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French Consumer Law

The sponsorship agreement does not constitute a legal category in itself because its terms and conditions differ depending on the type of sponsorship used: sometimes the sponsor provides its support for an event by a visual presence or sound, or it “sponsors” one of the participants, etc. Contractual freedom prevails. Taking into account the variety of advertising services possible, the parties ma …

A protean contract

Sponsorship ("parrainage") and patronage ("mécénat") share the same object: to provide financial support for an event, a work or a person. Their purposes differ however; while sponsorship involves the commercial exploitation of an event - funding provided by the company to the sponsoree giving rise to certain obligations for the latter; patronage consists of voluntary action which is free from self interest to support activities in the general interest through private backing carrying out a socially-driven, more discreet, exploitation of the event insofar as the support of the patron does not receive any economic consideration from the beneficiary . 

Sponsoring, like patronage, is covered by Law No 87-571 of 23 July 1987  on the development of patronage, which governs the tax regimes applicable. The concepts are specified in the Order of 6 January 1989 on economic and financial terminology :

- patronage is defined as “material support, without direct consideration on the part of the beneficiary, provided for a work or a person in the exercise of activities of general interest”,

- sponsorship consists of “material support for an event, a person, a product or an organization with a view to obtaining a direct benefit”. 

The fiscal schemes covering patronage and sponsorship are different. Since its amendment by the Law of 23 July 1987, Article 238 bis of the General Tax Code relating to expenses deductible from taxable profits of companies subject to income tax or corporate tax covers payment made for the benefit of “works or organizations of general interest with a philanthropic, educational, scientific, social, humanitarian, sporting, family, cultural aim or which contribute to the development of the artistic heritage, to the defense of the natural environment or the dissemination of French culture, language and scientific knowledge” (patronage expenditure).

This tax deduction scheme was transformed into a scheme for the reduction of tax under Law No 2003-709 of 1 August 2003  on patronage for associations and foundations. Now, Article L. 238, paragraph 1(a) of the General Tax Code  provides that patrons are entitled to a reduction equal to 60 % of the tax owed, capped at 5 /1000 in respect of turnover. This tax scheme is much more advantageous than the one applicable to sponsorship. 

The Law of 23 July 1987 has also supplemented Article 39, I, of the General Tax Code which lists the expenses that are deductible from the taxable net profit for undertakings subject to corporate tax, adding “expenditure incurred in the context of philanthropic, educational, scientific, social, humanitarian, sporting, family, cultural or contributing to the development of the artistic heritage, to the defense of the natural environment or the dissemination of French culture, language and scientific knowledge French, when they are incurred in the direct interest of the operation” (sponsorship expenses).

The tax provisions appear to reinforce the distinction between the two concepts as the texts assign objectives which appear to be different: patronage expenses are incurred in support of '"works or of organizations of general interest" while sponsorship expenses are incurred in “the direct interest of the operation”.

In practice, however, patronage and sponsorship are not so different from each other; patrons, with their “lack of interest” also seek, like sponsors do, to increase awareness of their brand or products. There is therefore an interest for patrons to engage in such operations. 

For an example of a patronage in the case of a buy-back sale, see Cass. com., 30 June 1998, LawLex200300003135JBJ, holding valid the practice of a cosmetics manufacturer which had agreed to reimburse consumers for the price of some of its products, stating however that a sum would be donated for each product purchased to a work of general interest, insofar as the operation, limited in time, was not carried out at a loss since it was based on a statistical forecast and consisted of a precise minimum and maximums amount of compensation below which the insurance taken out could no longer guarantee the losses and finally, the statement regarding the patronage was not untrue.

General Tax Code, Art. 238 bis: "1. The right to a tax reduction equal to 60% of payments made, limited to 5 per thousand of the turnover, carried out by the companies subject to income tax or corporation tax, for: a) works or organizations of general interest with a philanthropic, educational, scientific, social, humanitarian, sporting, family, cultural aim or contributing to the development of artistic heritage, the defense of the natural environment or the dissemination of French culture, language and scientific knowledge, especially when these payments are made for the benefit of a University Foundation, of a partnership foundation referred to respectively in Articles L. 719-12 and L. 719-13 of the Education Code or a corporate foundation, even if the latter bears the name of the founding company. These provisions shall apply even if the name of the company providing the payment is associated to the operations carried out by those organizations". 

