreement with the advertiser wherein all the rights and responsibility, terms and conditions of the advertising agreement would be set out. While doing so, the parties must keep in mind the terms used in the agreement because, at the time of conflict/dispute/disagreement between the parties, the adjudicating agency or court of law would refer to the written agreement.

Key Takeaways

The Advertising Agreement should be preferred to be in the express form (written) because if there is any conflict/disagreement/dispute between the parties then their legal interest would be protected by the written agreement and it would be easy for the court of law or for any adjudicating agency to resolve the matter.

The above discussed are few of the important key terms in the advertising agreement. The list is not exhaustive. Please refer the below draft Advertising Agreement between the Advertiser-Agency-Broadcaster for ease reference:

Agreement between Advertiser, Agency and Broadcaster

This Agreement made this _____________ Day of _____ 2021. 

• Names and addresses of the agency and client

This is the first part of your contract and should be at the top as it clearly shows who will be entered into the agreement.

The draft shall be as follows:

BY 

        , a Company incorporated under the provisions of the Companies Act, 2013 and having its registered office situated at (hereinafter called the “ADVERTISER”), as the FIRST PART;

AND

         having its registered office located at (hereinafter called the “AGENCY”), as the SECOND PART;

AND

_____________________, LLP incorporated under the provisions of Limited Liability Partnership Act and having its registered office located at ________ (hereinafter called the “BROADCASTER”), as the THIRD PART.

WHEREAS:

1. The ADVERTISER, the AGENCY and the BROADCASTER are positively desirous of entering into a business commercial relationship.

2. The ADVERTISER is engaged in the manufacture, sale, marketing and distribution of goods and services in different categories such as   .

3. The AGENCY is engaged in the business of providing advisory services, brand communication and solutions, buying and planning of media spots for advertising and other ancillary activities.

4. The BROADCASTER is engaged in the business of broadcasting, phishing operations through its network of TV/ media channels.

The parties to this Agreement shall be individually referred to as “ADVERTISER”, “AGENCY” and “BROADCASTER” respectively and shall be referred collectively as the “PARTIES”.

The ADVERTISER has agreed for marketing of the brands, services and products and the BROADCASTER has agreed to telecast advertisements on the negotiated rates. The parties agree to the terms and conditions, as stated below:

Definitions

For Advertising Agreement, the following words and expressions shall help us to understand the concept and terminology:

“Advertiser”

“Advertisement Commercials” 

“Agency” 

“Broadcaster” 

“Channels” 

“Commercials” 

“Copyright” 

“Other Advertising slots” 

“Product(s)” 

“Release Order”

“Rates” 

“Spots” 

Booking and scheduling

Under this clause, the adviser agrees to authorize Broadcaster in connection with the advertisement of the products and/or services of Advertiser for a term (“Term”) as hereinafter provided. Your scope of work is the one place that can land you in all sorts of trouble if you’re not careful.

The clause can be drafted as below

1. The BROADCASTER shall post advertisements of ADVERTISER’S products/ brands/ services and shall advise that such booking shall be through a Release Order and to be communicated in the written form by the ADVERTISER. 
2. The ADVERTISER shall provide such schedules in a soft and/or hard copy in the form of Release Orders. The Release Orders communicated electronically as soft copy shall be binding on the ADVERTISER for consideration.
3. The BROADCASTER shall telecast the advertisements agreed or booked by the ADVERTISER as per the activity scheduled by the ADVERTISER through the Release order.
4. The ADVERTISER may in need re-schedule the spots with a minimum of 7 days’ notice and the BROADCASTER shall, at its own discretion, agree to Re-scheduling. And once the BROADCASTER has agreed for re-scheduling, such revised schedule shall be deemed as the original schedule.
5. The BROADCASTER may at its own discretion, may refuse to transport any advertisement or commercial marking or branding that is found to be violating any laws in force at the relevant time.

Consideration and payment terms

Nobody likes hammering a payer for a late payment or an overdue invoice. It’s frustrating and can affect the parties’ relationship.

