ENDORSEMENT AGREEMENTS AND LEGAL LIABILITIES

This Article is written by Simran Goel of Asian Law College, Noida, an intern under Legal Vidhiya.

Abstract

Endorsement agreements play a vital role in modern advertising by using the trustworthiness of celebrities and influencers to sell products and services. This article looks at the legal framework surrounding these agreements. It focuses on the rights, duties, and responsibilities of the endorser, brand, and advertising agency. It explores important contract clauses, the rules about misleading advertising, and the effects of false claims, particularly in India. The article reviews key points from the Consumer Protection Act, 2019, and highlights important court decisions that have influenced the standards for responsibility and care among endorsers. Understanding these legal aspects is essential for reducing risks and encouraging ethical behavior in the endorsement field.

Keywords

Endorsement agreements, legal liabilities, advertising law, consumer protection, celebrity endorsement, influencer marketing, deceptive advertising, misrepresentation, due diligence, brand ambassador, Consumer Protection Act 2019, ASCI, Indian judiciary, contracts.

Introduction

The world of marketing often features impressive partnerships and equally significant failures. Take, for example, the well-known case of M.S. Dhoni and Amrapali Builders[1]. The cricket star distanced himself from the real estate company after homebuyers launched a social media campaign against false promises. Another case is Malayalam actor Mammootty[2], who faced legal trouble over a misleading fairness soap advertisement. These examples highlight the high stakes in endorsement deals. In these contracts, individuals – whether they are established celebrities, athletes, or rising social media influencers – publicly support or recommend a product, service, or idea in exchange for payment.

In today’s connected world, the endorsement industry has grown rapidly. Brands use the perceived authenticity and reach of public figures to engage with consumers. This has led to multi-million-dollar contracts and a flood of promotional content. However, this fast-evolving landscape is not straightforward. A solid understanding of the law is critical for all parties involved – brands, endorsers, and agencies – to manage risks, follow changing regulations, and protect their image. This article will explore how endorsement agreements can be powerful marketing tools but also come with complex legal responsibilities. Clear contracts, careful following of advertising standards, and an understanding of shifting consumer protection laws are necessary, especially with the Indian legal system’s increased scrutiny. We will examine the details of these agreements, the legal responsibilities of endorsers, the role of regulatory bodies, and recent court interpretations that are shaping this evolving field.

Anatomy of an Endorsement Agreement

An endorsement agreement is a detailed legal contract that clearly defines the relationship and responsibilities between parties that use public figures for marketing. Understanding its components is essential for managing risks effectively.

The key parties typically include the Endorser, such as a celebrity, athlete, social media influencer, or expert, whose public image and credibility are being used. The business that owns the good or service being promoted is known as the brand or advertiser. An Advertising Agency often acts as a vital mediator, facilitating negotiations, managing campaigns, and ensuring that both the endorser and the brand meet their commitments.

At its core, an endorsement agreement relies on several important contractual clauses. Careful drafting and negotiation of these clauses are crucial to reduce risks and ensure a beneficial and legal partnership. Some of the clauses are:

1. Scope of Endorsement: This clause specifies the products, services, or campaigns to be promoted. It includes the geographic area, target audience, and approved media channels.

2. Term and Termination: This clause defines how long the agreement lasts and the conditions for early termination, such as damage to the brand’s reputation or the endorser engaging in misconduct.

3. Compensation: This outlines both financial and non-financial benefits for the endorser, including upfront fees, royalties, equity, and performance-based incentives.

4. Usage Rights: This gives the brand permission to advertise using the endorser’s name, picture, and other distinguishing characteristics.

5. Exclusivity: This clause prevents the endorser from promoting competing products during the agreement’s term, protecting the brand’s investment. The details of exclusivity are often heavily negotiated.

6. Deliverables & Performance Metrics: This section outlines the endorser’s specific obligations, such as the number of public appearances, social media posts, or content creation.

7. Representations and Warranties: Both parties give assurances, like the endorser’s right to enter the contract and the brand’s ownership of the product’s intellectual property.

8. Indemnification Clauses: These shield each party from monetary damages brought on by claims from third parties. For example, if the endorser breaches a warranty, they may indemnify the brand for losses. Conversely, the brand would indemnify the endorser if the product causes harm.

9. Force Majeure: This clause deals with unforeseen events, like natural disasters, that prevent either party from meeting their obligations.

