This article is written by Anurag Mawai who is pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from Lawsikho. 

Introduction

The American Marketing Association defines Marketing as the activity or set of institutions and processes for creating, communicating, delivering and exchanging offerings that have value for customers, clients, partners and society at large. Marketing is a vital process and in-fact is regarded as one of the key processes for growing an organisation, management thinkers have even dedicated seven essential features which can only be accomplished by a successful marketing process, they can be highlighted as follows

• Promotion.
• Selling.
• Product management.
• Marketing information management.
• Pricing.
• Financing.
• Distribution.

The above list of functions themselves make the case for the vital nature of marketing operation in an enterprise. Marketing is so essential that based on it David Packard, founder of HP gave his famous quote “Marketing is too important to be left to the marketing department”, in this sentence he is by no means undermining the efforts or role of the marketing department of an organisation instead he is trying to make a case for adopting an all-round approach for marketing. This includes using hiring outside agencies or specialists which can serve the needs of an enterprise better as they have the expertise and the skills which not every manager may possess. To hire these external specialists a Marketing Agreement is used.

What is a Marketing Agreement?

To hire a specialized marketing agency, the proprietor or the enterprise needs to have a properly authorized legal document which appoints the marketing agency exclusively or non-exclusively for performing the marketing tasks for a period of time as specified in the Agreement. Hence, Marketing Agreements can be defined as a legally binding written acknowledgement by both the parties i.e. the seller of the product/services and the marketing agency that they have a commercial relationship in which the seller will outline the marketing task outline and the marketing agency will carry out the actual tasks and use their expertise as per the product and remuneration decided.

What is the benefit of entering into a Marketing Agreement?

A properly drafted and executed Marketing Agreement can provide benefits for both the seller and the marketing agency. Some common benefits of entering into a marketing agreement are as follows

• It allows both parties to have a clear understanding with a written proof and explanation about the task outline and their respective obligations during the term of the Agreement.
• It lays down the obligations with the payment and compensation to clarify the portions of the deal which are negotiated and clarify the end result for both parties to understand and prevent future dispute.
• It lays down deadlines be it of the entire engagement or of various sub tasks which are allotted to the marketing agency.
• Due to clear outlines of tasks and compensation no party has any misgivings or confusion thus it establishes trust in the venture.
• Takes care of the confidentiality matters during the venture by clearly binding the marketing agency and specifying the terms too.
• Clarifies the steps to be taken in situations like Force Majeure, Assignment of rights, Intellectual Property right violation, even indemnification clauses can be added.
• It specifies the conditions when either of the parties can terminate the agreement. 

As can be seen from the above points having a Marketing Agreement helps in ironing out any misgivings or confusions and even go as far as addressing any future contingencies which may arise during the engagement. This prevents disputes, solves confusion and builds faith on both sides of the negotiation table. Now that we have understood the importance of having a Marketing Agreement, we should try to have one which fulfills the above listed expectations and for that, there are few clauses which must be incorporated.

Essential Clauses of a Marketing Agreement

• Name of the parties and the relationship– The Name of the Parties should be mentioned along with the nature of relationship between them, if the marketer is on exclusive or non-basis, is the marketer employed as an outsider consultant or on fixed term retainer basis etc. This clarity while writing the Clause helps in clarifying the rights and responsibilities of the parties. An example of this clause can be as follows

“The Seller wishes to appoint the Marketer for providing certain marketing services in connection to the products/services. The Marketer agrees to provide the services in accordance with the terms laid down in this Agreement.

The Seller appoints the Marketer as its exclusive/non-exclusive provider of advertising and marketing services for a period of_______ commencing from the date of execution of this Agreement. The engagement of the Marketer shall be for the term of this Agreement, unless it is terminated as per the conditions laid down hereunder.”

• Scope of the work– The most important function of a Marketing Agreement is to define and lay down the extent of services to be provided as per the engagement. This helps in keeping a written record of expectations and guarantees of the parties. This is vital for settling any future dispute and also in deciding if the parties have actually performed all the respective duties laid down in the Agreement. An example of Scope of Marketing Agreement can be as follows

“The Seller grants the Marketer the right to market the Seller’s products and services in accordance to the terms of this Agreement. The Marketer in fulfillment of his duties shall provide the following services

• Carry out study of the Seller’s market

• Analyze the current marketing strategy and adjust as well as modify it according to the suitable market requirements.

• Develop, Modify and Adjust the range as well as quality of Seller’s services.

• Evaluate in cost and effectiveness the various marketing and advertising services which Seller may provide as per the Market Studies

• Formulate and Develop a communication programme for forming and implementation of marketing strategy.

The Marketer’s functions shall also include any ancillary functions to be undertaken which may come under the above heading but are not explicitly listed. Any plan or proposal developed by the Marketer shall be approved by the Seller or its authorized representative before being implemented.”

• Remuneration and Expenditure Clause– This Clause is meant for deciding the payment mechanism, as marketing ventures have a variable element, so they usually specify a procedure where the Seller has regular meetings with the Marketer and they discuss the expenditure undertaken by the Marketer and the reimbursement as well as fees to be paid thereafter. The initial document can specify this in schedules in the Agreement where the price bands of the Marketer may be specified. An example of this Clause can be provided as follows

“The Seller shall in consideration of the services rendered by the Marketer compensate him according to the marketing plan chosen by the Seller. The Marketer’s plans are specified in Schedule-A of this Agreement, they specify the level of detail and resource which the marketer shall commit to the venture.

