ANALYSING THE IMPORTANCE OF CERTAIN CONTRACTUAL TERMS IN ENTERTAINMENT AGREEMENTS
Author: O. M. Atoyebi S.A.N FCIArb. (U.K.)., Contributor:
Theodora Nnodim
Complex contracts are used frequently in the entertainment sector to shield companies from financial risk. Artists, actors and most people in the entertainment sector may find the one-sided or overly complicated stipulations in entertainment contracts inconvenient. To calculate artists’ or actors’ royalty payments, record labels as well as producers use complicated contractual formulae. A number of provisions in the recording agreements are utilized to lower the royalty percentages, lower the quantity of units for which royalties are paid, and postpone payment.
This article discusses the various types of clauses contained in entertainment contracts, the effect of each clause, and the possible legal implications.
What is a Clause?
To make reading legal documents easier, it is customary to break them into multiple, sequentially numbered sections. All of these numerous subdivisions are together referred to as Clauses. Clauses are a common feature of legal documents such as contracts, wills, deeds, settlement agreements, and others.
When information is broken down into clauses, it is easier to find and make reference to pertinent information. The term “Clause” in grammar refers to a set of words that contains both a subject and a verb. Legally speaking, it is regarded as being a part of a document.
What is a Contract Clause?
The phrase “Clause” refers to a specific term or section included in a contract. A contract will contain clauses that each address a different aspect of the subject matter. They are meant to spell out exactly what obligations, advantages, and rights each contract party will have.
Despite the fact that provisions can be included anytime in a contract, they are most usually seen near the end. Clauses, which may be in many different formats, cover almost every area of the organization or business. For example, one prevalent clause in employment contracts is a Non-disclosure Agreement. This provision prohibits employees from disclosing any trade secrets or other confidential information of the Company.
Different Types of Clauses Prevalent in Entertainment Contracts
The following are some of the clauses present in entertainment contracts:
Exclusivity Clause
An Exclusive Clause also refers to a non-compete clause. It prohibits one party from getting in touch with or negotiating with a third party for a specified period of time. They are typically included in confidentiality agreements. This means that in entertainment contracts, the exclusivity clause could include that the artist or actor may be told, that all creative works made by the artist, shall be published by either the Record label or the producer. For instance, the clause could appear like this:
“The artist/actor commits to avoid giving any of his creative output to another record label or producer…..”
The effect of the above is that, whatever the Artist creates, belongs to the record label signing him and if the artist decides to leak his work through another record label, there will be consequences. Also, the fact that it will apply to everything created by the artist, is an important point to pay attention to.
Termination Clause
A Termination Clause specifies how a contract may be terminated. This clause includes the right to end a contract without paying any fees. These rules often outline who has the right to cancel the contract and why. This clause is important in entertainment contracts because it helps put the terms of the contract in perspective.
Therefore, the effect of the termination clause is that if an artist intends to be with a record label for a year, and the contract indicates that he remains with them for more than a year, then it means before signing such contract, the termination clause has to be varied.
Disagreement Clause
The Disagreement Clause, otherwise known as the Dispute Resolution Clause, explains in writing between parties, the procedure to be followed in the event of a dispute. Most contracts, describe steps to do in the event of a problem so that it doesn’t get worse.
The effect of a disagreement clause is that parties treat each other with respect. It also instils confidence in parties on the need to resolve any dispute that may arise, with ease.
Limitation/Indemnification Liability Clause
This clause deals with the parties agreeing to reduce their possible financial risk in carrying out their obligations under the agreement by limiting their liability for potential future liabilities. Simply put, the Liability Clause controls a party’s total risk or financial exposure under the contract.
If there are no liability restrictions in your contract, then it means the other party is willing to accept unlimited liability.
In other words, the effect of not having the clause is that the party may be held fully accountable for any harm brought on by the performance of the contract.
Royalty Clause
This clause indicates a legally binding payment granted to an individual or business in exchange for continued use of their assets, such as copyrighted works, franchises, and natural resources, which is known as ‘Royalty’.
In other words, it is a sum of money given to a writer, musician, inventor, etc., each time whatever they have developed or invented is purchased or used by others.
CONCLUSION
From the listed clauses above, it is clear that any guide in a contract could form a clause. Each party to a contract will naturally intend for the contract to be in their favour. Therefore, it is imperative to pay attention to all the clauses in the contract to avoid being exploited.