On 25 October 2022 Adidas dropped its partnership with Kayne West and his Ye brand as a result of anti-Semitic and racist comments made across multiple platforms.
The sports brand said “adidas does not tolerate antisemitism and any other sort of hate speech”. Ye has also been dropped from Gap, Def Jam Records and, Balenciaga.
This highlights the importance of protecting your reputation in any partnership deal be that celebrity endorsement, sponsorship deals to dealing with business partners. It does, however go much further than this and the issue of reputational risk and protection should really be considered in all business relationships where your reputation may be adversely affected or impacted by another. In reality this is going to be important in most commercial arrangements.
When preparing any partnership deal, be that as a joint venture, endorsement deal, sponsorship deal, marketing/advertising agreement or influencer agreement it is important that you have a carefully drafted contract. This should include clear expectations around conduct, how you describe the relationship, what can and cannot be done without approval, what can and cannot be made public ( including on social media) without agreement and the clear and express right to terminate the agreement if there is a real risk to your reputation.
The contractual right to terminate where there is reputational damage to you or a risk of the same gives you options, often in difficult times. This is an under utilised contractual provision in the UK but one which affords good protection to your business, especially with the reliance of many businesses on social media and the ingrained nature of social media in society. It is important to remember that posts from years before can suddenly be resurrected and be damaging to a business. In addition society changes and behaviours and even industries which may have been acceptable in the past may become damaging over time or following a specific event.
The inclusion of termination for risk of reputational damage is setting a clear line in the sand that your business reputation is of material importance to you and any risk to this justifies immediate termination of the agreement.
Business reputational risk is not only a risk with third parties but also is a risk with those working in the business. All businesses should ensure they have clearly drafted social media policies and ensure it is clear that actions so serious that they present a risk of reputational damage to the business justify gross misconduct and immediate termination.
Depending on the industry you should consider how you can ensure the public can distinguish between comments of staff and those of the company. Processes and policies should be clear and properly enforced.
No written contract/clause
If there is a serious/material breach of contract the parties have the right to immediately terminate the contact. This has to be a very serious breach and you cannot do something to affirm the actions. The principle being that the action must be so serious that it justifies immediately terminating the agreement . This is a very complex area of law and presents a significant risk.
There are however likely to be scenarios where the behaviour of the other party is so serious it justifies repudiation of the contract. If you do not have the contractual right to terminate in your written agreement but someone has recently done something to damage your business reputation you should obtain legal advice quickly on your option to terminate.
Before terminating any contract, whether with a express clause or by way of repudiatory breach specific legal advice should be sought to avoid lengthy and costly disputes. This is a specialist area and requires carefully considered legal advice.
However, if there is a risk to your business reputation as a result of something being done it is important that action is taken swiftly. Reputation takes years to build but can be destroyed almost overnight.
We would suggest before any new relationship you carry out a suitable level of due diligence to try and mitigate the risk to you and your business. You should have properly drafted agreements to cover all your business relationships. Do not underestimate the importance of your business reputation and ensure you have access to experienced lawyers for swift advice and action to protect you.
About the author
Hot shot solicitor Karen Holden launched A City Law Firm in 2009 after growing concerned about the impact pregnancy would have on her career at an international law firm.
The company are now the go-to legal experts for entrepreneurs and they have won several prestigious accolades including Most Innovative Law Firm of the Year 2016. Karen has also been shortlisted for Working Mums Champion this year by WorkingMums.
Karen’s drive to succeed stems from being raised on a tough council estate in Wales, where her her mum worked three jobs as a single parent. Desperate for a better life, Karen managed to secure a scholarship to study at Cambridge before qualifying as a solicitor.