The Marketer shall submit to the Seller invoices for the total amount payable by the Seller on a quarterly basis, such invoices shall be payable within fourteen (14) days of receipt of such invoice. GST and other indirect taxes shall be payable by the Seller on the invoices, the Marketer shall provide suitable invoices of the taxes paid by the Seller.

In the event the Seller fails to honour the invoices within the stipulated time provided hereinabove, the Agreement shall stand terminated as per the conditions laid down in this Agreement.”

• Confidentiality– Engaging an outside agency for marketing purposes means disclosing to them proprietary information in the course of developing a good product based advertisement plan, this information if disclosed to any competitors can prove to be detrimental to the survival of the company itself. To ensure that this information is not disclosed in a manner which may harm the Seller it is recommended that the Seller insert a non-disclosure clause in the marketing Agreement. An example of a Confidentiality Clause can be given as under

“The Marketer shall keep confidential all business, products or service information which may be disclosed by the Seller directly or indirectly during the course of this engagement (“Confidential information”).

The Marketer undertakes not to disclose such confidential information to any third party without the prior written permission from the Seller unless required by law, regulatory authority or court order, and only to such extent where such disclosure shall not be detrimental to the interests of the Seller.

The Marketer further agrees that upon expiry or termination of this Agreement it shall not by itself or through a subsidiary or agent or otherwise seek to or sell, license, market, distribute any of the database, marketing surveys, information, intellectual property rights (in whole or in part) or store or develop any database based upon such confidential information provided hereinabove

The restriction contained in this Clause shall continue to apply after the termination or expiry of this Agreement without any limit in time”

• Intellectual Property Rights- This Clause is drafted to clarify how the intellectual property created out of the marketing process would be vested and how it is to be handled post the termination of the agreement. It should ideally list all the kinds of intellectual property created and who the owner shall be and if there is any licensing done for the marketer to use the intellectual property. An example of intellectual property clause can be given as follows

“Except otherwise agreed in writing between the parties or stated in this Agreement, no provision hereunder shall grant or be deemed to grant either party a right, title or interest in any intellectual property right owned by the other party including the other party’s logos, trademarks or any other intellectual property rights in any way whatsoever without obtaining a prior written consent.

All rights, title and interest in all intellectual property rights developed in and relating to the products (“Marketing products”) of the Seller shall be vested to the Seller. The Marketer shall be granted an exclusive right to use the said marketing products only in his product portfolio without use of any of the logos or trademarks of the Seller.”

• Termination Clause- This Clause is used to specify when both the parties are released from the obligations specified in this Agreement, this helps in laying down the boundaries of their duties and to specify when they can say that contract is not binding anymore. It can provide details of the penalty to be imposed on the parties in case of termination. An example of termination clause can be given as follows

“Each party shall have the right to terminate this Agreement at any time by providing a written notice of 30 days to the other party. The parties shall be entitled to terminate the Agreement in the following events

• Either of the parties commit a material breach of this Agreement, which cannot be remedied or a breach capable of being remedied but the party fails to remedy the said breach within 14 days of the written notice.

• The other party is subject to a bankruptcy proceeding, or becomes insolvent or makes an arrangement for the benefit of its creditors where its assets are subject to any form of seizure or a similar officer is appointed over the other party’s assets.

• The Marketer or its representatives engage in prejudicial conduct, which may damage the reputation and may be detrimental to commercial interest of the Seller

• The Marketer is conflicted as a result of other marketing assignments which are competitors of the Seller 

In the event of expiry or early termination of this Agreement the Marketer shall cease to provide the services listed under this Agreement and return to the Seller all of its material provided during the course of this Agreement and shall certify its compliance with all of the obligations specified hereinabove.”

Checklist for a suitable Marketing Agreement

The above specified clauses are only a sneak peek into the vital information which a marketing agreement should iron out, the counsels of both the parties should also take care of certain other things which the marketing agreement should convey. They can be listed as follows

• Clarify the purpose and functions– The Scope of the Agreement should be drafted in consultation of the parties and should list all the functions which the Seller may foresee as availing from the marketing agency. In cases where the agreement directly or indirectly does not specify a particular service the seller will open himself to being charged additionally and even being dragged out of other protections like indemnity which would not cover actions outside the agreement.

• Subject specific draft– The Contract finally drafted should not be a copy past from template but should be tailored to the specific sector in which the Seller operates, this plays out in almost all clauses be it scope of services or the Intellectual Property Clause. 

• Time frame– Specifying a time frame is important in the Agreement, instead of leaving things open ended, a time frame is required in clauses like the term of the agreement which provides for the manner of renewal of the services, or in Intellectual Property Assignment Clause or Confidentiality Clause which provides for the time frame till when the provisions will apply. Additionally, in termination and notices clause the time frame of raising complaints and redressal of the same.

• Liability- This clause should specify the party and the scenarios when the liability would be imposed and the limit on the said liability. Clarifying these aspects can act as a deterrent against callous behavior of the other party as penalties are specific and implementation is quick in these cases.

Conclusion

A marketing Agreement as can be seen is a vital document be it from the perspective of the seller or the Marketing Agency, it can be used for laying down the rights as well as making the erring party make up the losses. Entering into an agreement can also be used for clarifying basic things like expectations of both sides. The Above points can be used for drafting a clearer and sector suitable agreement which can help parties in ironing out the marketing operation details. The main point which the parties should take in consideration is that every marketing agreement is different and depends on the needs of the parties and emanates from the transaction itself, because it is after all an agreement for the market, and made for getting in a market.

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