10 Things to Think About When Someone Hands You a Contract

Thanks to Jim O’Brien of Poyner Spruill, LLP and a member of ArtWorks Law Committee for this article:

10 Things to Think About When Someone Hands You a Contract

 

Whether you’re a musician, filmmaker, painter, game developer, actor, or gallery owner, sooner or later you will be asked to sign a contract.  If you are serious about your art (as art and as a business), you will need to take a serious approach to understanding, negotiating and performing the contracts that are presented to you.  Here’s a list of 10 things you should consider when someone hands you a contract.

1. Establish expectations.  A contract should establish the parties’ expectations for the relationship. This is just as important as the payment terms or your ability to get out of the contract.  If you sign a contract that doesn’t reflect your expectations, the relationship is destined for failure.  For example, if you’re negotiating a recording agreement, and you expect to keep all your publishing rights, but the record label expects to share in the publishing rights, you have a problem. If the parties’ expectations are not aligned, you may be better off finding another deal.

2. Keep it simple and clear.  Deals in the entertainment industry can be very complex, as can the contracts for those deals.  Sometimes the complexity is necessary, but not always.  If possible, try to use contracts that say what you mean in a simple, concise and clear manner, but be sure not to oversimplify. If both parties understand what the contract means, you’ve hit the mark.

3. Everything is negotiable.  Everything is negotiable—even terms that the other party tells you aren’t negotiable.  You’re not likely to get everything you want, and if you push on things that are extremely important to the other party, you may lose the deal, but you will quickly learn where there’s flexibility. Part of the art of negotiating is identifying the things that are important to you and the other party, and finding a middle ground.  If an important point becomes non-negotiable—a “deal killer”—then you may have to walk away from the deal.

4. Be willing to walk away.  This is very important and, sometimes, it may be your only leverage in negotiating a contract.  Leverage—the principle of using a small advantage or even merely a perceived advantage to gain a benefit—is critical in contract negotiations.  Sometimes, especially as an artist, the only leverage you will have is the ability to walk away from a deal.  If you indicate you’re willingness to walk away, the other party may be more willing to negotiate terms in your favor.

5. If you don’t understand something, ask.  Contracts are legal documents often drafted by lawyers and usually include confusing language or concepts.  So, don’t be afraid to ask a question if you don’t understand what something means (remember, there are no stupid questions).  If you sign a contract, it’s binding whether you understand it or not.  Understand what each provision means before you sign it.

6. Use a qualified lawyer if you can.  While lawyers can be expensive, they can also save you money and aggravation in the long run (and the short run).  A lawyer can help you understand the contract and negotiate terms in your favor.  A qualified lawyer will know your industry and which terms should be negotiated.  Avoid using a friend or relative who is a lawyer, but doesn’t specialize in your industry—you may end up paying for it down the road.

7. Put all deal terms in writing.  It’s surprising how many times you may hear “just trust me” when you’re negotiating a contract.  That’s a negotiating tactic—an appeal to your emotions—often used by people who don’t have a legitimate negotiating position.  All your important deal points should be in the contract and not left to “trust.”  These include:  (a) the reason for entering the contract; (b) what you agree to do and what the other party agrees to do; (c) when these things are supposed to happen; (d) what the financial terms of the deal are (e.g., how and when you get paid); (e) how you get out of the deal if something goes wrong; and (f) how long the deal lasts.

8. Don’t make assumptions.  Don’t assume anything when drafting or negotiating a contract.  Spell out all the key assumptions in the contract.  For example, if you’re negotiating an agreement with a personal manager named John who works in a company with several personal managers, don’t assume that John will actually do your work.  If it’s important to you that John actually does your work, make that clear in the contract.

9. Pay attention to “boilerplate.” Boilerplate refers to the standardized, formal language in a contract that is often located at the end of the contract.  Boilerplate provisions affect your legal rights and are binding when you sign the contract even if you don’t read them.  Be sure you read and understand these provisions, and negotiate them if you don’t like what they say.  Examples of boilerplate provisions are:  (a) requiring the loser in a lawsuit to pay the other party’s legal fees; (b) requiring a lawsuit to occur in a selected state (which may be far from where you are); (c) prohibiting transfer or assignment of the agreement; (d) specifying which state’s law controls the interpretation of the agreement; and (e) requiring arbitration.

10. Understand your business.  Translating your business deal into a contract requires a good knowledge of the customs and nuances of your business.  If you don’t already have an intimate knowledge of how your business works and how deals are structured, talk to others who have done similar deals.  If you don’t know what’s customary in your industry, you may not end up with the best contract.

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Jim O’Brien is a partner at Poyner Spruill LLP in Raleigh, North Carolina, where he runs the firm’s entertainment law practice and works as a business lawyer.  Jim works with clients in all aspects of the entertainment industry, including film production and financing, film fund formation, NASCAR, coproduction deals, production issues, exclusive recording agreements, band representation, gaming, television, and distribution.  For more information, see www.ncentertainmentlaw.com, or call or e-mail Jim at 919.783.2827 or jobrien@poynerspruill.com.
Do you have something to say to the Triangle’s Creative Community?  Want to post an article or be a guest blogger? Email us at info@triangleartworks.org.
Beth

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