Entertainment Contracts: Common Issues
September 12,
2013.
Most of the media attention surrounding contracts
of professional athletes and entertainers revolves around those contracts they
ink with their respective teams, recording labels or movie studios.
However, professional athletes and entertainers also enter into many other
contracts (such as those with sponsors or money managers) that do not receive
the same (or any) amount of media attention. In addition, the professional
athlete or entertainer often receives these contracts as part of packages that
include many form documents requiring his or her signature, making the contract
seem like another unimportant piece of paper that simply needs to be
signed. As a result and not surprisingly, the professional athlete or
entertainer typically signs the contract with no questions asked. And why
wouldn’t they? The contract seems no different than the form documents included
with the rest of the package, and they want to get paid or start receiving services!
However, despite the lack of media attention and seemingly “form” nature of
these contracts, they are often riddled with terms unfavourable to the
professional athlete or entertainer that create legally binding obligations
upon him or her.
In short, if you are a professional athlete or
entertainer, hire an attorney to review these contracts. The review will be
quick and cheap and very likely limit your future exposure and liability under
the contract. To demonstrate the point, we review below some of the most
common issues found in these contracts:
Conflicts
with Pre-Existing Contracts
You should always review any pre-existing contract
to which you are a party (such as your contract with your team, record label or
film studio) before entering into any subsequent contract because your
pre-existing contract may contain terms that prohibit you from entering into
such subsequent contract. For example, your contract with your team may
prohibit you from endorsing certain products. If you have any doubts as to
whether the terms of a particular contract conflict with your pre-existing
contract, you should seek legal counsel and/or ask the general counsel of your
team, record label or film studio whether you are permitted to enter into the
particular contract.
Intellectual
Property Rights
Some of these contracts may impact or otherwise
affect your intellectual property rights (i.e., the rights to use and profit
from your name and likeness). For some of these contracts such as endorsement
deals, it is standard to grant the company endorsing you limited intellectual
property rights. However, intellectual property rights are some of the most
valuable rights of professional athletes and entertainers, and grants of
intellectual property rights can vary with respect to exclusivity, term,
revocability, geography and scope. More often than not, the first draft
of the contract will grant the company an exclusive, perpetual, non-revocable,
worldwide grant of your intellectual property rights. If a company is
asking you to grant them a broad, blanket grant of your intellectual property
rights, they should pay a significant premium for it. However, not
surprisingly, they will not pay unless you ask, and you will not know to ask
unless you (or an attorney) carefully review(s) the contract and know(s) what
to look for.
Exclusivity
and Negative Covenants
You should be cautious when entering into any
contract in which you grant exclusive rights or otherwise covenant not to do
certain things. In doing so, you may preclude yourself from entering into
future contracts such as endorsement deals with other companies. If a company
is asking you to grant them exclusive rights or covenant not to do certain
things, they should pay a premium for it. However, not surprisingly, they
will not pay unless you ask, and you will not know to ask unless you (or an
attorney) carefully review(s) the contract and know(s) what to look for.
Indemnification
Indemnification provisions are often very dense and
difficult to understand, but they are some of the most important provisions to
any contract. Generally, indemnification gives you the contractual right
to be compensated for certain damages or losses that you suffer as a result of
the contract through no fault of your own. Almost every contract you sign
will have indemnification provisions that, at minimum, should indemnify you for
any liability with respect to the acts or omissions of the other party to the
contract. However, there are many other instances in which you should ask for
even broader indemnification rights which, not surprisingly, companies
typically do not spontaneously offer to you. Yet again, unless you ask,
you will not get these rights, and you will not know to ask unless you (or an
attorney) carefully review(s) the contract and know(s) what to look for.
Unilateral
Amendment, Termination and Renewal Provisions
One of the more egregious issues with these
contracts is that they often contain unilateral amendment, termination or
renewal provisions. If you sign a contract with unilateral amendment,
termination or renewal provisions, the other party can amend, terminate or
renew the contract without your consent. To demonstrate how unfair such a
provision is, imagine that you sign a contract with a money manager pursuant to
which you and the money manager agree to a set fee as the money manager’s
compensation. If the contract allows the money manager to amend such contract unilaterally, the
money manager can, without your consent, amend the contract to increase
his or her fee. This result is unacceptable. Almost without exception,
any right to amend the contract should require both parties to agree (in
writing) to any amendment, and termination and renewal provisions should be
similarly mutual in nature (or, if appropriate, unilateral in your
favour). Consistent with the theme, unless you ask, you will not get these
rights, and you will not know to ask unless you (or an attorney) carefully
review(s) the contract and know(s) what to look for. Be proactive in the
business of commercialising your talent (s).
Afolabi
Babade is with:
AB&C Entertainment (Law) Solicitors
www.afolabibabadesolicitors.webs.com
