A morals clause is a provision in a contract or official document that prohibits certain behavior in connection with a person’s private life. Such clauses tend deal with objectionable behaviors, such as sexual acts and drug use. They were commonly used in the contract between actors/actresses and film studios to uphold the public image sought to be portrayed by the studio. Morals clauses are included today in certain contracts of public figures, such as athletes, actors/actresses, and others. [Note: A morals clause may also be made part of a judgment for divorce or marital dissolution, typically preventing unmarried cohabitation or overnight guests of the opposite sex while children are present].
Endorsement contracts, such as those entered into between brands and famous figures, come with explicit morals clauses. Companies take on quite a significant amount of risk when contracting with professional athletes and/or celebrities to endorse their products, as the famous individuals and their behavior – whether in terms of sporting or in their often paparazzi-plagued personal lives – serves as a reflection of the brand. In order to protect themselves and their carefully crafted identities, brands include explicit morals clauses in their spokespersons’ contracts. The athletes’ counsel will undeniably push for more lenient terms, and the parties may negotiate a bit before they ultimately decide on what the terms of the moral clause will entail.
A particularly strict clause may read as follows: “If at any time, in the opinion of Sponsor, Athlete becomes the subject of public disrepute, contempt, or scandal that affects Athlete’s image or goodwill, then Company may, upon written notice to Athlete, immediately suspend or terminate this Endorsement Agreement and Athlete’s services hereunder, in addition to any other rights and remedies that Sponsor may have hereunder or at law or in equity.”
Remedies for a Morals Clause Violation
Regardless of what behavior triggers the clause, the remedy for such a violation may ultimately be more significant. The endorser/brand (Nike, for instance) will likely seek any number of potential remedies for such a violation, including but not limited to: the termination of the agreement; suspension the agreement for a period of time; imposition of a financial penalty for the behavior at issue without terminating the endorsement contract; or the payment of damages by the athlete for breaching the agreement.
As Christopher Chase of Frankfurt Kurnit Klein & Selz, PC accurately states: “Termination and suspension raise another issue – the payment of compensation. If either option is exercised, the advertiser may want to: hold back compensation owed to the athlete; pay the athlete on a pro-rata basis either for the services performed to date or based on the term of the agreement (and pay nothing else going forward); or seek a refund of any compensation paid to the athlete (however, a refund clause is often a difficult provision to insert).”