Principles of Contracts: Introduction

Why Contracts Matter

Money is truthful. When a man speaks of honor, make him pay cash.
-Robert A. Heinlein, speaking as Lazarus Long, Time Enough For Love, 1973

The Concert
In the early part of this century, I participated in a charity event to benefit the family of a dead hippie. The event was an exemplar of the DIY spirit, with dozens of multi-platinum musicians sharing a stage and donating their time for a free concert for the public, with the proceeds from the concessions and DVD sales destined to build a pension for the widow of the hippie.

It was a beautiful day, and a day I’m proud to have been a part of, working as I did on the video and troubleshooting crews.

The trouble came after the event, but to understand the trouble, you first have to know the culture. Hippie culture, much like any close-knit artisan culture, is an in-group. Everybody’s family. Deals are done on a handshake. Hospitality is the expected norm. The notion that this way of doing things might not be appropriate in all venues is a pretty foreign one – it’s the main reason that the hippie in question died bankrupt instead of dying a multi-millionaire (he had, after all, launched the careers of some of the biggest names in rock-and-roll history).

The trouble started when about half of the raw footage was stolen due to a lack of physical security (the mere suggestion of locking up the footage for safety provoked sniffs of indignation from the event organizers). Then there was the problem with a lot of the footage not being legal to use, because the organizers didn’t think it was important to post the legally-required notices that video recording was happening backstage and on stage. Problem after problem materialized, over basic procedural issues, derailing the project for months at a time.

For half a year, as the problems mounted, I was mystified. I’d worked on a fair few productions by that time and none had run into such a series of obstacles as did this one charity event. Then the time came for the editing to start, and I was tapped to do part of it. I did what one does in such situations: I asked for their basic contract.

I’d be hard pressed to accurately describe the firestorm that followed, let alone the uselessness of it. After all, I was not asking for money – this was a charity event. Rather, I wanted to make sure that I released the correct rights to my camera work, still photographs, and editing labor, to ensure that I got credit for my work, and that I retained the right to excerpt small portions for the purposes of promoting my business and putting in my reel. When I explained this, the event’s organizer said “I don’t have a problem with any of that,” so I again asked for the contract, knowing that he would need the contract on file in order to release the DVDs through Sony, as the original plan was.

The contract never happened. Instead, what followed was the four day fight from hell, during which I was schooled in Hippie economics. I learned that asking for a contract was an insult to the integrity of the deal, that nobody would ever care, that I had nothing to worry about because it was a charity event, and that my mind had been twisted into knots by my time as a small businessman, and that I would never amount to anything because I didn’t trust anybody. All this because I asked for a legal document that told me what rights the producer needed, so that I could grant them without compensation for the sake of a charity and to help out a friend.

I walked away, all the while shaking my head at the uselessness of the whole situation. It was the only sane thing I could do.

As you might guess, the distribution deal with Sony fell through because Sony wouldn’t touch such a poorly documented deal with a ten foot pole due to liability concerns. It wasn’t just me that the organizers had no contract with, it was everyone – the musicians, the tech people, the grunt labor, the concessionaires, the photographers – all the while trying to claim eminent domain over all materials, music, photographs, and interviews produced at the event (for those of you unfamiliar with copyright law, this king of rights grab is illegal).

The unfortunate consequence is that the DVD release was delayed several years, and then only happened on a very small scale. The concert organizer, who sunk tens of thousands of his own dollars into the event in order to help a friend’s widow, lost a lot of money. Those of us that contributed our time, talents, and intellectual property lost all that too. The whole enterprise involving thousands of man-hours, thousands of people, and boatloads of goodwill didn’t accomplish a thing. And the widow whose pension this was supposed to build? She didn’t get anything either – and at this stage, it’s likely she’ll never see anything other than the concert itself.

The Prevailing Logic

In the intervening years, I’ve seen the Hippie attitude about contracts recapitulated all throughout the DIY culture. The logic is simple: We’re friends, we’re artists, we’re trying to help each other out. So why should we worry about paperwork? Why should we bring the state into it? We know that it’s a one-in-a-million that any of us will get lucky and get a big deal out of this, and if it happens, we’ll make it good then. Right?

It’s seductive logic.

Ironically, this reasoning, intended to protect relationships and community, is a very good way to sabotage careers, cultivate exploitability, and destroy friendships.

And, of course, there’s the emotional factor. Contracts are intimidating for those of us who aren’t lawyers. They’re obscure, filled with technical language, and frightening. Many of us have had people use contracts and/or the law to bully us at one point or another.

Fortunately, it doesn’t have to be this way. Contracts don’t have to be scary, they don’t have to be threatening, and they don’t even have to be adversarial. They can be documents that clarify, that head off disputes, that simplify complicated-looking problems, and that enhance trust and community.

Over the next few posts, I’m going to run through the basics on the nature of contracts, the ethics of doing business with friends, and some techniques that can help make things clear, easy to understand, and advantageous for all parties.

Aside from a few broad principles, I will not be discussing specific matters of law, as I’m not a lawyer. For the basics of copyright law, see this excellent book put out by NoLo press. If anything I say contradicts that book, believe the book, not me.

Next time: What is a Contract?