When entering into a relationship with an outside firm for public relations services companies should insist that the parties enter into a formal contract that describes the services to be provided by the firm, the compensation structure, rights to ownership and use of materials used and/or developed during the relationship, and the term of the relationship and right to renew the contract or terminate the contract prior to the end of the term.
Depending on the circumstances, the firm will be expected to provides a variety of services in addition to ongoing public relations (i.e., introductions to and maintenance of media contacts) including organizing an analyst/media tour, Web site design and content preparation, product launch events, video interviews with key client executives, press releases for major events (i.e., product launches, major customers, major strategic alliance partners etc.), development and placement of articles, and trade show participation. It may be useful to prepare a detailed addendum to the contract that spells out the elements and budgetary allocations associated with the specific public relations program that the firm intends to pursue on behalf of the client. The parties should be careful to avoid potential future disputes through the use of unclear language in the description of services. For example, descriptive adjectives such as “extensive” and “comprehensive” can often create misunderstandings between the firm and its client and provide a basis/excuse for clients to refuse to pay allegedly due to “non- performance.”
The parties may choose from several different alternatives when establishing the method for compensating the firm for services rendered under the agreement. One common method is to provide for payment of a minimum monthly fee, a “retainer,” in recognition of the fact that the firm will be providing continuous attention to developing and implementing a public relations campaign on behalf of the client. The firm would not be required to demonstrate that the actual amount of time spent on the client’s account, when calculated using the firm’s regular hourly rates, equals or exceeds the minimum monthly fee; however, it is certainly reasonable for the client to request a summary of the activities that the firm actually conducted during the month on behalf of the client. Other alternatives for a fee structure include a fixed project fee, hourly arrangement with advance, and hourly arrangement without advance. In rare situations part of the compensation for the firm may take the form of stock options and/or percentage of revenues from the particular product or service that is the focus of the public relations activities of the firm.
In general, public relations services relationships should reviewed no less frequently than annually and performance should be measured against objective metrics mutually agreed upon by the parties before the relationship begins. The contract often allows either party to terminate the agreement by providing advance written notice to the other, assuming that the agreement has not been breached, and requires that the contract period must extend at least to a specified date before a party can announce its intent to terminate. The parties may also terminate the agreement immediately upon the occurrence of certain specified events with respect to the other party including insolvency and uncured materials defaults under the agreement. Whenever the contract is terminated the firm should be obligated to assist in transfer of materials back to the company so that the company can continue its public relations activities.
The content in this post has been adapted from material that will appear in Business Transactions Solutions (February 2008) and is presented with permission of Thomson/West. Copyright 2008 Thomson/West. For more information or to order call 1-800-762-5272.