Advertising Contract 101: The Basics
Advertising is a way to market a brand, product or service. Most advertising is quite general in nature and only obliquely suggests that the customer contact the advertiser. There are also those advertisers who might want to engage one on one with clients and provide greater detail on a new product offering or specialty service. That so requires a more tailored approach. That’s where an advertising contract plays a key role.
An advertising contract is a specific agreement between a business client and an advertising or marketing company or professional for a particular advertising campaign. The ad contract may cover traditional advertising mediums such as print and television. An ad contract can also be used in a digital setting or for sponsorship of an event.
A business most often uses an advertising contract to cover an advertising campaign which it wishes to run over a period of time. The terms and conditions might cover a variety of issues. Such issues might range from sponsoring a radio program or station during a specific time slot , to placing advertisements in newspapers or magazines, to securing space for a billboard, or even paying for space on a website. An advertising contract formalizes the arrangement between the client and the advertising agency or provider.
Key Provisions of an Advertising Contract
We’ve covered the three main types of advertising contracts, but within each category, there are key clauses that break down the specifics. This section depends a lot on the type of contract, but standard clauses include details like:
The scope of the project
This is the most important section and should be as detailed as possible. It spells out the exact deliverables for the project including the number of spots that will run and on what billboards. Other bullet points include the CSS placements, creative plan and execution. An agency may also want to add in the editorial plan, including copy and time to air plans. Depending on your company, there’s also the availability of inventory. Do you have inventory in hand to support the launch of this campaign? Do you have to purchase from an inventory pool? Be specific with pricing too, and include what’s included in those prices. For example, if the total project price includes two weeks of flight and two hours of creative. Be clear about where that option is defined and how it affects pricing. Specificity is a value add to your advertisers.
Payment terms
How and when do vendors pay your station? Standard language such as standard industry terms is often used, but you can expand on that to be more specific. For example, is the payment net 30? Net 60? Do you offer a discount for early payment? There cannot be too much information in this section, especially if you’re working with a large group of advertisers on a campaign. Many countries have different requirements for currencies and taxes, so include those terms in the contract. Are the values listed in Canada’s Canadian dollars or the United States’ US dollars? You might also include reserving an inventory option within payment terms if a certain campaign runs out of inventory.
Additional terms
Other important terms include cancellation policies. When can the advertiser cancel? What happens if they cancel mid-campaign? The extent of the details is entirely up to you. You could offer penalties for early cancellation or make the penalty charge be based on the exact residual costs. Discuss early cancellation and offer options that benefit both the station and the advertiser. Don’t forget confidentiality agreements. Be specific on what the advertiser can and cannot disclose. Depending on your business plan, you may need to go into detail about royalties and how they work. Are there restrictions in terms of format, spot length, and how much story can be included? As we said before, provide clear language and definitions.
Advertising Contract Sample
This is a binding contract between (Advertiser) and (Publisher).
Date: ____________
Duration of agreement: ____________
(Advertiser) is (description of Advertiser’s business).
(Publisher) owns and operates the website (description of the Publisher’s website).
(Publisher) agrees to publish (description of advertisement) on (Publishers Site or sites) for the purpose of generating advertising revenue.
(Publisher) shall charge (Advertiser) (price) for (Advertiser’s) advertisement (stating size, duration of advertisement, placement, etc.).
(Advertiser) agrees to pay (Publisher) ________. Payment is due within (30) days of the termination of this agreement.
(Publisher) agrees to provide (Advertiser) with a receipt for payment.
(Publisher) is not responsible for any and all sales tax or corporate taxes assessed.
(Advertiser) acknowledges that (Advertiser) has had the opportunity to review (Publishers) terms of service, privacy policy, and any and all other (Publisher) policies regarding (Advertisers) advertisement.
This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and shall not be amended or modified except in writing signed by both parties. The failure of either party to insist upon strict performance of any of the terms and conditions of this Agreement shall not be deemed to be a waiver of such terms or conditions and shall not be deemed to be a waiver of any subsequent breach or default in the performance of any of the terms or conditions of this Agreement. No waiver shall be effective unless in writing signed by the party to be charged. This Agreement shall not be assigned by either party, either directly or by operation of law, without the prior written consent of the other party. (Print name) the undersigned duly authorized representative of (Advertiser) and (Publisher) agree to the terms of the forgoing agreement stating the period of (Advertiser) advertising on the (Publisher) network. I hereby certify that I am authorized to enter into this agreement as a (title) for the (Advertiser) and (Publisher). Signed: ___________ (Advertiser) (Publisher)
Frequently Seen Errors
One of the common mistakes that advertisers might make when entering into an advertising contract is to not ensure they have the rights to all the materials that are being purchased, created or promised. Advertisers should ensure that their contract includes not only the ownership of the intellectual property rights, fee obligations and payment schedule, but also a clear description of what happens to any materials that are developed both before and after the completion of the contract. For example, in some cases, a multi-platform promotion may include prize redemption outside of the scope of the initial campaign purchased. What happens to the materials used to implement the promotion? Has the creator or vendor graced the advertiser with the unlimited right to use the materials going forward, so that the vendor cannot demand additional compensation for that use? Does the vendor have the same right to continue to use the materials, particularly if the vendor is an advertising agency and wants to have the materials available for its other clients? Does the vendor have the right to portray the advertiser’s products in its portfolio? These are all important issues to consider in negotiating the initial deal so that there is no confusion or unnecessary cost later on.
