This article has been written by Nikita Arora pursuing the Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from LawSikho. This article has been edited by the Ruchika Mohapatra (Associate, Lawsikho) and Dipshi Swara (Senior Associate, Lawsikho).
Table of Contents
Introduction
Marketing in its original, fullest, purest, and best form is more crucial today than ever before. Today’s world is flooded with innovative products, services, technology, solutions, business models, and so on. To produce income and profit, these innovative offerings must be brought to the market and promoted. Innovation cannot sustain a business on its own; it must be combined with marketing. While there are many tools available to help you understand how to design a marketing plan for your business, sometimes it is best to leave it to the subject matter specialists. This entails hiring a marketing agency or consultant to handle your small business’s marketing on your behalf. While this can greatly free up your time, not to mention leaving it to the specialists to do what they do best, market your brand, working with an outsider on something so essential requires you to think through logistics. In this instance, you must create a marketing agreement. In this article, we will discuss how agreements between brands and marketing and advertising companies are created, as well as the important negotiation issues that you, as a lawyer, should keep in mind while drafting agreements.
Meaning of marketing partnership agreement
A marketing partnership agreement is:
- A written document that is created by one side.
- All parties involved have agreed on it.
- All marketing efforts done by the outside company or consultant are included and described.
- The scope is unambiguous.
A marketing partnership agreement, like any other business contract, explains what is anticipated of the hired marketing agency or consultant, as well as the scope of work for which they have been employed. It is a legal document that explains why a marketing agency or marketing consultant was recruited in the first place. It serves as a record of what all parties have agreed to, and it goes into detail on points such as payment, schedule, and deliverables.
It also serves as a written record that protects all parties by clarifying what is expected of whom and when. For example, because the marketing partnership agreement explicitly states the scope of the project, the company cannot fraudulently claim that the marketing agency did not keep its end of the bargain.
What should a marketing partnership contract incorporate?
A marketing partnership agreement, unlike other types of business contracts, does not have a clearly defined framework that must be followed. There will be some clauses featured in the majority of agreements, but there isn’t a specific format that all businesses utilize.
As a result, all marketing partnership agreements will include a discussion of payment conditions, timelines, and some articulation of the marketing agency’s job. There may also include a part dealing with legal issues such as copyright protection, nondisclosure, or other provisions concerning a company’s proprietary information.
A marketing partnership contract will almost certainly include details on what parties will do if the agreement is terminated prematurely, as well as a clear outline of what success looks like so that the business can determine whether or not the marketer has accomplished what they were hired to do.
The elements of a comprehensive agreement
So, what exactly is a marketing partnership contract? An agreement must include the following elements to be used in business:
Discussion of exclusivity
A contract will typically grant the marketing agency or consultant exclusive rights to undertake marketing, public relations, and so on for the business or product for the period of the deal.
That is, if a small business hires a marketing agency to promote a new product, the marketing partnership agreement will state that no other marketing agencies will be involved in marketing said product for the set period.
This includes precisely identifying the client (the company) and the consultant (the agency or marketer), as well as outlining the duration or scope of the project and stating that no other agency will be employed during that period.
Timeline details
A timeframe is an essential component of every marketing arrangement. For one thing, the agency or consultant will not have exclusive rights to perform the business’s marketing indefinitely; they are most usually employed for a set period (to promote a newly launched product, service, or business, for example), or to promote a specific product or service.
As a result, a marketing partnership agreement must have a clear schedule that is agreed upon by both the client and the consultant. This is usually one to two years, however, the timetable is determined by the needs of the firm.
Payment and cost details
What is the entire cost of hiring the agency or consultant? This is where the nuts and bolts come into play.
This portion of the marketing partnership agreement should specify the total amount of payment as well as any payment structure information. As a result, this could take the form of a discussion about monthly payments, a clarification of the total amount upfront, and so on. It is essential to obtain prior written approval for payment conditions.
Project-specific details
This is the most adaptable portion of the marketing agreement; after all, each agreement will be unique.
Make a note of the facts of the project you hope to engage an outside marketing business agent to complete at the outset since you will incorporate those elements into the agreement. What kind of work are you looking for them to do? Are they creating a comprehensive advertising and marketing strategy for your entire company, or are they only marketing a single new product? What routes do you want to pursue? Do you want a well-structured social media campaign, PR outreach to local media, paid to advertise, and so on?
Remember that a marketing partnership agreement is a record of your expectations, so getting on the same page in terms of what you anticipate from your selected agency provides you the best opportunity of having a satisfying working relationship.
Timeline for completion
As mentioned earlier, you will need to explicitly outline when the various project components are due, how long you anticipate working with the agency or consultant, and any other date-specific information. So, if the project includes deliverables that must be finished by a given date, include them here, as well as the entire duration that the relationship spans (a one-year contract, two years, and so on).
Any legal disclaimers, insurance information, confidentiality, or similar points
Depending on your sector, various regulations may need to be addressed in your marketing agreement. There may even be a debate about taxes and who will pay what. In addition, if relevant, include any insurance details.
If your company relies on sensitive intellectual property or proprietary information, you may need to give details on how this will be handled. This may include a discussion of property ownership—that is, you may need to go into depth about who owns existing pieces of your firm, as well as who will own everything created.
