When the Spice Girls’ sponsorship agent sent a fax reassuring a prospective sponsor, few realised the ultimate consequences.
Who: Spice Girls Limited and Aprilia World Service BV
When: January 2002
Where: The Supreme Court of Justice – London
What happened: We have already reported in marketinglaw on the judge’s first instance verdict in this case, in which Italian motorscooter maker Aprilia contracted to pay at least £600,000 to the Spice Girls for endorsing their products. In the ensuing litigation the Spice Girls unsuccessfully sued Aprilia for all but the first £150,000 instalment, Aprilia’s refusal to pay the balance being the result of its realisation that instead of five Spice Girls, there were only to be four following the departure of Ms Halliwell.
The Spice Girls appealed against that judgement and the decision of the Court of Appeal was published in January 2002. The appeal was rejected, but the judgement highlights an issue which all those using and acting as sponsorship agents, or indeed many other types of marketing agent, should be fully aware.
An important document in the case was a fax sent to Aprilia before the sponsorship contract was signed, and also in advance of a planned commercial shoot which was to prove crucial in the proceedings. When the fax was sent, non-binding “Heads of Agreement” had already been entered into by Aprilia and the Spice Girls for the sponsorship in question, but after that, there were at least two abortive attempts to arrange photo calls.
Also after the heads but before the key fax was sent, Geri Halliwell first indicated verbally to the other Spice Girls on 9 March 1999 that she was thinking of leaving. But the Spice Girls’ sponsorship agents KLP were unaware of this conversation when, three weeks later, they sent the fax to Aprilia in an attempt to ease the scooter maker’s fears that the whole deal was off following the abortive photo-calls. The fax stressed that the whole group was “totally committed to their involvement with Aprilia” and “committed also to ensuring all the activities and TV ad production works well and positively for Aprilia”. There were also assertions as to the confidence of the Spice Girls that the operation of the agreement would achieve “maximum value and results” for Aprilia and that the group prided itself on “being wholly professional in our approach”.
The evidence showed that it was in reliance on this fax that Aprilia made arrangements for a further commercial shoot, at which all five Spice Girls attended. The main endorsement agreement itself was signed five weeks later, but in the court’s view, the die was first cast by the KLP fax of 30 March. The court held that this contained “express representations” as to the commitment of all five Spice Girls to the future implementation of the Aprilia deal. Unfortunately for the Spice Girls, however, the court held that this representation was untrue. Even though KLP was not aware at the time of sending the 30 March fax of the 9 March indication by Geri that she was thinking of leaving, and even though the Spice Girls did not know of the terms of the KLP fax, its contents were still held to amount to a misrepresentation by the Spice Girls themselves. The basis of this finding was the acceptance by the parties that at all relevant times, KLP was acting on behalf of Spice Girls Limited and representations of the kind contained in the crucial fax were well within their authority.
Why this matters:
Where a sponsorship agent, or indeed any other type of marketing agent, is acting on behalf of its client in negotiations with a potential contracting party, the latter can quite legitimately regard everything the agent says as the words of the agent’s client. There is no suggestion that in this case KLP Scotland exceeded its authority or did anything contrary to the will of the Spice Girls, but there was clearly a communications failure between client and agent at a critical time. In situations like this, the sponsorship agent will want to be sure that its contract with its client places a heavy obligation on the client to be absolutely frank and open with the agent on any matter which might possibly be relevant to the agent’s role. For its part the client will want to be sure that all the arrangements are in place, both in terms of the agency-client contract and the day-to-day operational arrangements, for the client’s prior approval to be obtained before any key communication is sent by the agent.