Picture this – you’re a team about to start a new year of racing and all of a sudden your leading contracted driver tells you they can’t or won’t drive for you anymore. They give you every excuse under the sun why they should be let out of their contract – but should they? And to make things worse, they start making stuff up about how bad you are, that you’ve breached the agreement and that this means they should be able to get out.
Or picture this – you’re a driver mid-way through your contract with a team and all of a sudden they tell you they’d like to temporarily suspend you from driving duties or terminate you. They give you every excuse under the sun why it’s not working out – but do any of these excuses give them the right to terminate? And to make things worse, they start making stuff up about how bad you are, that you’ve breached the agreement and that this means they should be able to get out.
Ok so you’re not a driver or a team, you’re the sponsor and your sponsorship is conditional on a certain driver staying with the team.
Picture this – the team tells you (the sponsor) that the driver will no longer drive for them after their contract runs out and you should remain supportive of the team, but also in support of a new driver.
You’re advised that the original driver is leaving the championship anyway for a little personal time away so you can’t follow the driver to another team anyway. You later find out that what you’ve been told by the team may not be correct. You haven’t approved the new driver or entered into a new Sponsorship Agreement with the team.
Take it from us, you can’t make this stuff up. Because you don’t have to – it happens.
No matter which party you are in the driver/team/sponsor dynamic, relationships can be complicated. Things can get more complicated very quickly if a party wants to change the relationship outside of what a Driver or Sponsorship Agreement provides.
Why are Driver and Sponsorship Agreements so important?
It’s simple. Driver and Sponsorship Agreements set out many things – they set out expectations and obligations of each of the parties, the compensation, they impose restrictions on things parties can or can’t do, and importantly, they also set out how and when the agreement can be varied or terminated prior to its natural expiry. They create certainty which allows the business that is based around the relationship to plan and execute on plans.
Can I terminate early if I’m not happy with my relationship with the team or driver?
Yes. No. Maybe. Ultimately every situation will be different and the situation that you find yourself in will always be different from the person in the garage next to you. When thinking about how you could terminate your contract before its expiry, it’s important to consider your own obligations, as well as the other party’s obligations and any termination provisions that may be part of your agreement.
Sure, if one party breaches – which must be a matter of objective fact (not just a “I don’t like this anymore”). Contracts will have mechanisms to terminate. The general law also applies to give parties rights. But even then, there may be rules set out in the agreement about how any disputes are managed before anyone can look at ending the agreement.
But, just because you might have a better offer or option doesn’t mean you can just change the deal or look to greener pastures. If the parties don’t agree to end it, you’re stuck. It’s what you signed up for. Contracts mean something.
What do I do if my team, driver or sponsor want to terminate outside of the terms of our agreement?
If you’re on the receiving end of any of the above scenarios, it may be that the other party doesn’t have a legal right to terminate or vary the agreement in the circumstances. Or that they do.
If you’re the person who wants to terminate, it’s best to seek good legal advice on your contract before taking any steps to terminate to make sure you understand what you can and can’t do. The same applies if you’re on the receiving end or see it coming.
Well meaning (or perhaps not so well meaning) people will offer all manner of advice and come up with all sorts of really clever tactics and strategies. Sometimes they work, but rarely. Mainly they don’t and they come back to bite. Hard. Don’t get caught up in other people’s agendas.
As sponsor who is witnessing a potential breakup also has (or should have) rights. The sponsor will have devoted considerable resources to activate around a particular driver or the team associated with a driver. If your agreement is good, you don’t have to remain passive. You should have rights to take part in the conversation.
But even so, at a commercial level, quite apart form what the contract might say, your money talks – even if the sponsorship agreement might not support your active intervention. That’s the reality. The driver or the team needs your financial and brand support so make sure they in turn support you.
In all of the scenarios above and no matter which party you are, you may have rights or other options or solutions that you or the other party haven’t thought of.
But, in looking at where you are at don’t make stuff up. It never works in the end.
We routinely act for drivers, teams and sponsors – so we know.
How to know when to accept the relationship is over
As the dynamic of a relationship changes overnight because one party wants out, each party must consider the outcome they want and the outcome they need. And the outcome that they can actually get.
Sometimes staying in the relationship isn’t going to benefit anyone. Sometimes the relationship can be mended enough to see the agreement through.
For any party:
- consider what the relationship ending or continuing may do for your business and reputation. Is it in your interest to stay and work through it? Or is it in your interest to move on?
- consider your other options – can you work with the termination? What benefit can you gain from it?
Ultimately accepting the outcome of a legitimate termination, or mutually agreeing to terminate the agreement, may be in everyone’s your best interest. If so, Terms of Settlement or an exchange of correspondence between the parties setting out the terms of the termination is a must. This will ensure that your obligations on termination are clear, it will also ensure that all parties are aligned with respect to confidentiality, press releases and critical communications that need to be made.
Our tips
- If you’re looking to terminate an agreement, don’t do it on a whim. Get good legal advice to ensure that you are meeting your own obligations while attempting to terminate or vary the agreement.
- If you’ve been told by your team, driver or sponsor that they want to terminate or vary your agreement and you don’t agree – get good legal advice to find out where you stand.
- When entering into agreements, put some thought into the “what if” scenarios. Relationships are never bad at the beginning, but they can and do get complicated along the way. Thinking about the “what if” scenarios doesn’t mean you’re anticipating the relationship will fail, but it will better protect you if it does.
Do you have any questions or want any advice on your Driver or Sponsorship Agreement? Get in touch with our Motorsport Law team.
