Business and employment contracts play a vital role for businesses. Contracts allow a business to have certainty in its affairs, and they give businesses the knowledge that other people will respect their obligations to the business.
However, employment contracts are often highly specialized documents, and a good contract will protect the interests of the business if the employee does not fulfill his or her obligations. In high-value contracts, including contracts with a celebrity endorser, it is important that the contract contemplate unforeseen circumstances.
One way businesses protect themselves against unforeseen circumstances in endorsement deals is to include a morals clause. A morals clause is usually written in broad language, which allows the company to terminate the contract if the endorser does something illegal or is involved in a scandal.
Champion, a manufacturer of sporting goods and apparel, had an endorsement deal with NFL running back Rashard Mendenhall that had such a morals clause. The clause states that Champion could terminate Mendenhall he "commits or is arrested for any crime or becomes involved in any situation or occurrence tending to bring Mendenhall into public disrepute, contempt, scandal or ridicule, or tending to shock, insult or offend the majority of the consuming public."
In May, amid celebrations of the death of Osama Bin Laden, Mendenhall posted several controversial messages on Twitter, which criticized people for celebrating the event and questioned whether Bin Laden was involved in the September 11 attacks.
When Mendenhall's comments generated a public outcry, Champion terminated the contract. Now, Mendenhall is suing the company, alleging the company breached its contract with him.
One of the strengths of a morals clause is that it contemplates unforeseen events. However, in order to contemplate those events a morals clause contains broad and somewhat ambiguous language. That type of broad and ambiguous language often leads to employment litigation when a dispute arises.
Source: CNBC, "Mendenhall Sues Champion After Termination," Darren Rovell, 18 July 2011