Red cards and red flags: celebs and morals clauses

The walking ego that is Cristiano Ronaldo has thrown his toys out of the cot. In an explosive interview, he ripped into Manchester United’s owners, directors, coaches and former teammates. Not even the kitchen staff and jacuzzis were spared from Ronaldo’s wrath. Ronaldo’s contract with Manchester United has been terminated mutually in what has been described as a no strings attached departure, meaning he can sign for a new club in the summer. But what if Ronaldo had planted his feet firmly in the cot? What if he had refused to leave Manchester United?

Manchester United would likely have inserted a key provision in Ronaldo’s contract: a morals clause, also sometimes called a disrepute clause. These clauses allow companies to swiftly terminate contracts, without penalty, based on behaviour by the other party that is likely to damage their brand or reputation. Hardly a novel legal manoeuvre, you may find these clauses in sponsorship agreements, collaboration agreements, and some employment contracts, prohibiting people from engaging in conduct that would, or would be likely, to bring themselves, their company, or in respect of sportspersons, the sport into disrepute. As you can imagine, these clauses get a pretty good workout.

However, morality clauses are notoriously subjective, making it a slippery concept to distil into an enforceable provision. Vladimir Putin’s threshold for ‘immoral’ conduct may be vastly different to that of Peppa Pig’s. Avoiding vague morality clauses by identifying specific conduct – such as public disparagement of Manchester United in the case of Ronaldo – will reduce the likelihood of divergent interpretations.

Trusting your company and brand in the hands of a sportsperson or celebrity is high risk. We saw this play out in spectacular fashion when Ye, the artist and mogul formerly known as Kanye West was dropped by a plethora of brands, including adidas, for donning a “White Lives Matter” shirt at Paris Fashion Week and his slew of antisemitic and anti-Black comments. Even Madame Tussauds booted Ye’s wax figure from public viewing. Similarly, we suspect these companies relied on a breach of a morals clause to terminate their respective agreements with Ye.

Whilst the aim of a morals clause is to allow for a swift and easy exit from a deal with a celebrity or sportsperson who has gone rogue, the reality is almost always more complex. The effectiveness of a morals clause not only depends on the precise language of the provision, but how it operates in connection with the rest of the agreement. For instance, a company may be able to terminate the agreement, but if the payment terms are stacked towards the front of the term, it may be difficult to recoup payments already invested for unperformed services.?

The fallout of Ronaldo and Ye is a stark reminder that agreements with sports stars and celebrities should not only plan for the best of times, but the worst too. Therefore, we recommend having a watertight contract in place which includes prescriptive morals clauses to capture all potential forms of reputational damage.

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