- Contracts must contain the essentialia negotii: Who, what, to whom, why and when.
- Verbal contracts and informal agreements should be avoided.
- Experienced lawyers should check contracts if there is a financial risk.
- Contract contents include exclusivity, good conduct, confidentiality and liability.
- Important provisions relate to entry into force, term, option rights and place of jurisdiction.
- A lack of reporting obligations and guarantees can lead to disputes.
- Tax aspects are important, especially for clubs and professional teams.
I regularly receive sponsorship agreements from clients with which companies or advertisers want to engage with esports teams or enter into cooperations with streamers.
However, these contracts are regularly formulated in questionable terms, incomplete or also guarantee great legal risk. The basics of such a contract can also be checked by each of them. And only then do you go to the lawyer: this is usually cheaper than when the lawyer has to rewrite everything.
In principle, a contract must contain the so-called essentialia negotii, i.e. “who” wants “what” of “who” and actually “why” and “when”.
What should we pay attention to?
- In principle, oral contracts or any informal agreements should be excluded from a plethora of emails, WhatsApp, Skype Messages, etc.
- Contracts should be examined by lawyers who are familiar with them as soon as they reach a certain relevance and thus financial risk.
- Of course, you can also take samples, but sponsorship contracts in particular can be very complicated when it comes to the questions of what the “sponsor” has to fulfill, when he receives a consideration, for which he has to be liable and much more.
- Typical contract content also includes issues of exclusivity, good conduct(see, e.g., here), disclosure, confidentiality, earmarking, cheating(see this article), personal performance/fulfillment, and thus assignability. Provisions on a disclaimer, possible contractual penalties and various set-off situations may also be relevant.
- It is also important to have provisions on the entry into force, duration, option rights, possible premature termination of the contract, the return of services, intellectual property rights such as copyright, written form, access to declarations, applicable law, place of performance and to the place of jurisdiction.
What can all go wrong?
In my experience, the biggest problem areas in esports and streaming are that agreements (I don’t like to call them contracts) don’t clearly regulate what a team/stream needs to do, when, or for how long, to be able to demand the consideration. There is also often a lack of reporting obligations and guarantees on reach, target group and much more. Often there is a sponsor (mostly non-endemic) who is engaged in the influencer/streaming/esport area for the first time after a campaign frustrated with the results and there is a dispute about whether the streamer or the esport team was honest about the reach and the target group and whether everything agreed was fulfilled.
However, there is also a lot of controversy about who exactly has to fulfil what obligations, for example to create advertising materials and what quality or content these advertising materials should or should have.
Such legal disputes are often very ungrateful, as it is only possible to resolve them with a great deal of effort and often causes unnecessary problems.
What else do you have to consider?
If you have a good sponsorship contract, you should of course also pay attention to what the whole thing means in terms of tax law. For professional teams and streamers, this is usually operating income and it would be only necessary, if foreign countries are involved, to check whether and how much VAT is payable.
In the case of a registered association, on the other hand, the income generated in connection with sponsorship may also be tax-free income in the ideal area. That’s where the details matter. If the association provides restrained PR services to the sponsor, the association receives tax-free services and the sponsorship income received is not subject to corporation tax or vat.
That is why!
Anyone who makes their professional existence, whether as a streamer or as an esport team, dependent on sponsorship income, should also invest in professional contracts! If you have a lawyer draw up a sample, however, you should be aware that under certain circumstances the law on general terms and conditions applies to these contracts and therefore not every clause would be permissible (see this and this article).
