Hertz is in good company. Pepsi-Cola Co. paid a reported $7 million to $10 million to have Michael Jackson act as its spokesman, until the star was plagued with allegations of child molestation. Pepsi had also used boxer Mike Tyson until he was charged with wife beating. Years ago, before they had their problems with Burt Reynolds, the Florida Citrus Commission found its spokesperson, Anita Bryant, on a crusade against homosexuals.
And how could Procter & Gamble have known that Marilyn Briggs, the model who beamed from boxes of Ivory Snow in the early 1970s, would also be the star of the X-rated film "Behind the Green Door."
How can advertisers protect themselves when public idols prove to have feet of clay? Ideally, the endorsement agreement has a clause allowing termination by the advertiser on short notice, for any reason or no reason. This, however, is the real world, where no idol worth his megabucks will accept a contract tying him up as spokesman for years while allowing a sponsor to drop him at will.
A variation on a pure "at will" contract is the "pay or play" clause, familiar to Hollywood producers. "Pay or play" means that the advertiser has the option to use the spokesperson or not, at its discretion, but must pay the fee in either case. A useful clause, but understandably an advertiser will cavil at footing the bill for the superstar's peccadillos. A middle ground is to set a "kill fee"-a payment less than the full fee-if the advertiser decides to drop the spokesperson.
A traditional no-cost termination option is the so-called "morals clause," which has been around since at least the early 1920s, when low film attendance was blamed on the lurid accounts of stars' lives appearing in the press (remember Fatty Arbuckle?). During the McCarthy Era, the clause was used to censor political rather than moral conduct. It was upheld in court when RKO used the clause to deny credit to a screen writer who had invoked the Fifth Amendment before the House Committee on Un-American Activities.
Today such clauses are standard in endorser agreements. A typical morals clause reads:
"Company shall have the right to terminate this agreement if Talent becomes involved in any situation or occurrence which, in the Company's reasonable opinion, subjects Talent or Company to ridicule, contempt or scandal."
Of course, the greater the bargaining power of the endorser, the weaker the clause, and vice versa. However, the clause is often so broad that almost any activity can fall within it. Indeed, many clauses are now drafted to let advertisers terminate endorsement agreements for misbehavior "at their sole discretion."
In cases where it is impossible to negotiate a broad morals clause, an alternative approach is a clause that lists kinds of misconduct or adverse publicity that would relieve the advertiser of the star's services. As the case of athletes Doc Gooden and Jennifer Capriati suggest, such a clause might enumerate drug use, arrests for or convictions of crimes, gambling or other acts or publicity that would destroy the value of the endorser to the advertiser.
While less powerful than a full-scale morals clause, such a clause might be easier to negotiate. Also, such a clause could have the advantage of avoiding a debate in court over whether the particular behavior or publicity falls within a broad but unspecific morals clause.
However, there is the inevitable question: What kind of endorsement contract does an 800-pound gorilla sign? Any kind it wants. For the advertiser who has been unable, because of a star's clout, to obtain any kind of early termination clause for misbehavior, is there any hope of saving the cost of disposing of such a star if his luster is tarnished?
There is a group of doctrines in the law of contracts that go in various incarnations under the names "impossibility," "commercial impracticability" or "frustration of purpose." These doctrines can provide an escape from contracts where performance by one party has been rendered valueless to the other party, particularly when the cause is the behavior of the guilty party. The question the court will ask is, "Has the spokesperson's aura that the sponsor paid for been so diminished that substantially all its value has been lost?" Even an 800-pound gorilla may have an Achilles' heel.
Mr. Rabinowitz is a partner and Ms. Godin an associate with the New York law firm of Moses & Singer.