NOV10

Important clauses in contracts for creatives

In the world of creatives, it can be next to impossible to comprehend the legalese without a thorough understanding of the law. There must be some essential points to a contract that all creative people should know about. In searching for an answer to the “essential points” question, it is necessary to understand these five very important clauses.

1: Term

The term must be defined in any contract. The parties need to know how long the deal will last and how the time is defined. For instance, in a record deal the term might be defined by the number of records released. However, a management contract might stipulate terms in the form of number of years the agreement lasts. Both examples are terms of a contract, but it is essential to know how long the contracting parties are tied to any deal. The terms of a deal provide a defined length of time and should be included in every creative contract.

2: Rights

This entails a lot, ranging from author’s rights, the exclusivity rights, moral and economic rights, and licensing rights. The exclusivity provision will define how tightly the agreement will bind you. An exclusive rights deal can be thought of as a monopoly over a particular work. In an exclusive rights deal, an artist agrees to only license a particular work to one party. In the case of designers, portfolio rights are very important to consider as it is the permission to display the work in your portfolio after its done. This usually drags into another set of rights, being the moral rights. This is the right of attribution, the right to have a work published under a pseudonym or anonymously, and the right to the integrity of the work. While the economic right is the right to payment, royalties or remuneration for its usage. A successful artist's name and image can become valuable commodities. Use of the artist's name and likeness by another party can infringe on rights held by the artist.

3: Obligations

This is that clause where you say which obligations you have. Likewise which obligations your client has. This really needs to be as specific as possible. Because you are going to be setting the boundaries here. You can say what you are going to do as the service provider and what you won’t be doing. Also, what your client needs to do. For example, in the case of musicians who sign record deals with labels to produce a certain number of albums, while the record label handles the obligation to distribute, market and publicize the album.

4: Royalty and Remuneration

A contract should state the terms for payment to the writer or owner of the work. In a film work for example, it is suggested that negotiated items should include, “the purchase price, plus bonuses, plus “back end” profit participation, plus residuals in original TV or film production, and in all sequels, remakes, spinoffs.” When considering a contract’s terms on payment, you must include “the right to regular accounting statements and to audit the company that produces and/or distributes the TV or film project.” Record companies also use complex contractual formulas to determine royalty payments to their artists. Companies typically offer seemingly large royalty percentages to artists. Various clauses in the recording agreements then are used to reduce the royalty percentages, reduce the number of units on which royalties are paid, and delay payment for many months. Although a few small record companies have made some effort to simplify the structure of recording agreements, the major record companies and their smaller affiliates have fought to maintain the more complex, formula-based agreements.

5: Termination

Surprisingly, many contracts are missing a termination clause. This can put your rights in limbo or become a costly expense if you ever need to exit a deal. So, always make sure you understand how you can terminate the contract, and how much notice you have to give. Also, note that including a “Cure Period” could require that you give the other party a certain amount of time to cure any breach before you can terminate the contract.