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Sports & Entertainment Law Section Website › Newsletters › Sports & Entertainment, November 2011 › Morality Bites: Morals Clauses in Entertainment and Advertising Contracts

Morality Bites: Morals Clauses in Entertainment and Advertising Contracts

Article Date: Monday, November 21, 2011

Written By: Taurian C. Houston

Think before you act. Watch what you say. These common expressions can be important words to live by for some celebrities and athletes. One slip of the tongue or one wrong move in the public eye can lead to a violation of a "morals clause" in their employment or endorsement agreements, possibly costing them millions of dollars.

What are Morals Clauses?
What better way to market a product or service of your company than to have Sidney Crosby, Tom Brady, Taylor Swift or any other well known athlete or recording artist be your spokesperson? Most modern endorsement and sponsorship deals involving these high profile figures likely contain some type of morals clause intended to protect the public image of the company.1 These contractual provisions often give a company the right to terminate the contract if the conduct or actions of the athlete or celebrity brings him or her into public contempt or reflects badly on the company's products.

Morals clauses first originated in the early 1920's when film studios used them to protect themselves against irregular behavior by their actors, as well as directors and producers with alleged communist ties.2 Recent examples where morals clauses have been the center of discussion include Nike choosing to suspend Michael Vick's endorsement contract in the wake of his dog fighting case3 and Charlie Sheen's dispute over his firing from "Two and a Half Men." 4


Morals Clause Interpretation
Because "morals" are founded on the fundamental principles of ethical conduct rather than on the lawfulness of an act, discerning what is and is not moral can be a difficult task. Most morals clauses are vague in their wording and are usually associated to the beliefs of society. Because of the broad and ambiguous language used in such a clause, it may lead to litigation of the dispute for courts to determine its interpretation and application. For example, Pittsburgh Steelers running back Rashard Mendenhall's contract with Champion was terminated after he made comments using his Twitter account to criticize the public celebration of the death of Osama Bin Laden. Mendenhall's endorsement contract contained a morals clause, prohibiting him from engaging in actions that would "shock, insult, or offend the majority of the consuming public."5 Subsequently, Mendenhall filed a lawsuit in the United States District Court for the Middle District of North Carolina alleging that Hanesbrands, Champion's parent company, breached their endorsement contract by terminating him.6

The determination of who wins in this matter may come down to how the morals provision of the contract is interpreted. If the provision is deemed to be ambiguous and subject to more than one interpretation, then the jury will have the responsibility of deciding what the issues of fact are. However, if the clause is deemed to be unambiguous, then the only issue at hand will be if Mendenhall breached the contract by violating the provision, which could be determined by the judge.

When negotiating morals clauses, the devil really is in the details. One of the most important issues is what kind of behavior will trigger the clause. The contracting attorney must understand the implications of the use of certain terms when phrasing the provision. The use of broad, subjective language like "contemptible" or "reasonable" gives the sponsor the advantage to determine whether the endorser's acts are enough to establish a violation. The use of more objective language like "convicted of" or "is a party to" in the clause may allow the sponsor to enforce the clause and/or terminate the contract only when specific actions take place.

Another factor to take into account when negotiating morals clauses is the remedy that a sponsor may seek for the violation of the provision. The public often identifies sponsors by the product they sell and the people whom they associate themselves with. Simply cutting ties with an endorser may not be enough to earn back the trust and respect the public had for the business and may cause them to suffer monetarily. While most remedies simply include either the suspension or termination of the contract in order to sever the connection between the sponsor and endorser, some sponsors may impose a financial penalty to the endorser while continuing the contractual relationship.

Conclusion
The rationale behind the use of morals clauses is that the sponsor simply wishes to protect that which they have invested in; the goodwill of the endorser. With so many instances of the flawed personal antics of actors and being brought to light, it almost seems as if being in trouble is a rite of passage. With a properly placed and worded morals clause, a sponsor may be able to save itself from public backlash if they do not agree with what their endorser says or does. Or in Mendenhall's case, Tweet.  •


End Notes
1. D. Blaine Sanders, Morals Clauses - Beware of the Tiger … or Gilbert or …, (last modified March 2010), < http:www.rbh.com/morals-clausesbeware-of-the-tigeror-gilbert-or-02-23-2010/>
2. Defene Gunay, Morals Clauses: Tiger Woods and The Death of His Sponsorships (last modified March 4, 2010) <http://iplj.net/blog/archives/1368>
3. Michael McCann, Morals Clauses and Michael Vick's Endorsement Contracts (last modified July 30, 2007) < http://www.sports-law.blogspot.com/2007/07/morals-clauses-and-michael-vicks.html>
4. Scott Collins, Charlie Sheen imbroglio is no morality play (last modified Feb. 21, 2011) < http://articles.latimes.com/2011/feb/21/entertainment/la-et-sheen-morality-clause-20110221>
5. Stokes, Lazarus & Carmichael LLP, Litigation to focus on morals clause in Mendenhall contract (last modified July 11, 2011) < http://www.atlantabusinesslitigationlawyers.com/2011/07/litigation-to-focus-on-morals-clause-in-mendenhall-contract.shtml>
6. Tom Breen, Rashard Mendenhall sues Champion over 9/11 tweet (last modified July 19, 2011) < http://www.suntimes.com/sports/football/6600051-419/rashard-mendenhall-sues-champion-over-911-tweet.html>


Taurian C. Houston is a 2L at Charlotte School of Law.

Views and opinions expressed in articles published herein are the authors' only and are not to be attributed to this newsletter, the section, or the NCBA unless expressly stated. Authors are responsible for the accuracy of all citations and quotations.