Archive for the 'Principles of Contracts' Category
July 18th, 2011 by jdsawyer
Because this one deals a lot with the law again, the usual disclaimers apply: I am not a lawyer. This is not legal advice. This is one man’s opinion on how business is done. Always consult a qualified legal professional when seeking legal advice.
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Previous chapter: Embrace Your Inner 2 Year-old
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It’s come to my attention that in some of my business posts I’ve inadvertently fed an unspoken, and erroneous, business assumption shared by many people in the arts (and, frankly, most people in society at large). It goes something like this:
“Corporations are all-powerful. They have bigger lawyers than you do. You’ll never find a lawyer to take your case if one rips you off, so you’re just going to have to roll with it if your record label cooks the books, your movie studio subjects you to creative bookkeeping, or your publishing house pads their returns. You’re only the talent–you should expect to be the victim. The talent always loses.”
In other words, you can’t fight City Hall.
Not to put too fine a point on it, but this is a con. You CAN fight City Hall. And you can win. But you have to be savvy.
First Things First
When I say things like “You don’t want to be a test case,” as I did in my chapter on the Peggy Lee decision and its implications for artist contracts everywhere, it’s easy to hear that as reinforcing the erroneous idea I’ve delineated above–an impression for which I owe some of you an apology. It’s true that in untested areas of law, a dispute on a point that’s not entirely clear is a test case, by definition, and that these kinds of cases are a pain in the ass. It’s also true that these kinds of cases are, by their nature, uncertain in their outcome. However, by stating that being a test case is a pain, I don’t mean to advocate fear of lawsuits, or a strategy of folding before parties who have bigger lawyers than you do. Not at all.
What I meant to advocate, and what that chapter will more clearly advocate when these chapters are edited and collected in a book, is a basic principle which I’ll call “Defensive Business.”
“Defensive Business” has its analog in “Defensive Driving” rather than in “paranoia” or “social defensiveness.” You don’t have to be paranoid or live in fear to practice defensive business–in fact, paranoia will usually lead you to rash behavior that can get you into trouble.
Continue reading ‘Principles of Contracts: You CAN Fight City Hall’
May 31st, 2011 by jdsawyer
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Previous chapter: Everybody Knows Peggy Lee (Or Should)
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Implicit in the early installments in this series was the assumption that when you do a business deal, both parties have something to gain and something to lose. It follows then, that all other things being equal, when you approach the negotiating table, you’re negotiating with an equal. Unfortunately, things are most often unequal.
There are a lot of things that go into the power dynamics of a negotiation. The most obvious is need: whichever one of you needs the deal more has less power to dictate terms. That’s important, and we’ll deal with it in this installment, but it’s not the whole picture.
Why not? For two reasons:
First, people live in societies, and those societies have laws that govern how contracts are made and limit what terms can be legally agreed to, and under what conditions. It is not, for example, legal to sell oneself into slavery in the West, or to sell another into slavery. Snicker all you want, this was not always the case–in fact, by some looser definitions of the term “slavery,” this has only become illegal in the United States in the last two generations. I kid you not.
What constraints the law imposes on your bargaining ability varies from industry to industry, but in general the terms are governed by three areas of law: Contract law, Tax law, and domain-specific regulations (copyright laws, labor laws, real estate laws, environmental laws, etc.). Some of these laws vary radically from state-to-state, and Federal law can trump State law or defer to State law, or it can specify which State’s laws have jurisdiction in an interstate deal–all depending on the circumstances. As the party to a contract, it’s your responsibility to get familiar with the laws in the domains you’re dealing in. If you’re working in a heavily regulated industry, or an industry with a lot of caselaw (ex: anything involving employees or intellectual property), you’d be well advised to run things by a lawyer.
Second, everybody’s human, and as such are susceptible to losing sight of the deal because their focus shifts to the contest. This is the stock-in-trade of every salesperson on the planet: to convince you to buy what they’re selling by distracting you from the deal when you display reluctance. These distractions can take the form of compliments, social bonding gestures (getting you a cup of coffee, talking to you about movies), by threats and insults (“only a fool would pass this up,” “I can only give you this deal today”), incentives (“Act now and get a free dairy cow”), plays for sympathy (“how can I feed my children with a profit margin that slim?”) and affected offense (“I can’t believe you’d think I’d cheat you!”). These tricks come in all guises, and played well, they bear the stamp of legitimacy, but using the trump card I get to later you can strip away a lot of the pretense.
