Contractual Protection of Brands from Misconduct by Celebrity-Counterparties

Endorsement agreements or even co-branding arrangements with public figures, artists or brand ambassadors offer the advantage of increasing the visibility of both the brand and the public figures themselves (e.g., actors, singers, influencers, etc.).

However, the conduct of the counterparty does not constitute merely a matter of personal reputation, but rather a critical factor affecting the reputation, credibility, and financial interests of the brand. A characteristic example is the case of South Korean actor Kim Soo-hyun. Following the disclosure of his relationship with the late South Korean actress Kim Sae Ron, while she was still a minor, there was a deterioration of his public image as well as the termination of his collaboration with the 16 companies with which he had contracted. These companies even proceeded to claim damages due to his conduct, which was contrary to public morals. The agreements concluded with the aforementioned actor contained a “moral clause,” which is commonly included in endorsement contracts. This clause prohibits the celebrity-counterparty from engaging in conduct that could defame or expose the brand (e.g., indicatively: sexist, homophobic, violent or racist statements and behaviors or involvement in scandals, etc.). In case of breach, early termination of the agreement and pursuit of damages by the brand is provided for.

This case demonstrates how conduct contrary to public morals can trigger contract terminations and financial claims.
Although Greek law does not expressly provide for a “moral clause,” it offers full legal capacity for the protection of the brand either through early termination of the contract for good cause, assessed on a case-by-case basis (in concreto) and the pursuit of compensation due to such termination or additionally through the insertion of a penalty clause, in the event that the counterparty fails or fails to properly perform their contractual obligations.
Regarding the early termination of the contract, in order to protect the brand from potentially improper and immoral behavior of the counterparty, the agreement may include a termination clause worded as follows (by way of example):

“…In the event that the counterparty (in this case the celebrity) engages in any act or makes any statement that is contrary to public morals, inappropriate, politically incorrect, and of offensive content (with an indicative enumeration of such acts or statements), which is in conflict with the principles and policies of the contracting party (the brand) and which act or statement causes damage to the public image of the contracting party, the latter shall have the right to terminate the present agreement without liability, by means of immediate written notice to the counterparty…”

On the other hand, a method of protecting the brand in the event of conduct by the public figure contrary to public morals is the inclusion of a penalty clause in the contract, based on Article 404 of the Greek Civil Code. Such clause shall provide that the counterparty (the celebrity) undertakes to pay the contracting party (the brand), as a penalty, a monetary amount or other consideration, in the event of failure or improper performance of the obligation, including cases where there is a public moral discrediting of the values and principles represented by the contracting party.
Although Greek law does not provide for a formally institutionalized “morality clause,” it offers full legal capacity for the protection of a company’s reputation when entering into agreements with public figures. The provision of early termination of the agreement for good cause or a penalty clause, allows for an immediate response and secures the commercial integrity of the brand.

For more on the case of South Korean actor Kim Soo-hyun and the morality clause, click here.