Contracts are everywhere; they crop up in every aspect of our day-to day lives, and we all enter into multiple contracts on any given day, even without realising it. Contracts govern many aspects of the creative sector, and are highly relevant to ensuring the smooth progress of a project.
The key point is that a contract is a legally binding agreement between two or more parties to carry out certain specific obligations, or mutually agreed promises. The performance of those obligations or promises is enforceable as a matter of law, which is to say that if there is a valid contract in place, the courts will allow one party to enforce the other party’s performance and, if the other party does not perform, the law will award certain remedies.
In the entertainment industry, whenever someone is making a deal, or has made a deal, ensuring that there is a proper, identifiable, contract in place is very important. The contract does, not as a matter of law, need to be in writing but which will make life a lot easier if it is.
Being able to refer to and rely on an identifiable contract is important not only for holding non-paying parties to account, but also in the context of, for example, chain of title when parties come to sell projects. If someone has taken your product and has not paid you for it, or you consider that someone agreed to provide services to your production, if you cannot point to an identifiable, enforceable, contract setting out the agreement, the challenge will be far greater.
It is always preferable to have an agreement in written form (although, again, oral contracts are enforceable, subject to certain important caveats, particularly around being able to identify with certainty the terms that were agreed). In a written form of contract, though, as a general rule of thumb, the more specific the information, the better. As a basic minimum, the document recording the agreement should contain:
- the names of the parties to the contract;
- the date on which the contract was made;
- the terms and conditions that each party must observe, including (a) the service, or product, that is the subject of the contract (so for example, writing the screenplay, or providing FX services to a production), and (b) what is being exchanged for that service or product (i.e. the payment terms);
- an acknowledgment that the parties agree to the terms in the contact; and ideally a signature of each party; and
- the governing law and jurisdiction of the contract; so, the laws that will govern the contract and, if the parties end up in a dispute, that will be applied to resolve the dispute, and how and where that dispute will be heard. Depending on who the contracting parties are, and where they are based, the jurisdiction may be the laws of England and Wales or, commonly in the entertainment sector, the laws of California or New York. There are significant differences so jurisdiction is crucially important.
Content producers in particular should be aware of terms which assign rights in work product to the counter party. Similarly, any restrictions on a party’s ability to sell, or licence, rights in the product should be noted, as should exclusions and limitations of the counter party’s obligations (for example, a distributor seeking try to limit or exclude its obligation to use good faith and fair dealing).
So contracts are key!