Continue reading ‘Principles of Contracts: Embrace Your Inner 2 Year-Old’
May 26th, 2011 by jdsawyer
Preface: I mentioned this in the first post in this series, but because I’m going to be talking about some specific points of law in this post, I need to reiterate: I am not a lawyer, am not qualified to dispense legal advice, and none of what follows should be considered as legal advice. All of what follows is opinion based on experience and on layperson’s research, and you should always consult a lawyer of an appropriate specialty when negotiating an IP-related contract (especially when dealing with a company that can afford bigger lawyers than you can).
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Previous chapter: Market Awareness
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If God had a lounge singer in the 40s, 50s, or 60s, I’d lay you even odds that it would have been Peggy Lee. Along with Etta James, Billie Holiday, and Rosemary Clooney, she had a glorious, smoky, rich alto that wrapped naturally around horns and clarinets to make sounds that were the aural equivalent of chocolate.
Peggy Lee had a good friend named Walter, and Walter need a singer/songwriter for his new project. Walter did good work, and he was a good friend, so Peggy gave him a good rate, and in 1955 the result of that project hit the country like Christmas. It was a little movie called Lady and the Tramp.
It was a great collaboration, and they had a good contract for the time (Peggy and her cowriter retained rights to “transcriptions” such as record albums and sheet music–a smart move). Everything might have been peachy for life, if Sony hadn’t screwed up the world with home video.
Videotapes have been around pretty much since the Big Bang (or at least since 1951) in broadcast, but nobody really expected that it would wind up being something people used at home any more than the early computer manufacturers thought that your phone would contain twice the computing power that sent men to the moon (which some of them now do). Even if it were technically possible, why would anyone want home video when they had, you know, lives? And television? A professional toy like video tape wouldn’t appeal to a mass market–or such was the thinking. Sony, by the 1970s the world leader in miniaturization, disagreed. In 1975 they introduced Betamax, the first home video format.
It took a few years for it to catch on, but (thanks largely to the porn industry) by the 1980s home video was THE thing (and in the years since, this trend has only deepened with more formats being released). Studios started making their bread-and-butter money from video rentals and sales, rather than from theatrical exhibition. The only people who had a problem with this were the artists who weren’t getting paid for the work they’d done for theatrical exhibition–but most of them just grumbled. Not Peggy Lee. Peggy Lee pulled out her lawyers and said “Sic ‘em.”
Continue reading ‘Principles of Contracts: Everybody Knows Peggy Lee (or should)’
November 16th, 2010 by jdsawyer
You walk into the grocery store to buy apples, but when you reach the produce section the apples are twice what they are across town, and the quality isn’t quite as good as you remember them from the other store. Do you buy them? Maybe, if you’re in a rush and apples are a must have for you today. Otherwise, you’ll hold off and go to the other store for your apples, because the inconvenience is less expensive than the extra dollar or two per pound you’d spend here. Maybe it’s not even an inconvenience, because you have another reason to be at the other store tomorrow.
What you’ve just done is a rudimentary cost/benefit analysis. In a business deal, everyone does this, and to negotiate effectively, you have to understand your market.
Continue reading ‘Principles of Contracts: Market Awareness’
October 4th, 2010 by jdsawyer
There’s a conversation going on at the always controversial blog of Dean Wesley Smith. The post itself is interesting for its unconventional wisdom, but it is the comments that are important. In it, several authors with pub credits in the dozens and loads of literary experience talk explicitly about contract terms, money management, professionalism, and negotiations. They compare notes, go into deep detail, and it is absolutely essential reading for ALL authors-indie or newbie or podcast or mainstream established.
I kid you not. This is indispensable. Here’s the link again. It’s the kind of information I started ANMAP to help disseminate. Go there. Now.
