Contracts 101: ­Pitfalls to Avoid in your Entertainment Deals – Part 2

(A NATAS speaking engagement personified)
By Andrew J. Contiguglia, Attorney at law

Put your contracts in writing!

Think of a situation where you go to someone’s office and you sit down and pitch a deal. Or you show up at lunch and you are talking and you say, “That seems like a great idea! Why don’t we go ahead and do that.” Or you might meet them in a conference room and try to put something together under more formal circumstances. One thing that I do after engaging in these types of conversations, whether it is dealing with someone on the telephone or sitting down with them, is them a deal memo, recapping the conversation. A deal memo says that, pursuant to the conversation earlier this afternoon, it is my understanding that we are going to do the following…. I usually conclude my deal memos with, “If this is not your understanding, let me know immediately.” This way, if they don’t get around to doing what they said they would, if it ever comes up in court down the line, you can say we met for lunch, we discussed these deal points and immediately that afternoon, I typed a letter, sent it to this person, and told him to let me know if he didn’t agree. And that person will be sitting on the stand saying yes, I did get that letter, and no, I didn’t tell them that I didn’t agree with them. There are number of ways that you can go about doing this. You can have a secretary perform these tasks for you or you can hire an attorney to do it for you. Or, just like trying to lose weight, you can change your habits. You have to learn to do these things. You have to take your industry seriously, not only from a creative standpoint, but also from a business standpoint. Because once you become creative, you have to become businessmen. If you do not do these things, you will continue to run into problems.

Another way to prove your deal exists is to come up with a boilerplate agreement. Boilerplate agreements are standard contracts that state you are going to develop a film working with particular people. Think of these agreements as a “fill in the box” type of agreement; they are very basic and not catered to any specific situation. You both sign the boilerplate agreement and you are done. If you are happy with the agreement, toss it into your file and move onto the work. If the need ever arises, you have a written agreement with both signatures.

There are a few reasons, however, that I am not a huge fan of boilerplate agreements. I do think they serve a particular purpose in some instances, but as I discussed earlier, the entertainment business is about relationships. You can’t build a good relationship with a generic agreement. What’s good about boilerplate agreements is that they are quick, but they can create a fissure between people because they don’t nurture any significant business relationships. You don’t sit down. You don’t negotiate. You don’t talk. You don’t create an atmosphere of wanting to do business. Part of being creative is building that type of relationship. You have to find a comfortable medium between being “all businesses” and being creative.

If you have a contract that everyone involved is happy with, it is less likely that you will have problems with it down the line. If everybody is happy, there is no reason to sue anyone. Lawsuits usually happen because one of the parties is unhappy. They may be unhappy because they feel like they were taken advantage of in a talent agreement, distribution agreement or editing agreement. By putting everything in writing, you avoid those pitfalls and you build the relationship. You go through the negotiation process. You finetune the aspects of your contract in order to help build and facilitate the relationship with everybody.

The bottom line is that it is important that you are very detailed in the type of business work that you do. As I mentioned, you can do the deal memo, which is just a letter or an acknowledgement to the other person ­a skeleton of the type of agreement you are going to put together. The deal memo also makes it clear that you are going to enter into another agreement down the line that will fill in all of the little details. The major points ­when people are going to get paid, the timeframe of the project and all of the other aspects ­will be done at a later date.

The first deal memo is essentially the first contract. Then you will have the second contract later on which has more detail. But this first contract is still a contract ­it still binds the parties. It still has promises in there. It has mutual understanding and inducement in it. Writing is just a way of proving what the deal is.

Sometimes you can have lunches and meetings with people, and follow it up with a letter afterwards. Then the ball is in their court. You have just protected yourself. Forget about them. If you are going to get into a dispute about anything, better you be protected. Sometimes, when you are dealing with big players, they can hold their thumb over you and say, “If you don’t like it, get out the door because there are plenty of other people in line wanting to do business with us.” Being a smaller independent type of producer or editor puts you in a difficult position. But that doesn’t mean you don’t have any rights, and it doesn’t mean you don’t have any negotiating power. And it is important to at least explore that and not take at face value these boilerplate agreements that big corporations throw at you. I think that in every deal you enter into, there is always room for negotiation.

