The King of the Mountain – with a twist

Oct 16, 2020

This weekend will see a new king of the mountain crowned as the winner of the coveted Bathurst 1000. However, this year will be different. It will be done without the normal crowds due to the impacts of COVID-19, the race will be the final event in the shortened championship calendar, the traditional Holden v Ford legacy is reshaped with Holden exiting Australia and it marks the end of an era for major sponsors, Supercheap Auto, after sponsoring the event for 16 years.

So what does this mean for organisers, participants and sponsors?

Given this event marks the end of the season, strategic positioning for drivers and sponsorship for next year will commence in earnest. Teams, drivers and sponsors need to thoroughly review agreements to ensure they cater for the uncertain COVID-norm operating period, that is likely to extend into next year.  The contractual landscape has changed, the interpretation and importance placed on specific contract terms has taken on a new light and rolling over or using previous agreements may not suffice.

Sponsors should consider the following issues when negotiating sponsorship in the current climate:

    • Whether the entitlements contained in sponsorship agreements are being delivered, and capable of being delivered, in this new environment and if not how will this be managed and impact on the payment of sponsorship fees and the agreement moving forward. For example hospitality suites or other benefits contained in the agreement may not be available due to COVID restrictions.
    • To provide the opportunity to renew the sponsorship beyond the term, whether an options to renew clause or exclusivity period that allows for renewal negotiations to occur prior to the termination date and without discussions occurring with alternative sponsors can be included in the sponsorship agreement.  This should also ideally include an opportunity to match any better offer received by the rights holder prior to them entering into an agreement with another party.
    • Ensuring provisions exist within the sponsorship agreement to protect the brand and reputation of the sponsor in circumstances where an athlete and/or the team are involved in an adverse event.

The potential for changes to the law, franchise agreements and supply chains needs to be factored into all contracts to provide for the opportunity to renegotiate the contract in these circumstances. Contracts should include provisions that trigger a default event, dispute resolution and/or termination provisions in the event unforeseen external changes that adversely impact on the ability of one party to fulfil the terms of the contract.  An example of this is Holden deciding to exit Australia with franchisees having binding contracts in place with other parties and an obligation to fulfil them, unless provisions exist to the contrary.  Another example is changes to legislation to manage the COVID environment, that may or may not trigger the force majeure provisions of a contract.  If the contract is not carefully drafted a binding obligation may exist that cannot be fulfilled due to external changes.  This could be costly and cause a major disruption to the affected party.

The Kalus Kenny Intelex Commercial and Sports Law team specialises in supporting sporting organisations, teams, athletes/drivers and sponsors with these matters.  Don’t regret entering into an agreement that does not provide protection for you in the changing landscape we now operate in.  If you need advice our team is here to help.