The best way to avoid this is to have a clear payment schedule outlined from the moment advertiser starts working with the agency and broadcaster. This part of your contract must outline the total amount you will be paid, how they will make payment, and if the payment is refundable:

The clause can be drafted as below

1. The compensation for Advertising Commercials and the other perquisites as agreed by the Parties shall be binding during the entire term of this Agreement.
2. The BROADCASTER agrees to make good the value in the event of significant distribution reduction due to either blocking of advertisements or programs by Cable Operator/s or power failures. 
3. All prices, rates included in this Agreement are inclusive of 18% p.a. as Agency Commission and plus applicable taxes.
4. The Invoice communicated to the ADVERTISER will have to be paid by the ADVERTISER within forty-five (45) days from the receipt of the invoice.
5. In case of disputed invoices (in part or whole), the entire invoice will remain pending until such time the dispute is resolved. The BROADCASTER and the ADVERTISER undertake to resolve disputes within fifteen (15) days of receipt of the invoice.
6. Failure to pay the Consideration as per the schedule, the ADVERTISER shall be liable to remit the amount alongwith 12% interest per annum plus applicable taxes from the date of the default. 
7. In the event of the breach of any of the conditions of this Agreement, the ADVERTISER may at its sole discretion agree for the waiver. The ADVERTISER reserves the only right to withhold payment in the event of a breach of any of the conditions of this Agreement. 
8. The ADVERTISER shall not be entitled by any reason of set-off, counterclaim or other similar deduction to withhold payment of any amount due to the BROADCASTER hereunder.
9. The BROADCASTER shall raise an invoice based on prices and rates agreed between the BROADCASTER and ADVERTISER in written form and in the name of the ADVERTISER in respect of the Advertising Commercials that are utilized by the ADVERTISER at the end of every month or at any other schedule agreed in the basic terms of the Agreement.
10. Invoices shall be communicated by the BROADCASTER not later than fifteen (15) days after the end of the calendar month. In case of any corrections, the receipt date will be taken as the date on which the revised invoices are submitted and acknowledgement shared by the ADVERTISER as being factually correct and complete in all respects.
11. Any discrepancies faced in the Invoice shall be brought to the notice of BROADCASTER by the ADVERTISER within seven (7) days in written form from receipt of the invoice. 

Changes in agency

Set out a clear process if the Advertiser requests a scope of work amendment or to change the agency. Any amendments shall be clearly communicated to other party of this contract and must specify the effects of changes on the rights and entitlements of each party to the contract.

The clause can be drafted as below

1. In the event of ADVERTISER changing its agency, all the obligations, terms, conditions, entitlements and rights of the ADVERTISER and the BROADCASTER shall remain unchanged and fixed. 
2. Any such change in the agency shall be approved in written form by the ADVERTISER. 
3. The ADVERTISER hereby agrees to settle all outstanding dues, commission payments which have fallen due with the existing Agency before business shall be routed through the new authorized Agency.

Intellectual property and trademarks

The clause can be drafted as below

For the term of this Agreement, the ADVERTISER grants to the BROADCASTER a royalty-free, non-transferable license (with no right to sub-license) to those of its patents and design rights (and the patents and design rights of its Affiliates) with claims that cover the Products or any of them, solely for the limited purpose of permitting the BROADCASTER to market and advertise the products or services.

• The BROADCASTER shall acknowledge that all the technical data, commercial information made available by ADVERTISER must be known as intellectual property of the ADVERTISER and further, the ADVERTISER is the registered user/ absolute owner of all trademarks, copyright, trade names, artistic works in the data, designs, documentation and other work made available or communicated or provided by the ADVERTISER to the BROADCASTER.

At any time and under any circumstance the BROADCASTER shall not:

a. do anything which shall or may impair the right, title or interest of ADVERTISER in its Intellectual Property or create any right, title or interest therein or thereto adverse to the interest of ADVERTISER.

b. use or permit the Intellectual Property of ADVERTISER to be used by any person.

c. use the Intellectual Property of ADVERTISER with any other mark or marks or any other marks unless for the purpose of specific and limited use allowed under this agreement for sponsorships or promotion activities.

d. infringe, copy, initiate or otherwise interfere with the Intellectual Property Rights of ADVERTISER or otherwise prejudice the same in any manner whatsoever.

• The ADVERTISER shall acknowledge that all the technical data, commercial information made available by BROADCASTER must be known as intellectual property of the BROADCASTER and further, the BROADCASTER is the registered user/ absolute owner of all trademarks, copyright, trade names, artistic works in the data, designs, documentation and other work made available or communicated or provided by the BROADCASTER to the ADVERTISER.

