Agree to Agree, Part Five

I fondly remember my original intention to have this entire series - a breakdown on contracts and agreements for creators - done over the course of a few weeks.  Fortunately for me, and perhaps unfortunately for those waiting with bated breath for each chapter, I ended up getting so busy with non-blog writing that it was difficult to carve out the time to finish it up.  However, I've gotten enough comments, Twitter mentions and so on to know that people are actually finding this series to be pretty useful, so I'll redouble my efforts to get it done.  Assuming things go as planned, there will be six chapters total, plus a seventh that will be composed mainly of a sample agreement or two for creators to use. The previous four installments covered contracts in general, rights, term/termination provisions and work-for-hire.  While it's not essential, I would suggest reading those before going through this chapter, which will discuss scary language in contracts - the sort of things you want to think twice about before agreeing to.

Before I get into those, let me first say that the "goodness" or "badness" of a contract, or any specific provision in it, is very much context-dependent.  To illustrate, let me tell you a story: in the early days of Saturday Night Live, the agreements with the performers were much like the contracts on any television show.  The actors showed up, helped to write sketches, performed, took a day to sleep and then did it all again the next week.  Anything they did outside the scope of that job wasn't covered under the contract.  As some of those early actors started to get famous (Belushi, Murray, Chase, Radner, etc.), they began to appear in movies during the SNL summer hiatus.  Some of them went on to lucrative sitcom careers.  Others didn't (Where Art Thou, Charlie Rocket?), but by and large, it started to become clear that SNL was a major launching pad for a career in entertainment.  Eventually, Lorne Michaels and his people realized that if they were going to be picking comedians out of obscurity and essentially handing them (some of them, anyway) multi-million dollar movie careers, then they should participate in some of that.  So these days, if you sign on at SNL, you agree to cut them in to a portion of entertainment projects you are able to get going for a specified period - even after you no longer work at the show.

You know what, though? That's really not such a bad deal.  SNL is a proven commodity as a talent launcher.  Getting a spot on that show is like winning the lottery as far as national exposure.  So, what would have been a terrible agreement for Bill Murray to sign (because when he started on SNL it was just a scrappy variety show that no one could have predicted would go as far as it did) turns out to be pretty darn okay for a guy like Jason Sudeikis.  The point is that context is really important when dealing with contracts.  The most important thing is to understand what's in front of you.  If you understand it, and how it might affect you, then you know what you're going to object to.

So, some things to watch for - first, tread carefully any time you see the word "perpetual" in a contract, or you see a term that doesn't seem to ever end.  Perpetual means, of course, forever.  If you're granting a perpetual right, license or anything like that, it means that it's basically gone forever absent a lawsuit alleging that the contract was invalid for some reason.  I see this a lot - people assume a contract will last for, say, the length the book's being published, when in fact it might go on forever.  Perpetual provisions can be hidden inside other terms, and they might not be immediately obvious.  There are only a few specific reasons why a term in a contract might need to be perpetual: (1) you're being paid money specifically to give up a right perpetually, such as in a work-for-hire agreement (see the last installment for more on that); (2) the person you're contracting with has a valid reason for needing to be able to have that right forever (like if they're incorporating your work into something bigger that will have a life of its own, and you're cool with that); or (3) the person you're contracting with needs to know that they can rely on you not doing something forever (I often see this with confidentiality clauses, where you'll get to see specific secret information as part of the contract, and they need to know you'll keep it secret forever).  Otherwise, it's hard to see why any term needs to last forever - even those SNL contracts probably have a point where the show stops participating in an ex-player's career.  There can be exceptions to every rule.  Just pay attention if you see something that's supposed to last forever.

Next thing to watch for: deferred compensation, aka "I'll pay you later."  As I've discussed in previous chapters, there's nothing wrong with not getting paid up front if you're sure that's what you want to do, but it's an area to make sure is handled in a crystal-clear fashion in the agreement.  If you're taking a piece of the overall revenues from a project, you want to know exactly how much you're getting, and exactly when you're supposed to get them.  Watch for the terms "gross" and "net" when applied to deferred pay.  If the contract says you get a share of the gross, it generally means that you get your percentage from the first dollar earned by the project.  If it's net, it means that you get paid out of what's left after a bunch of other expenses are paid (printing, marketing, maybe even other creators).  There are no absolutes here, and again, the most important thing is to understand what you're agreeing to.  Anything dealing with what you're supposed to get paid should NOT BE VAGUE.

In fact, that's another biggie - vagueness.  A good contract is perfectly clear.  There shouldn't be anything to hide.  Legalese has its place, but it's not always necessary.  Watch for a contractual partner who says something like, "well, it's not in the contract, but if this happens, then we'll definitely do this - you'll be fine."  Incorrect - if something goes wrong and you end up in court, it's almost always the contract that rules the day.  (That's called the "four corners" rule, as in "unless it's inside the four corners of the paper that the contract's printed on, then whatever.")  If someone is telling you something verbally that isn't in the agreement, it doesn't count.  If they mean to stick by what they're saying, they should be happy to put it in the agreement, in writing.

Alternative dispute resolution - this is a fancy term, also called ADR, for any way of solving a disagreement in a contract besides going to court.  It primarily covers things like arbitration and mediation.  The intention is to streamline disputes, so everyone can get an answer quickly and move on with their lives.  These provisions are usually structured so that both sides waive their right to a jury trial or other court proceeding, and instead they have to do something else, like arbitrate.  In many cases, arbitration and mediation are awesome - they really do speed things up, and they can reduce some of the uncertainty and expense connected with jury trials.  However, that's mostly true when the parties on both sides of a contract are either corporations or moneyed individuals.  The thing about ADR is that it's still pretty expensive.  Filing an arbitration claim usually costs thousands of dollars.  In addition, if you give up your right to a standard trial, it also means you give up one of the most powerful tools for freelance creators when they need to get paid: small claims court.  In every state, you can go to small claims if you're owed less than some threshold amount (usually $5,000-$10,000) and get a quick resolution, from a judge, that costs you almost no money.  You don't need a lawyer, you just have to show up and present your case in plain language.  However, if you agree to an ADR clause, this right goes bye-bye.

Similar to the preceding point, watch for "choice of venue" clauses that would force you to sue the other party only in one specified location (usually the home base of the person giving you the contract.)  If you live in Miami, and the contract requires you to sue in Oregon, that can be troublesome.

Watch for the term "best efforts" - if a contract says you'll use best efforts on a project, it seems like you're just supposed to try really hard - do your best.  Nope.  "Best efforts" is a legal term that means you will use every ounce of energy you have to complete a project, to the exclusion of everything else in your life.  If you don't, and the other side can prove it, then they can say you're in breach and refuse to pay you.  Best efforts is a term that almost never has a place in a contract.  If you see it, object, and ask it to either be deleted or, at worst, amended to the phrase "commercially reasonable best efforts."

I think I'll stop here - there are certainly other things that can be drafted into contracts that can be troublesome, but every contract is different, too.  As I've tried to illustrate, one person's horrible agreement can be fine to someone else.  The most important thing, again, is to read the whole thing, every single word, and understand what all of those words mean.  If you don't know what you're signing, then you deserve what you get.  Ask the other side about anything unclear, or even better, ask your own lawyer.  There are plenty of pro bono arts lawyer organizations out there that will help you for free: the biggest is Volunteer Lawyers for the Arts, but they aren't the only ones out there.

Still deciding what to cover for the final installment, but I'm leaning towards some general contract negotiation tips.  See you then!


Why we do this.

More from A 27 Halloween!