10. Dispute Resolution: This outlines how to handle disagreements, usually preferring arbitration or mediation.

11. Moral Turpitude/Scandal Clause: This important provision allows the brand to end the agreement if the endorser engages in actions that damage their reputation or the brand’s image.

12. Due Diligence Clause: This increasingly needed clause may require the endorser to conduct reasonable due diligence on the product to ensure they genuinely believe in its claims. This requirement is emphasized by consumer protection laws.

Legal Liabilities for Endorsers

An endorser, often viewed as just the face of a product, carries significant legal responsibilities that go beyond their contract, especially in India’s consumer-protection-focused environment. The main liability is for misleading advertisements, as the Consumer Protection Act, 2019 (CPA), has greatly improved consumer protection and endorser accountability.

1. Section 2(1) of the CPA defines a “misleading advertisement” as one that falsely describes a product or is likely to mislead consumers.

2. Section 2(18) specifically includes an “endorser” among those who can be held responsible.

3. The Central Consumer Protection Authority (CCPA), created under Section 10 of the CPA, can investigate misleading ads and give orders. For a first violation, the CCPA may impose fines of as much as ₹10 lakh, while for subsequent violations, penalties can reach ₹50 lakh. Additionally, the endorser could face a ban on endorsements for a period of up to three years.

4. Section 89 of the CPA details penalties for false or misleading ads, with endorsers facing civil liabilities outlined in Section 21.

A key part of this liability is the duty of due diligence. Indian law clearly expects endorsers to check the claims made in advertisements. This means they should not just lend their face or voice; they are expected to genuinely use the product (if applicable), conduct reasonable inquiries into its claims, and ensure that their statements are truthful and not misleading. The endorsement must reflect the endorser’s honest opinion and experience, based on solid information.

Beyond regulatory penalties, endorsers can face serious consequences, highlighting the need for them to act with caution, conduct thorough due diligence, and seek expert legal advice before entering any endorsement agreement. Some of the consequences are:

1. Breach of Contract: Endorsers face serious consequences for breaching their contract. This can happen if they fail to meet obligations, violate exclusivity clauses, or breach moral turpitude clauses. Consequences can include demands for monetary damages, injunctions, termination of the agreement, and the return of fees already paid.

2. Reputational Damage: Endorsing a controversial product can cause significant reputational harm to the endorser, leading to a loss of consumer trust and future endorsement chances. The Mammootty case is a prime example of an endorser facing public scrutiny due to product failure.

3. Intellectual Property Infringement: Endorsers can be held liable along with the brand for intellectual property infringement if they use copyrighted material or trademarks without proper licensing in their endorsement content.

4. Negligent Misstatement: Although less common, an endorser acting in an expert capacity could face a claim for negligent misstatement if they make a statement carelessly that a consumer relies on to their detriment[3].

Legal Liabilities for Brands/ Advertisers and Agencies

The advertising landscape in India imposes serious legal responsibilities on both brands and the agencies that create and distribute their campaigns. These responsibilities mainly focus on ensuring truthful advertising, meeting contractual obligations, and respecting intellectual property and privacy rights.

1. Liability for Misleading Advertisements 

The Consumer Protection Act, 2019 (CPA) establishes a framework for holding parties accountable for false advertisements. Under this Act, the brand holds the primary and ultimate responsibility for the truthfulness and legality of its ads.

• Brand’s Primary Liability: The brand is mainly responsible for the accuracy of its advertising. The Central Consumer Protection Authority (CCPA), under Section 21[4], can impose heavy penalties on brands, emphasizing their non-delegable duty to back up all claims.
• Ad Agencies’ Liability: Advertising agencies may also be held responsible. According to Section 21(3) of the CPA, agencies can be jointly and severally liable if they were aware or should have been aware of the misleading elements of the advertisement.

2. Breach of Contract with Endorser 

Brands and agencies working with endorsers, such as celebrities and influencers, must strictly follow their contracts. Breaches can include:

• Failure to pay compensation: Not paying or delaying payment of agreed fees.
• Improper use of likeness: Using an endorser’s image, voice, or persona beyond the agreed limits regarding scope, duration, or platforms can lead to issues.
• Breaching exclusivity promises: Working with competing brands when an exclusivity clause exists.

      Consequences for these breaches can be serious, including monetary damages for lost earnings or reputation, injunctions to prevent further unauthorized use, and even specific performance that compels the brand to fulfill its contractual obligations.

3. Product Liability 

If an endorsed product is defective or harms someone, the brand is directly responsible under product liability laws. While the endorser may also be liable under the CPA, the brand is the primary target for such claims.