I think people are under the impression that they don’t have the personal power to disagree and say, “I don’t like this part,” but in actuality they do have that power.

Forget the handshakes. Forget the pats on the back. You can have an oral contract, but the problem you will run into is proof. There are some contracts that must be in writing. Those contracts are contracts for real estate, and that includes leases. For example, office space or studio space to be part of your production. Other contracts that must be in writing that could be applicable to the entertainment field are contracts that cannot under any circumstances be performed in less than one year. So, if you contract with somebody and it is a twoyear agreement, you know that a twoyear agreement cannot be performed in less than one year because it is two years in length. Sale of goods over $500.00 contracts must be in writing. The reason these, and other contracts cannot be oral is because of the significance in the subject matter and the duration of the deal.  Without a writing all you will have is your word against the other party’s word. And how do you go about proving what somebody else said? How do you go about proving what the deal is?  Without a writing, proof problems will arise.


Monday, March 6, 2006, 11:30 AM ­KUSA, Denver, Colorado.

Miller & Steiert, P.C.
1901 W. Littleton Blvd. Littleton, CO 80120
3037982525
andrewc@m-s-lawyers.;
www.m-s-lawyers.
com

(C) Andrew J. Contiguglia, 2006, All Rights Reserved

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2 responses to “Contracts 101: ­Pitfalls to Avoid in your Entertainment Deals – Part 2

  • Sheila Pastore

    I can tell you first hand that it is very important to put contracts in writing.

    My situation has nothing to do with any type of business but something personal. When I was too young and naive to know better, I had a situation occur where I lived in another state. I had bounty hunters actually from here in Colorado who had traveled to this state to look for a certain individual who was wanted for rape in Colorado. I had went out with this man that was apparently the brother of this person they were looking for. I had no clue of any of this so it was a very scary situation for me.

    To make a long story short, I helped lead the bounty hunters to this person and they brought him back here.

    Prior to finding him, I met the bounty hunters for breakfast and they had told me in return for finding this person that they would give me $5,000. Needless to say I never saw my money and they were long gone. I never pursued it and it was years ago so the statute of limitations has run out. It probably would have been very hard for me to prove though since I had nothing in writing.

    I was just too young and too trusting. It did teach me to always get things in writing though and I would never make that mistake again.

  • Beth Foley

    Your story Sheila, is a good example of an oral contract gone south. I did look up the statue of limitations for oral contracts in Colorado and it is 2 years.
    I think with most laypeople, without any knowledge of contract law, there is the gut feeling that ‘ I ought to get this in writing for sure.’ Knowing a little bit more about oral contracts I am comforted by the fact that an oral contract can be enforced, without need for any written agreement. I think it’s good to be able to legally hold an offeror to the agreement.
    On the flip side however I had/have some concerns about the situation when someone thinks they are merely thinking out loud, rambling an opinion, or dreaming of possibilities, when the other party to the conversation believes a verbal offer of some sort has been given. The ‘offeree’ than can solidify the agreement by sending a memo recapping the elements. If the ‘offeror’ doesn’t take action to refute the contract it can be deemed valid.
    I’d like to bring up the concept of ‘silence as acceptance’. As I understand it, an offeror cannot just assume that an offeree has accepted the terms of a contract merely by ‘being silent’ and ‘not refuting it’. Yes, there are exceptions, however, the courts have found that one who does not solicit an offer shouldn’t have to be vigilant in avoiding offers. You shouldn’t be able to ‘force’ someone to perform, to respond, to any offer made.
    On the flip side, if an ‘alleged’ offeree sends a memo to an alleged offeror, stating the terms of an oral contract, it appears that unless that memo is refuted than it is a legal contract. I just wonder, for some, (perhaps the more wealthy), how vigilant they must remain in order to refute what someone else might want to construe as an oral contract. Is it fair to allow anyone to write in a letter or memo, “Per our discussion last week you have agreed to…..” and then if you don’t repond, you’re held to the agreement.
    So, on one level, it’s nice to know that a verbal agreement has legal clout on another level it seems that it may be unfair to force a response to anyone who claims an oral contract took place.

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