At any time and under any circumstance the ADVERTISER shall not:

a. do anything which shall or may impair the right, title or interest of ADVERTISER in its Intellectual Property or create any right, title or interest therein or thereto adverse to the interest of BROADCASTER.

b. use or permit the Intellectual Property of BROADCASTER to be used by any person.

c. use the Intellectual Property of BROADCASTER with any other mark or marks or any other marks unless for the purpose of specific and limited use allowed under this agreement for sponsorships or promotion activities. 

Warranties, obligations and undertaking

The clause can be drafted as below

1. The Parties warrant and undertake that throughout the Term each of them has and will continue to have full authority to enter into this Agreement and to undertake each and all of the particular obligations on their respective parts contained herein.
2. The ADVERTISER affirms that the contents of the advertisements provided to BROADCASTER for airing shall be in conformity with the laws prevailing in India, especially the Advertisement Code and the Standards of practices issued by Advertising Standards Council of India (ASCI) and also in conformity of Rule 7 of the Cable Television Network Rules, 1994 ( as amended from time to time) and have been duly censored by the appropriate authority, if required.
3. The ADVERTISER further declares and affirm that nothing in the advertisement infringes the Copyright or any other right of any third party and that there are no claims, actions or proceedings, pending or threatened, affecting the advertisement or the title thereof.
4. The BROADCASTER undertakes and the ADVERTISER consents that the BROADCASTER shall make recordings of the advertising material for archive in order to comply with the provisions of all applicable statutes and/or codes when required.
5. The Parties shall in the fulfillment of their obligations comply with all applicable laws, byelaws and regulations of the Government and other concerned authorities.

Termination

The clause can be drafted as below

1. Subject to the following provisions, this Agreement shall commence on the Commencement Date and shall continue thereafter unless terminated by either party giving the other at any time not less than one month’s prior written notice to expire on or at any time after the end of a one (1) year period following the Commencement Date.
2. Notwithstanding anything contained herein, either Party may terminate the Agreement with a prior notice of Thirty (30) days to the other party only in the following circumstances:

• if an event of force majeure which has lasted more than three (3) months.
• if the other party commits a breach of any term or conditions of this Agreement.

Consequence of termination

The clause can be drafted as below

1. If for any reason this Agreement shall be terminated or expire.
2. the BROADCASTER shall promptly pay all outstanding unpaid invoices rendered by the ADVERTISER in respect of the Products, which shall become immediately due and payable by the BROADCASTER, and, in respect of products or services ordered prior to termination but for which an invoice has not been submitted, the BROADCASTER shall pay immediately upon submission of the invoice. The ADVERTISER shall be entitled to modify or rescind the terms of any credit arrangement extended to the BROADCASTER for the remainder of the notice period.
3. except insofar as is reasonably necessary to sell any remaining stocks of the Products, the BROADCASTER shall cease immediately to use the ADVERTISER’s name or trade-marks to promote the Products or services or to make any other use of the ADVERTISER’s Intellectual Property Rights.
4. Termination of this Agreement for any reason shall not affect any rights or liabilities that have accrued prior to termination or the coming into force or continuance in force of any term that is expressly or by implication intended to come into or continue in force on or after termination.
5. The termination or expiry of this Agreement shall not of itself give rise to any liability on the part of the ADVERTISER to pay any compensation to the BROADCASTER for loss of profits or goodwill.

Confidentiality

The ad agency and advertiser should agree to a non-compete clause in the contract to protect both parties from revealing trademarked or proprietary information to competitors.

The clause can be drafted as below

The BROADCASTER shall keep confidential and only use for the purpose of this Agreement all Confidential Information, and the BROADCASTER shall ensure that such information, documentation and materials are not disclosed to any third party without the ADVERTISER’s prior written consent. 

The obligations set out in aforesaid sub-clause, shall not apply to any information or part thereof which:

• is already in the public domain or comes into the public domain through no fault of, or breach of this Agreement by the BROADCASTER or his AGENT or representative;
• is disclosed to the BROADCASTER by a third party having a legal right to do so;
• is developed by the BROADCASTER independently of any Confidential Information disclosed to the BROADCASTER by the ADVERTISER;
• the BROADCASTER is obliged to disclose by reason of any law or body having the force of law. In which case the BROADCASTER shall give the ADVERTISER prompt advance written notice of the disclosure (where lawful and practical to do so) so that the ADVERTISER has sufficient opportunity (where possible) to prevent or control the manner of disclosure.
• Without prejudice to aforesaid clause, upon demand the BROADCASTER will return to the ADVERTISER all such Confidential Information and materials and all copies thereof.