4. Intellectual Property Infringement 

Brands and agencies must carefully manage intellectual property rights. This includes ensuring the use of the endorser’s likeness stays within the agreed scope and does not violate third-party intellectual property, such as music or images, without proper permission.

5. Data Privacy Violations 

Brands and agencies must follow data protection laws when running campaigns that involve collecting data. Violating these regulations can result in severe penalties and diminish consumer confidence.

In conclusion, brands and advertising agencies work in a highly regulated environment. A proactive approach that includes legal review of campaigns, solid contracts, and a thorough understanding of consumer protection, intellectual property, and data privacy laws is essential to reduce significant legal and financial risks.

Regulatory Oversight and Self-Regulation

Regulatory oversight of advertising in India combines self-regulation and government enforcement. The goal is to protect consumer interests and promote fair practices.

1. Advertising Standards Council of India (ASCI) 

The Advertising Standards Council of India (ASCI) is a key self-regulatory body established in 1985. Its main job is to ensure that advertisements follow its Code for Self-Regulation. This code requires that advertisements be lawful, decent, honest, truthful, and non-harmful. ASCI mainly works by handling complaints about advertisements across different media. A significant change for modern endorsements is the ASCI Guidelines for Influencer Advertising in Digital Media (2021). Although ASCI cannot impose financial penalties directly, its recommendations are influential because of industry agreement and possible referrals to statutory bodies.

2. Central Consumer Protection Authority (CCPA) 

Created under the Consumer Protection Act of 2019, the Central Consumer Protection Authority (CCPA) is a legal entity endowed with significant enforcement authority. Unlike ASCI, the CCPA can issue orders, recall goods, stop unfair trade practices, and impose large fines on manufacturers, sellers, service providers, and even endorsers for misleading advertisements. For instance, it has the ability to impose fines of up to ₹10 lakh for deceptive advertisements, with even greater penalties for repeat violations. The CCPA’s enforcement powers make it a stronger regulatory body compared to ASCI’s self-regulatory approach.

3. Other Regulatory Bodies 

In addition to ASCI and CCPA, several sector-specific regulators also oversee advertising in their areas: 

• Insurance Regulatory and Development Authority of India (IRDAI): Regulates advertising for insurance products to prevent mis-selling and misleading claims. 
• Securities and Exchange Board of India (SEBI): Oversees advertising by financial market intermediaries to ensure transparency and protect investors. 
• Food Safety and Standards Authority of India (FSSAI): Regulates claims made in food and beverage advertisements, ensuring they meet food safety standards and are not misleading. 

      This layered regulatory environment ensures a thorough approach to advertising oversight in India.

Indian Landmark Judgments and Regulatory Actions

The Indian legal landscape regarding advertising has seen a major change with the introduction of the Consumer Protection Act, 2019 (CPA). This change shows a growing focus from the courts and regulators on holding both brands and endorsers accountable for what they promote. There is now a push for shared responsibility, which requires celebrities and influencers to be more careful in their endorsements.

1. The Maggi Noodles Controversy (2015-2016)[5]

Although it occurred before the 2019 Act, the Maggi Noodles case was a key event that led to stricter rules for endorsers. In 2015, Maggi noodles faced a nationwide ban due to claims of high lead and MSG levels. This controversy put brand ambassadors like Amitabh Bachchan, Madhuri Dixit, and Preity Zinta under intense public scrutiny and even resulted in legal notices. While no direct ruling against them was made under the previous laws, the incident highlighted the significant moral and public pressure on endorsers. It raised expectations for them to perform due diligence. The public perceived that endorsers attach their credibility to products, which implies a level of responsibility. This outcry played a major role in shaping the endorser liability rules in the following CPA 2019.

2. High Court/Supreme Court Observations 

While the CPA 2019 is relatively new in terms of Supreme Court rulings on “endorser liability,” the Supreme Court has made important comments that support the Act’s intent. In the case of Indian Medical Association v. Union of India and others (Patanjali advertisements case)[6], the Supreme Court emphasized in May 2024 that social media influencers and celebrities share equal responsibility for endorsing products in misleading ads. The Court stated that the right to health includes a consumer’s right to know about product quality, and it highlighted that endorsers must exercise due diligence. The Court also required advertisers to submit self-declarations to ensure they follow ethical standards. Although this was not a direct ruling against an endorser in that particular case, it sets a strong precedent for future actions.

Risk Mitigation Strategies

To navigate the complex advertising regulations in India, brands, endorsers, and advertising agencies must create strong risk management plans.

