A glazing error: Perez terminates sunglass deal after sponsor's inappropriate tweet

Following the announcement of Mr Trump's US election win, Hawkers tweeted "Mexicans, put on these glasses so they can't see your crying eyes tomorrow when building the wall" (a risky line for a brand to take, I might add!). Despite swiftly removing the tweet and issuing an apology, Perez responded with "What a bad comment, today I sever my links with @HawkersMX. I won't let anyone make fun of my country! #MexicoUnited. The relationship between Perez and Hawkers was still in its honeymoon stage, with apparently good relations up to now, and it is reported that 20,000 limited edition pairs of sunglasses bearing the driver's name were about to come off the production line for sale in Mexico. Perez, however, has claimed that now he has split from them, Hawkers will have to stop producing these products.

Not only does this episode reveal the importance of brands having robust checks and balances in place to manage and risk-assess social media platform use by its employees (it has been suggested that a ‘rogue’ Hawkers' Community Manager may have stepped out of line in this case), but it also raises questions about how and whether brands and talent can sever their commercial arrangements.

More specifically, the question us sports lawyers are pondering is this: would the tweet sent by Hawkers actually be caught by a legal mechanism such as a morality clause - which might allow the talent to terminate the sponsorship agreement?

Agreements between sponsors and talent often contain a morality clause in favour of the sponsor, meaning if the talent does something which brings them or the sponsor into disrepute (such as a doping offence, criminal behaviour or making derogatory statements about the brand) the sponsor will be able to terminate. Well advised talent will ensure that there is a similar clause in their favour.

Morality clauses tend to prevent either party from making a defamatory or derogatory comment about the other party, rather than making comments that would offend the other party. A firm conclusion can't be drawn without seeing the contract itself but it wouldn't be surprising if the Hawkers tweet, which pokes fun at Mexicans rather than him personally, doesn't actually fall into any morality clause that might be contained in the agreement with Perez. If this is the case, and Hawkers' actions are not caught by the morality clause, then Sergio Perez could be in breach of contract for unlawfully terminating the agreement. This might allow Hawkers to claim damages which in this case could amount to loss of profit Hawkers would have made on the sunglasses. As an alternative, Perez could try to argue that he has a common law right to terminate the agreement; that the tweet was a fundamental breach of the contract which went right to the heart of the relationship. However, this would likely be a difficult argument to make.

Sponsorship agreements also often contain a clause regarding each party's ability to make announcements about its relationship with the other. Usually these will say that each party must obtain the approval of the other before making any key announcements. As we can see from this episode, Perez has made a bold announcement regarding his relationship with Hawkers which he is unlikely to have notified Hawkers of, let alone gained approval for. This in itself may also be a breach of the agreement. This is a good, and rare, example of where a sponsor has failed to appreciate that the behaviours they expect of their talent are reciprocal under their sponsorship agreement. We are used to hearing about talent behaving immorally and leaving the sponsor with no choice but to terminate the arrangement (Ryan Lochte and Speedo comes to mind) but less often do we see inappropriate behaviour by the sponsor towards its talent. It is clear why Perez would want to sever his relationship with Hawkers but, legally, it might not be so easy to do so.

Let's hope Perez has a morality clause wide enough to capture the comments made by Hawkers, if not, he could be buying 20,000 pairs of sunglasses!