Sponsorship advertising and patronage

The sponsorship agreement does not constitute a legal category in itself because its terms and conditions differ depending on the type of sponsorship used: sometimes the sponsor provides its support for an event by a visual presence or sound, or it “sponsors” one of the participants, etc. Contractual freedom prevails. Taking into account the variety of advertising services possible, the parties may choose to register their contractual relationship as an employment contract , a contract for services, an advertising agreement  or a contract for the use of an image , or even opt for an undefined agreement specially adapted to their needs using various contractual techniques, including donations or loans for use . When the contract gives rise to a long-term involvement and not just the one-off funding of an event, the trial courts have sometimes classified the arrangement as a partnership agreement . In reality, the characterization of the contract depends on the type of relationship that the sponsorship agreement establishes between sponsor and sponsoree. In several cases, sponsorship arrangements have been classified as employment contracts.

A company sponsoring an athlete or an artist may choose to use a fixed-term employment contract. Indeed, among the cases using fixed-term contracts, the Labor Code quotes sectors of activity defined by decree or by convention or extended collective labor agreements, for which it is standard not to use open-ended contracts because of the nature of the activity and the inherently temporary character of such jobs (Article L. 1242-2, 3°). Such contracts are frequently used in professional sports , the performing arts, cultural events, the audiovisual sector, film production, music production . 

In the absence of an express stipulation, a sponsorship contract characterizes an employment contract when it creates a link of legal subordination between the sponsor and the sponsoree in particular by requiring the latter to be present at specific occasions. In the absence of that link, a sponsorship agreement cannot constitute an employment contract, regardless of how the parties have described the arrangement . The existence or a relationship of subordination between the sports personality and their sponsor depends on the freedom left to the sponsoree in the performance of the mission, which is assessed having regard to a number of indices. The courts found no relationship of subordination in the following cases: the participation in competitions at the athletes' own risk  and in their own personal interest  or with full autonomy , the absence of directives from the sponsor , the freedom to organize their professional activity , the fact that the obligations only partially relate to their professional life . 

When a company sponsors a theater, a concert, a fashion show, the classification of employment contract can be applied due to the existence of the legal presumption that the performers  (Labor Code, Article L. 7121-3)  or fashion models (Labor Code, Article L. 7123-3)  are salaried employees. The presumption of the existence of a contract of employment subsists regardless of the method of payment and the amount or of how the parties describe the contract themselves . According to the Court of Cassation, the presumption of a salaried status for performing artists is not irrebuttable . However, neither the evidence that a fashion model retains total freedom of action in the execution of his/her work , or that “the artist retains the freedom of artistic expression, that he is the owner of all or part of the equipment used or employs one or several persons as assistants, where he is personally involved in the show” , are able to reverse that presumption. The presumption may only be rebutted if the person concerned demonstrates that the exploitation of their reputation is carried out in the context of a real partnership and that they are on a totally equal footing with their co-contractors . 

The question has been raised as to whether a sponsored athlete may benefit from the same presumption of the existence of an employment contract which is applicable to performing artists and claim French Social Security coverage. The extent of litigation that the issue has created resulted in the authorities adopting a circular on the situation of sportspersons in relation to social security and employment law .

Under that circular, no presumption of the employment of athletes can be deduced from their obligation to pay into the general social security scheme provided for in Article L. 311-2 of the Social Security Code. The existence of a contract of employment can only be established by a body of evidence showing a legal relationship of subordination. The circular does however accept that sportsmen and women may be equated to performing artists with regard to the issue of the presumption of a salaried status as laid down in Article L. 311-3, 15° of the Social Security Code, whose scope of application does not exclude the sporting events or exhibitions. The circular states that in this case affiliation “by operation of law” to the general scheme, “is effective where the parties concerned meet the necessary conditions, without any need to first establish a relationship of subordination” . 

The courts do not seem to favor automatic affiliation to the scheme by operation of law. The Versailles Court of Appeal  has thus ruled that an individual who is solely a sportsperson and therefore cannot be equated with a performance artist, is not the employee of the sponsor in the absence of relationship of subordination. The Paris Court of Appeal also believes that the presumption of employment of performance artists is not applicable to sponsored athletes . The Court of Cassation  has enshrined the position of the trial courts. Although previously the Court had found that a racing cyclist, whether acting for his own account or for an employer company, was bound by a contract of employment  , relations between sponsors and sponsorees which have varying degrees of complexity depending on the contractual terms binding them, eventually led the Court to adopt a more pragmatic, case by case approach. It thus found that a pilot participating in sport exhibitions for a sponsor which is not an entertainment company provides a presentation which is different from that of an performing artist  in terms of its production and that the existence of a relationship of subordination - and, as a corollary, falling under the general social security scheme  - must be ruled out when the person concerned receives no directive and participates at his own risk  and in his own personal interest in competitions which have not been organized by the sponsor company . The Court of Cassation has also ruled out any relationship of subordination for a professional tennis player who remained free to choose which competitions she would participate in and to organize her activity, which was not affected by her contractual obligations as a sponsoree . However, the Court of Appeal in Limoges  held that rugby players having assigned the right to use their image are prohibited from contracting with other competing brands and are obliged to wear only the clothing of a specific brand even outside of any sporting event (in particular during TV and radio interviews), must be equated with fashion models and are thus affiliated as such to the general social security scheme. According to the Paris Court of Appeal , in sponsorship or more generally the commercial exploitation of the image and the reputation of sportsmen and women, a distinction should be made depending on whether the aim of the contract is only to enable the other party to use the image, in which case the relationship is purely commercial, or if it places specific obligations on the player, such as the participation in exhibitions or events, or if it provides that the athlete must present a product, service or advertising message or pose as a model, payments made to the player by the partner are subject to social security contributions under the scheme to which he or she belongs.