Similar to above, advertisers may also find themselves waiving the right to prevent their vendors from using the advertiser’s brand or product names, trademarks, or likenesses, or incorporating the advertiser’s materials, products or services into its portfolio without any compensation. This should not be given away. Advertisers can give their vendors the right to publicly state that the advertiser is the client, but no more than that. Advertisers should also consider negotiating the use of artwork, or any promotional or advertising materials. What happens to any materials that were prepared before and after the campaign? Are any additional fees required for the continued use of these materials? Are vendors allowed to portray or use their own employees or models in connection with the advertiser’s product? Will that employee or model receive any compensation? The advertiser should make sure that it is the one that is in control of deciding how their products or services are presented and used so that they can maintain their brand image. At the same time, advertisers must try to change their own internal policies concerning their own staff and employees. Advertisers may find that there are occasions when they have to bend these rules or exemptions, for example: allowing your lawyer to be the spokesperson or celebrity around town, will allow your lawyer to do his job better. But that doesn’t mean that you should give up those rights for the account executive that you decided to promote a product.
Legal Issues in Advertising Contracts
When drafting or entering into an advertising agreement, it is crucial that both parties understand the legal implications of the contract, specifically regarding liability, marketing regulations, and intellectual property rights. In the United States, the Federal Trade Commission (FTC) is responsible for helping maintain an effective competitive marketplace. The FTC monitors advertising contracts to ensure compliance with advertising standards. Both parties must ensure that their agreement meets the requirements of laws such as the Federal Trademark Act or CAN-SPAM Act and does not grant the opportunity to infringe competitors’ trademark rights. When a defamatory statement is published, the company or individual frequently has the ability to pursue defamation charges against the publisher. To protect against claims of defamation, the contract should specify the method of advertising that will be used, approving any and all publications of the advertisement. If the publisher has full control over the publication, this section will not apply and should be removed from the contract. A publisher who has full control over the content must have the protection of a full indemnification provision. Both parties should be sure to include an indemnification provision in the agreement . This provision requires one or both parties to compensate the other for any loss, harm, or damage-based negligence, including legal fees, if the other party suffers a loss because of something done or omitted by the indemnifying party. If the company oversees the creation and implementation of its own advertising without the involvement of the publisher, indemnity will be more difficult to mandate. In these situations, the one providing indemnification may require particular language to be included in the advertising material, or may require that the advertiser have fulfilled specific duties before the indemnity provision becomes effective. The contract may require that one party defend itself, or certain third parties, from claims by the other party, client, customers, users, licensees, potential customers, or potential licensees. The defense can relate to those claims that resemble the allegations made in the claims for which indemnity is sought. Defense provisions are often accompanied by indemnification provisions. If the company gives the publisher the right to use its name or credit the publisher for the advertising material, this clause should include an agreement to allow the company to have sole control over copies of the advertisement. If the parties agree to only one party’s confidentiality, there should be a clause stipulating the number of days for which each party can keep the advertising material confidential.
Tips for Negotiation
When it comes to negotiating favorable terms in an advertising contract, there are several strategies that can protect your interests and ensure mutual benefit. First and foremost, always read the fine print before signing. This can help you avoid any unpleasant surprises down the road.
Next, it’s important to know what you want and to clearly communicate those desires to your potential partner. Be specific about the compensation you expect, the length of the agreement, and any deliverables. If you feel uncomfortable asking for certain terms or benefits, consider what you would do if the distribution of work was reversed and you were the one offering the advertising. Would you be willing to sign without certain protections or incentives? If not, don’t sign.
Another strategy is to offer something in exchange for the terms you wish to modify. For example, if you want to reduce your obligations, offer to increase yours by a corresponding amount. Ending the contract with a time-limited obligation does not protect you if your partner doesn’t meet their obligations until after you are locked into the contract.
It is also important to understand how a breach of contract would be resolved. Most businesses prefer to rely on some type of alternative dispute resolution mechanism, from which they can benefit directly. However, be sure it is mutual or this term could come back to bite you. Finally, don’t be afraid to walk away from the contract if your needs are not being met. Your business deserves to be treated as the valued partner it is.
Importance of a Lawyer Reviewing Contracts
A legal expert in the area of advertising and marketing contracts should be involved in drafting the agreements. These professionals can assist you with more than just the legal language. If you do any advertising at all, you need to understand the basics about what you are agreeing to.
There are many pitfalls you can avoid by having an attorney draft an agreement for you or at least review an agreement you are considering. If there are any terms of an agreement that are unclear or inconsistent, a lawyer will be able to see this and potentially fix a problematic provision. Lawyers can help you negotiate terms that you may miss on your own because of the power imbalance of the transaction or because you simply are not noticing an important issue. An attorney may be able to help you anticipate issues when future events give rise to contract disputes. Future developments can include everything from the sale of your business to bankruptcy . Because your advertising agreement is a legally binding contract, a good lawyer will probably be able to work with your situation and create a reasonable solution in the agreement rather than waiting until problems arise after the fact. Then there is the potential for disagreements and litigation.
If you present your advertising contract to counsel prospective of conflicts with your business plan, they may be able to help you modify legal language to accomplish your goals, whatever they may be. You may want to obtain advice as to how to structure payments of fees by installment or other means without risking noncompliance with laws regulating your particular advertisement medium.
Agreements present unique issues from situation to situation. Whether or not your business is familiar with advertising and marketing contracts, it is likely to be appreciated that you have chosen to go above and beyond to protect your business. Disputes and litigation are unpleasant possibilities for everyone. Having a lawyer organize and draft your agreement might even save you a large amount of money in the long run.