Avoiding Fashion Faux Pas: Factors to Consider When Drafting Agreements for Fashion Companies

January 13, 2022 | Insights

By Serene Ateek & Shannon Zmud Teicher

In order to properly run a successful business and create a solid brand, fashion companies need to enter into many agreements that span the areas of corporate, real estate, and intellectual property. This article provides some important factors to consider when drafting favorable provisions within three agreements commonly entered into by fashion companies.

Morals Clauses in Celebrity Endorsement Agreements

First, fashion companies typically enter into celebrity endorsement agreements whereby a celebrity agrees to endorse and promote a fashion company’s products or services. These agreements come with a significant amount of risk, as famous individuals and their behavior are closely monitored by picture-hungry paparazzi and internet trolls. To protect themselves and their carefully crafted brand identities, fashion companies should include explicit morals clauses in their celebrity endorsement agreements.

A morals clause is a provision that prohibits certain behavior in connection with the celebrity’s private life. These clauses tend to deal with objectionable behaviors, such as sexual acts, drug use, and crime. They are commonly used in the contract between actors/actresses and film studios to uphold the public image sought to be portrayed by the studio. Valery Piedra and Emilio Nicolas wrote a great article about morality clauses here.

When drafting a morals clause, it is important to consider the following factors:

  1. What is the celebrity’s background and reputation? Has a background check revealed any issues of concern?
  2. Is the subject matter of the endorsement such that a certain type of scandal might negatively affect the success of the endorsement?
  3. Which “bad acts” will trigger the clause? Should the list be specific or broad?
  4. Who decides if the clause was triggered?
  5. Is the clause triggered when an act becomes public, or does it only apply to an act committed during the term of the agreement?
  6. Does the clause extend to acts committed by those closely associated to the celebrity?
  7. What is the desired remedy?
  8. Is the morals clause mutual?

Co-Tenancy Clauses in Retail Leases

Second, fashion companies want to enter into retail leases that allow them to be nimble, agile, and pivot with customer behavior. For these reasons, fashion companies should negotiate with landlords for co-tenancy clauses in their retail leases.

A co-tenancy clause provides the fashion company with a remedy should there be a loss of consumer traffic related to changes in the shopping center and protects the fashion company by ensuring that the shopping center remains busy and attracts consumer traffic to benefit sales.

When drafting a co-tenancy clause, it is important to consider the following factors:

  1. What kinds of businesses in the shopping center are most important to the tenant?
  2. How and by whom the co-tenancy failure is triggered?
  3. What rights are granted to the tenant on the occurrence of a co-tenancy violation? Is it the right to terminate, alternative rent payment, and/or right to go dark?

Account Ownership Clauses in Social Media Use Agreements

Lastly, fashion companies typically enter into social media use agreements with the employees in charge of running the company’s social media accounts. It is important to have clarity with these employees because social media is vital to the fashion company’s advertising, brand recognition, customer service, customer engagement, and promotions/contests. In order to avoid any litigation over the ownership of social media accounts, account ownership clauses should be included in social media use agreements.

An account ownership clause provides explicit language around the fact that the accounts ultimately belong to the fashion company. When drafting an account ownership clause, it is important to also consider the following factors:

  1. If, when, and how the password for the social media accounts can be changed?
  2. Which persons at the fashion company must have access to the login information for the social media accounts at all times?
  3. Upon an employee’s separation of employment from the fashion company, how and when should the transition of the social media accounts to the new employee happen?

Considering the answers to these factors will help you draft fashion company-favorable provisions that are better tailored to the needs and concerns of your client.

The opinions expressed are those of the authors and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for informational purposes only and does not constitute legal advice. For additional assistance related to drafting provisions within agreements, please contact an attorney in Jackson Walker’s Entertainment Transactions practice.