Now, back to producing the next podcast (hopefully tonight) and the next Principles of Contracts article (Thursday), and prepping for a big announcement (Monday).
July 28th, 2010 by jdsawyer
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Previous Chapter: Interlude: Think Contracts Don’t Matter?
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Most of this series concentrates on general contract principles. This week’s entry is a little different. It’s devoted solely to the creative industries (businesses like films, music, books, theater, etc. which depend on artists for their grist), and I’m posting it now rather than later because recent events have thrust it to the center of my attention. If you’re in a creative industry, this one’s for you.
It may surprise you to learn that Babylon 5 has never turned a profit. Not a cent. In fact, according to an Internet post earlier this year by creator J. Michael Straczynski, his most recent royalty statement informed him that the entire franchise is still $80m in debt. For perspective, all 5 seasons, plus 5 movies, plus the spinoff series, plus the follow-up Lost Tales special, cost under $200m to produce in aggregate. The franchise’s total revenues now totals in excess of $1.2b.
And, according to Warner Brothers, it’s never made a profit. Not a cent.
Continue reading ‘Principles of Contracts: Nothing But Net’
July 8th, 2010 by jdsawyer
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Previous Chapter: The Narrowness Principle
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All business deals are based on trust, and it’s a trust backed up by a trustworthy legal system. Without trustworthy courts, high trust between people in a culture, and an environment characterized by trust and reciprocity, business is impossible.
“Trustworthy! Dan, what country are you living in?” I hear some of you cry. “The American courts are kangaroo affairs stripping us of our civil rights, legislating from the bench. The Judiciary is a racist, corrupt tool of criminal violence against the underclasses, and nothing more than a puppet of the special interests and elites in this country.” I hear some of you say that (every day, all around the blogosphere), but I also can’t help but notice that you’re reading a blog series about best practices for contracts, and that upwards of 80% of you reading it live, work, and do business in the United States. This isn’t a coincidence.
A well-functioning economy works because the trust quotient is high, and the reason isn’t too difficult to see: If I can’t trust you to live up to your end of the deal, and you can’t trust me to live up to mine, then why in the world would we do business together?
Oh, and that financial meltdown and credit freeze we just had? That was caused by an erosion of trust.
Continue reading ‘Principles of Contracts: Self-Interest’
June 28th, 2010 by jdsawyer
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Previous Chapter: The Third Cousins Rule
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“Enter through the narrow gate. For wide is the gate and broad is the road that leads to destruction, and many enter through it.” Matthew 7:13, NIV
Seldom, if ever, have the words above been truer than when negotiating a contract. In a contract, the narrower your wording, the better off you are. Why? Because (with a few exceptions which I’ll get to later) you cannot be obligated to actions that are not specified in the contract – and neither can the other party.
As we learned in The Third Cousins Rule, a well-written contract will define terms to minimize confusion.
This is its chief corollary: It’s not enough to define your terms, you must also be careful to use the correct terms. Doing so is one of the key things that makes a difference between an artist who makes a living off her work, and one who perpetually gets taken for granted.
Continue reading ‘Principles of Contracts: The Narrowness Principle’
May 25th, 2010 by jdsawyer
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Previous Chapter: What is a Contract?
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Disputes and Contingencies
So, contracts are legal documents that obligate the signers to particular courses of actions in the event of enumerated contingencies. What about disagreements? After all, as a legal document, it’s always possible contract could wind up in court – one of the reasons that disputes are hell, particularly if not tended to immediately.
Continue reading ‘Principles of Contracts: The Third Cousins Rule’
May 24th, 2010 by jdsawyer
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Previous Chapter: Introduction
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A contract is probably not what you think it is. It’s not an ironclad dictate that you must sign or die. It’s not something that strips you of your rights. It’s not even a piece of paper (although the paper is an important part of it). Faustian bargains to one side, a contract does not entitle someone to your soul. Believe it or not, it’s fairly difficult to sell your creative work in a matter where you won’t eventually gain the rights back (this doesn’t mean a bad contract won’t hurt you–it will, a lot, in any field of business).
Continue reading ‘Principles of Contracts: What is a Contract?’