You will also need a section on confidentiality if you require your contracted marketer to sign a non-disclosure agreement. This normally looks like a statement that a signed non-disclosure agreement exists, rather than the actual agreement itself, which you will have to sort out at a later date and through a different arrangement.
The benefits of having an agreement
- Accountability: There is a clear illustration of all parties’ duties.
- Clarification of scope: Everyone will understand what the project’s scope is, promoting a positive working relationship.
- Reduced danger of miscommunication: If everything has been defined upfront, you are less likely to butt heads about when payments are due or the intended outcome of the project has not been obtained.
- A written consent: If the relationship fails in the worst-case scenario, you are safeguarded by the fact that you have a record of everything that was agreed upon by all parties involved. If there is a disagreement, you can always resort to the applicable law.
The drawbacks of having an agreement
- It takes more time to reach an agreement than it does to not reach an agreement at all: Clearly, creating a marketing partnership agreement takes more time and effort than skipping the process altogether.
- Things can still fall through the cracks: While you may try to cover all of your bases, indeed, it is not always possible to protect yourself from all potential undesirable outcomes.
- Some agencies or consultants may be hesitant to sign anything so official: There may be people who object to signing what appears to be a formal contract.
Some important clauses that should be included in the agreement
- Fees and Payment
Explanation: If you are new to contract drafting, you may believe that the payment and fees clause does not require much attention. However, it is crucial to note that not all agreements include a straightforward payment clause stating that the party receiving services will be paid monthly, on a set schedule, or after the completion of services.
The fee, manner of payment, period of payment, and inclusion of expenses must all be carefully adjusted in marketing service agreements. Because such agreements may deal with multiple fields at the same time, it is critical to include a phrase that covers the cost of taxes and other liabilities in this clause. Please read the sample clause supplied for clarification.
Sample Clause:
Flat Fee: As compensation for the Services rendered according to this Agreement, the Client agrees to pay Aquarius a flat monthly fee of $5,000.00.
Taxes: Client shall pay, reimburse, and/or hold Aquarius harmless for all sales, use, transfer, privilege, tariffs, excise, and all other taxes and all duties, whether international, national, state, or local, however, designated except income taxes, which are levied or imposed because of the performance of the professional services under this Agreement, except income taxes.
Other Fees: Unless otherwise provided in this Agreement, all other services, including Out-of-Scope Assignments, rendered by Aquarius shall be subject to additional compensation under a separate agreement between Aquarius and Client.
Payment Of Invoices: All invoices shall be paid by the Client within fifteen (15) days of receipt. Payments not made within such period shall be subject to late charges equal to the lesser of (i) one and one-half percent (1.5%) per month of the overdue amount or (ii) the maximum amount permitted under applicable law. Aquarius may suspend all services on seven (7) days’ written notice until the amounts outstanding are paid in full.
- Third-party license
Explanation: Third-party provisions are required, in which the parties anticipate that some items may be required from a third party for the agreement to be completed. between the two parties
It comprises the following items:
- Who must obtain liability licenses for such items;
- When and under what conditions does the Service Provider consider the client’s authorization to be granted
- What types of preceding items can be applied for, as well as their product. exceptions.
Sample clause: In addition to any other fees outlined in this Agreement, the Client shall be required to purchase any applicable third-party licenses for any third-party products that are necessary for Aquarius to design and develop Client marketing websites. Such third-party products may include but are not limited to server-side applications, clip art, “back-end” applications, music, stock images, or any other copyrighted work which Aquarius deems necessary to purchase on behalf of the Client. In the event any such third party product exceeds$50.00 per product, Aquarius shall obtain the Client’s prior written consent before incorporating such a third-party product.
- IPR rights
Explanation: Both sides generate a lot of IPR in marketing partnership agreements. Aside from production, there is a lot of IP exchange between both sides for correct information. As a result, when developing such terms, it is critical to understand the industrial requirements and adjust the clauses to the client’s demands.
Sample Clause: Service Provider will own all right, title, and interest in and all Intellectual Property Rights in the tools, all computer software of the implementing Tools, and all documentation for Tools (each of each which shall be deemed a “work made for hire” for purposes of the federal Copyright Act); provided that the Client shall be entitled to use of all the foregoing during the term of, in the manner, to the extent, and for the purposes required by this Agreement. Client hereby irrevocably transfers to the Service Provider Client’s entire right, title, and interest to all Intellectual Property Rights in such items.
Conclusion
While the drawbacks exist, they are minor when weighed against the advantages. Aside from a little amount of time spent upfront, having a marketing partnership agreement does not need significant time investment. And, while you cannot always protect yourself from every situation, having an agreement in place is still wonderful insurance against a falling out or unpleasant relationship, and will make it far more likely that everyone is on the same page and that the relationship runs smoothly. It is not structured in the same way as other types of commercial contracts. Terms and conditions vary from one company to the next, and no single format is used by all companies.
References
- https://streamline-marketing.com/what-is-partnership-marketing/
- https://www.signwell.com/contracts/marketing-agreement/
- https://benbutler.me/12-elements-every-marketing-agency-contract-should-have/
- https://smallbusiness.chron.com/simple-marketing-agreement-47610.html
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