Article D. 1242-2, 3° of the Labor Code provides: "In application of subparagraph 3° of Article L. 1242-2 "The sectors of activity in which fixed-term contracts may be concluded for jobs for which it is common practice not to use employment contracts for an indefinite period on account of the nature of the activity performed and the intrinsically temporary nature of those posts are the following: [...]; 5° professional sport ; 6° performing arts, cultural events, audiovisual sector, film production, music production; [...]. When a company sponsors an athlete or a performing artist, it can use this type of employment contract.

CA Paris, 5 July 2007, LawLex201300000599JBJ. A sponsorship agreement is a type of advertising agreement.

Court of Cassation, social chamber, LawLex200300001591JBJ; 7 November 1995, LawLex201300000519JBJ: no evidence of a relationship of subordination with regard to the sponsor for a sponsoree who participates in a sporting competition independently and subject only to the restrictions inherent in this type of event.

Court of Cassation, social chamber, 22 July 1993, LawLex200300001591JBJ; CA Aix-en-Provence, 25 June 2007, LawLex201300000461JBJ.

CA Aix-en-Provence, 25 June 2007, LawLex201300000461JBJ. 

Labor Code, Article L. 7121-3: "Any contract by which a person ensures, for remuneration, the cooperation of a performing artist for its production, is presumed to be an employment contract insofar as the artist does not carry out the activity which is the subject matter of this contract under terms involving their registration in the trade register".

Labor Code, Article L. 7123-3: "Any contract by which a person ensures, for remuneration, the cooperation of a model, is presumed to be an employment contract". See also Article L. 311-3-15° Social Security Code.

Labor Code, Article L. 7121-4, para. 1, relating to performing artists; Labor Code, Article L. 7123-4, para. 1, fashion models.

Court of Cassation, social chamber, 16 January 1997, LawLex200300001592JBJ.

CA Aix-en-Provence, 24 September 2011, LawLex201300000559JBJ.

CA Limoges, 24 June 2013, LawLex201500001115JBJ. 

http://www.legislation.cnav.fr/Pages/texte.aspx?Nom=CR_MIN_9460_28071994

On the last point, the Versailles Court of Appeal held that an athlete, who, because of this single quality, cannot be equated with the performing artists, is not the employee of the sponsor, in the absence of relationship of subordination.

CA Versailles, 12 February 1991, LawLex200300002712JBJ, upheld by Court of Cassation, social chamber, 22 July 1993, LawLex200300001591JBJ. 

CA Paris, 16 January 1995, LawLex200300001731JBJ, upheld by Court of Cassation, social chamber, 16 January 1997, LawLex200300001592JBJ.

Court of Cassation, social chamber, 22 July 1993, LawLex200300001591JBJ; 16 January 1997, LawLex200300001592JBJ.

Court of Cassation, social chamber, 7 February 1974, LawLex200300001590JBJ.

Court of Cassation, social chamber, 22 July 1993, LawLex200300001591JBJ, upholding CA Versailles, 12 February 1991, LawLex200300002712JBJ.

Court of Cassation, social chamber, 16 January 1997, LawLex200300001592JBJ, upholding CA Paris, 16 January 1995, LawLex200300001731JBJ.

CA Limoges, 24 June 2013, LawLex201500001115JBJ.

CA Aix-en-Provence, 25 June 2007, LawLex201300000461JBJ: in the absence of evidence of a relationship of subordination, the provision of equipment at advantageous conditions in consideration of a minimum participation at a few events designed to promote the products of the company that do not constitute payment in kind, does not establish the existence of a contract of employment.

CA Paris, 5 October 2017, LawLex201700001678JBJ.

CA Paris, 14 January 2005, LawLex200600001385JBJ.

CA Aix-en-Provence, 16 January 1996, LawLex200300001764JBJ.

Court of Cassation, social chamber, 22 July 1993, LawLex200300001591JBJ.

Court of Cassation, social chamber, 22 July 1993, LawLex200300001591JBJ upholding CA Versailles, 12 February 1991, LawLex200300002712JBJ.

French Consumer Law

61. A protean contract

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61. A protean contract

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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