Indemnity

The clause can be drafted as below

1. The BROADCASTER shall provide all information reasonably requested by the ADVERTISER in respect thereof. The BROADCASTER shall be solely responsible for, and shall indemnify the ADVERTISER against any claims, statements or representations made in respect of any product or service that the ADVERTISER has not approved in writing in advance.
2. The BROADCASTER shall indemnify the ADVERTISER against all losses or damages (whether direct or indirect, consequential or otherwise, including loss of profit), together with all costs, expenses and liabilities (including without limitation, legal and other professional costs) incurred, suffered or awarded against the ADVERTISER as a consequence of any breach by the Distributor of the Distributor’s obligations under this agreement or that arise as a result of the action of the Distributor, including, but not limited to BROADCASTER’s management and distribution of the Products.

Notices

The clause can be drafted as below

1. Any notice to be provided in this Agreement shall be in written form and shall be addressed or delivered or faxed by suitable electronic means as may be communicated to the other party. 
2. Any notice shall be effective on receipt or within seven (7) working days of mailing or upon transmission in case of fax transmission/ electronic.

Assignment

The clause can be drafted as below

The BROADCASTER does not assign or sub-contract, in whole or part, any of its rights under this Agreement without the prior written consent of the Advertiser. Without prejudice to any other rights to which the Advertiser may be entitled, if the Broadcaster seeks to assign or sub-contract its rights in breach of this clause the Advertiser shall be entitled to terminate this Agreement with immediate effect.

Invalidity

The clause can be drafted as below

If any provision of this Agreement is held to be invalid or unenforceable, such a provision shall (so far as invalid or unenforceable) be given no effect and shall be deemed to be excluded from this Agreement, but without invalidating any of the remaining provisions of this Agreement. The parties shall use all such reasonable attempts to replace the unenforceable or invalid provision by a valid regulation.

Force Majeure

The clause can be drafted as below

1. Subject to Termination clause, neither party shall be liable for any failure to perform, or for any delay in performing, any of its obligations other than the payment of money, if and to the extent that the failure or delay is caused by Force Majeure and the time for performance of the obligation, the performance of which is affected by Force Majeure, shall be extended accordingly but only if the party so affected gives prompt written notice of the Force Majeure and an estimate of its expected duration.
2. The party claiming to be delayed or prevented in the performance of its responsibilities or obligations under this Agreement by any reason of Force Majeure shall use reasonable endeavours to bring the Force Majeure event to a close or to find a solution by which the Agreement may be performed despite the continuance of the Force Majeure event. This Agreement does not require the ADVERTISER to give the Distributor any right of priority over the ADVERTISER’s other BROADCASTER or AGENT.

Governing law and jursidiction

The clause can be drafted as below

The interpretation, construction and enforcement of this Agreement and the Terms and Conditions and matters relating to them shall be governed in all respects by Indian law and the parties hereby submit to the exclusive jurisdiction of the XXX High Courts.

Dispute resolution

The clause can be drafted as below

In case of any dispute or disagreement arising out of this Agreement, the Parties shall:

1. in the first instance, attempt to settle the same cordially;
2. in the event of a failure to reach a cordial agreement, the dispute shall be referred to Arbitrator which shall be conducted in accordance with the provisions of Arbitration and Conciliation Act, 1996, or statutory re-enactment or any amendment thereof, as may be in force. 
3. and each party to the Arbitration will bear its respective costs relating to the arbitral proceedings. 

Alterations

The clause can be drafted as below

Save as expressly provided in this Agreement, no variation or amendment to this Agreement shall be effective unless it is in written form and signed by an authorized representative duly appointed by each party.

Waiver

The clause can be drafted as below

No waiver by either party of any default shall be considered as a waiver of any default of the provisions of this Agreement.

Entire agreement

The clause can be drafted as below

1. This Agreement and the Terms and Conditions constitute the entire agreement between the parties and shall supersedes all other/ prior written or oral understandings or agreements of the parties concerning the subject matter hereof which may not be changed or terminated except as set forth in this Agreement.
2. In the event of any conflict between the requisitions of this Agreement and the Terms and Conditions, the provisions of this Agreement shall prevail.

AS WITNESS the hands of the parties or their duly authorized representatives on the date set out above.

Signed and Delivered

For and behalf of the ADVERTISER

Name:

Designation:

For and behalf of the AGENCY

Name:

Designation:

For and behalf of the BROADCASTER

Name:

Designation:

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