For Endorsers: 

Endorsers, including celebrities and influencers, face growing responsibility. They must conduct comprehensive examinations of the product or service, verify claims, and assess the brand’s reputation. Seeking legal counsel for contract evaluation is essential. This ensures clarity on terms, usage, and liability. Endorsers should genuinely believe in, and ideally use, the product they endorse, as required by consumer protection laws. They must also be very aware of and follow disclosure requirements for material connections. Using clear hashtags like #ad or #sponsored helps maintain transparency with their audience.

For Brands/Advertisers: 

Brands are ultimately responsible. They should create strong contracts with endorsers, clearly outlining terms, work scope, exclusivity, intellectual property rights, and specific liability clauses for misleading claims or breaches. Vetting potential endorsers for past issues is essential. Brands must ensure full compliance with all advertising standards (ASCI Code) and the Consumer Protection Act, 2019, including having proof for all claims. Ongoing monitoring of endorsement content across all platforms is crucial to quickly address any non-compliance or misinterpretations.

For Advertising Agencies: 

Advertising agencies act as important intermediaries. Their role involves actively ensuring their clients follow all relevant laws and guidelines. They must advise clients on potential legal risks tied to advertising claims and endorsement practices. Agencies are also responsible for creating compliant advertising campaigns from the start to the finish, ensuring all content, disclosures, and representations meet legal and self-regulatory standards.

Conclusion 

The complex nature of endorsement agreements and legal liabilities has become increasingly important in the digital age, significantly changing the advertising landscape in India. This shift highlights a growing acknowledgment that an endorser’s credibility greatly affects consumer choices, leading to greater accountability from all parties involved. 

The Consumer Protection Act, 2019 (CPA), has been a major factor in this shift, creating a model of shared responsibility. Triggered by past issues like the Maggi Noodles case, the CPA has empowered organizations like the Central Consumer Protection Authority (CCPA) and strengthened the self-regulatory guidelines of the Advertising Standards Council of India (ASCI). These rules now require endorsers to conduct due diligence, ensure transparency, and verify claims, shifting responsibility beyond just the brand. 

Looking ahead, trends like the growing use of Artificial Intelligence (AI) in creating or influencing endorsements, and increased regulatory scrutiny of influencers (as seen in recent Supreme Court actions regarding insensitive content), will require ongoing changes to legal frameworks. The difference between endorsements made by humans and those generated by AI, along with the related liability considerations, requires careful consideration. Ultimately, maintaining trust in the endorsement ecosystem requires a strong commitment to ethical practices and proactive legal foresight from brands, endorsers, and agencies.

References

1. Lega Mart, https://legamart.com/endorsement-agreement/ (last visited July 8, 2025)
2. Medha Vinod, How to draft effective endorsement contracts for athletes —, [Online Article] (2025)
3. Khaitan & Co., https://khaitanlegal.com/legal-implications-of-social-media-influencers-endorsements-and-disclosures-in-india/ (last visited July 8, 2025)
4. Vol. 1, Government of India, The Consumer Protection Act, 2019 (Ministry of Law and Justice 2019)
5. ANP Partners, https://anppartners.in (last visited July 8, 2025)
6. Wikipedia, https://en.m.wikipedia.org (last visited July 8, 2025)
7. Vol. 1, Central Consumer Protection Authority (CCPA), Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022 9 (Government of India 2022)
8. Advertising Standards Council of India (ASCI), https://ascionline.in (last visited July 8, 2025)
9. Ritisha Mukherjee & Shrija Verma, Self-Certification of Ads: A Deeper Legal Perspective, — Bar & Bench —, [Online Article] (2024)

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[1] India Today, https://www.indiatoday.in/india/story/ms-dhoni-sakshi-amrapali-connection-explained-1573469-2019-07-25 (last visited July 8, 2025)

[2] The New Indian Express, https://www.newindianexpress.com/states/kerala/2016/Jan/19/after-not-getting-fair-by-mammootty-endorsed-soap-kerala-man-wins-rs-30000-870905.html (last visited July 8, 2025)

[3] Srishti Chawla, Negligence in Law of Torts, — Legal Service India —, [Online Article] (2019)

[4] KanoonGPT, https://kanoongpt.in (last visited July 8, 2025)

[5] M/s Nestlé India Ltd. V. Food Safety and Standards Authority of India, AIR 2016 Bom 225

[6] Indian Medical Association v. Union of India & Ors., AIR 2024 SC 406

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