The Pre-eminence of Morality Clauses in Endorsement Contracts

It is a fairly reasonable assumption to make that the famous or rather infamous relationship between law and morality would not apply to the commercial world of contractual arrangements. However, this is where morality clauses rear their heads to question that presumption. The morals or the morality clause, is a contractual provision in a contract or agreement that puts a restriction on certain behaviour emanating not from that person’s commercial identity but from their personal life. These clauses tend to veer towards prohibiting behaviour that is frowned upon in society.

Endorsement contracts which are entered into between corporates and celebrities or otherwise famous figures, contain explicit moral clauses. As such, the law does not lay down any statutory requirement curbing or highlighting the scope of such a clause. On a cursory glance, it may seem that the insertion of these clauses is patently unfair as it seeks to regulate a person’s actions in their private life, failing which, a corporate may impose substantial penalties or even terminate the contract if it so wishes. A closer look however justifies the reasoning of companies in safeguarding their interests by way of a morality clause. Companies sign deal with the celebrities, athletes as well as other famous figures (“Endorsers“) for huge sums of money which is predicated on the persona that the Endorser has cultivated. Oftentimes, a whole campaign is devised by the company that revolves around the Endorser in relation to the product or the brand. It is meant to evoke the same qualities that the public links with the Endorser. Therefore, in a nutshell these clauses exist because of the deep connection that the public comes to associate between the brand and the Endorser.

In such a scenario, it becomes essential that the company be able to dissociate itself with the Endorser if it comes to light that the Endorser has indulged in actions which either go against the what the company stands for or are against general standards of morality observed by any particular society. From the perspective of the company, it would be preferred to keep the morality clause as broad and widely worded as possible in order to account for a sizeable number of activities which may trigger the morality clause at their discretion. Typical phrases include act of moral turpitude, scandalous behaviour, public disrepute, offending public morals and so on and so forth without listing the specific acts, situations as well as circumstances which may lead an Endorser to fall afoul of the clause. While carving out a morality clause, companies should also provide cover for not just acts committed but also acts which the Endorser has been accused of committing. This is so because for the brand and the associated goodwill, public opinion can go south very quickly in the wake of potential inappropriate behaviour and the damage to the brand and its reputation is more often than not, already done before any confirmation for the same.

The necessity of discretion becomes paramount while crafting the morality clause since otherwise there may never be consensus on whether a certain act was indeed one that outraged public morality, given its subjective nature. The alternative is to list down specific instances in the contract which shall be deemed ‘immoral’ but that is not preferred since it would limit the effectiveness of the clause and may prove inadequate. An instance demonstrating the same is the case of Chris Webber, a famous NBA player whose contract with FILA, a sport wear company was terminated when he was arrested at the airport for possession of marijuana. He filed a wrongful termination suit against FILA arguing that the morality clause in his contract only covered ‘conviction’ and not an arrest. The Court, in concurrence, decided that it was in fact a case of wrongful termination. This example sufficiently highlights the importance of ensuring that the morality clause is carefully designed.

Nowadays, reverse moral clauses are also finding their ways into endorsement contracts wherein the Endorsers seek to impose a penalty or terminate the endorsement agreement in case the company is found embroiled in a corporate violation or malpractice. This move is not amiss as many Endorsers may find themselves locked into a contract with a company or brand whose actions adversely affect the reputation of the Endorser. A recent example that comes to mind is Priyanka Chopra terminating her endorsement contract with Nirav Modi in view of the Nirav Modi scandal.

Therefore, as is evident, the importance of a prudently crafted morality clause in an arrangement between a company and a public figure cannot be undermined in a domain where even the slightest hint of inappropriate behaviour has the potential to cause huge losses on both sides.