Many agreements in the entertainment industry contain morals clauses. These are provisions that provide a party with the right to terminate the agreement (and stop paying or even receive a partial refund of money already paid) in the event that any individual violates the provision. Morals clauses are especially important in endorsement agreements, because the brand paying the celebrity endorser is paying for the image of the celebrity at the time of the agreement. For example, if a brand had paid this guy to endorse its products prior to June 17, 2013, on June 18th it woke-up to the news that an accused murderer may have been the face of its brand. Not good.
Morals clauses are often heavily negotiated. For example, an attorney representing the talent may insist that the morals clause may only be triggered if the talent is actually convicted of a felony. The attorney will argue that their client is innocent until proven guilty and should not be punished if they are not guilty. Unfortunately, the court of public opinion is different from a criminal court. From the brand’s perspective, once the accusation is made and the celebrity is tarnished, the image of the brand has been hurt too. To go back to the example above, imagine a brand being locked into a contract with Aaron Hernandez for the past year while he awaits trial.
On the other hand, as celebrities have become brands themselves, they too need to protect their brands from being tarnished by affiliations with tainted products. Celebrities should insist that they too need the right to terminate the agreement in the event that the brand becomes embroiled in a controversy that harms the celebrity’s brand by virtue of their association. The easiest case would be a serious claim of false advertising brought by the Federal Trade Commission against the brand for claims made about the product the celebrity has endorsed. After all, why should celebrities be forced to continue to associate their goodwill and reputation with a tarnished brand? The more difficult case may be where the company has a recall or a scandal. For example, if celebrity endorses a food product and suddenly news breaks that that product killed 12 people, shouldn’t the celebrity have the right to immediately terminate the endorsement? However, a high profile civil claim against a corporation may not sufficiently tarnish the brand, or the celebrity by virtue of the association, to necessitate an immediate termination of the agreement.
Both parties should carefully consider the scenarios that may cause each one to want to terminate the relationship in order to protect their respective brands and draft the morals clause accordingly.