Advertising Agency Contracts: Everything You Need to Know

Advertising Agency Contracts are agreements that are handy for detailing the marketing and any advertising related obligations of an advertising agency on behalf of another business. 3 min read updated on January 01, 2024

If you're planning to create your Advertising Agency Agreement, the first thing you'll need to do is to include details of your business that needs advertising services. It will also include a description of the products or services, exclusive rights or non-compete agreements, commission percentage from the advertising media's charged fees, the minimum value of the liability insurance, and the start and end dates of the agreement.

Advertising Agency Contract

The business relationship between an individual or a business to an advertising agency should be formalized into a contract. Some bounds are expected to be discussed related to the responsibilities that the advertising agency should deliver. This will include compensation and grounds if the relationship should be terminated. The best way to track the relationship is through a formal written contract between the advertising agency and the advertiser. Before the public appointment of an agency, it is assumed that all outlines of the contract shall be discussed and agreed upon.

It is better to delegate the process of finalizing the agreement to a staff attorney or outside counsel who've been involved in the search process. These people have more understanding of the issues involved and have in-depth knowledge of the discussions happened during the search process.

Elements Every Advertising Contract Should Have

Though every contract might be unique from others, there are basic components of an advertising agency contracts.

Legal Names and Addresses. Both involved parties are expected to have their legal names and addresses cited in the contract. In citing the business names, it should be the proper legal names and can be followed the parties nicknames such as "Client" or "Agency". Adding the address of both parties to the contract will help mitigate the possible misidentification and confusion.
Duration of the Contract. This information details the start and conclusion of the contract. It is usually proposed that the contract should state that all payments need to be paid in full before the documents are released. This will ensure that the client won't run without the final payment.
Project Scope. The scope of the work is one of the most critical parts of the contract. This should appear in either the first of the second page of the contract. The best approach in detailing the scope of work is to make it straightforward and specific as possible. It might be lengthy because it will cover key points like what was agreed upon, the goal, services to be provided, what are the services and which of them are tangible, how these services will be delivered, and what is the required of the client.
Payment Schedule and Budget. This section usually details the amount to be paid by the client and the payment delivery. Common schedules in the industry are monthly, and 50% initial payment and 50% upon completion. You could also include late payment terms like payment dues, payment periods, and late payment fee. Three percent of the total invoice is a common late payment fee.
Termination. Questions like 'What will happen if one of the parties decides to terminate the contract?' can be answered by this section. You might want to specify information like notice period, a method of notice, handling of outstanding works, and refunds.
Breach of Contract. The failure of performing or delivering the obligations indicated on the contract is a breach of contract. This part discusses the possible scenarios if there is a breach of contract. It could be an immediate termination of the agreement without any refunds, or termination and compensation.
Copyrights. This part discusses the intellectual property rights of the process, systems, and final work. It is best to identify every element of the process and works that will be owned by the client or any third party involved.

These are only a few of the items you need to know when creating an advertising agency contract. Items listed above might be simple but these will save you a lot of stress when dealing when your business clients.

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