Negotiating contracts can be sublimely boring, where you could spend hours negotiating three lines in a paragraph regarding the settlement of disputes or some such banal area of human existence. Alternatively, these negotiations can be fun. We were once negotiating an agreement for one of the world’s most famous singers who was performing in Mumbai. The agreement went into details such as how many towels (size and colour specified) had to be placed in the star’s personal toilet, the keys to which had to be given to the star’s manager so no else could access the toilet, etc. Fun stuff, this.

While negotiating contracts for various rights, duties and services connected with the entertainment industry, the following issues should be carefully considered and discussed with your lawyer.

Trust us, we don’t need to put that into the contract

This statement should raise a hundred red flags. I often find people being asked to leave things out of an agreement because the relationship is based on a friendship. However, even in the best-case scenario, and if everything is genuinely above board, there is no harm in setting out that understanding in the contract. It’s not as if the parties are proceeding on a handshake. Since an agreement is being entered into, everything should be set out in writing.

There today, gone tomorrow

When you are contracting with an entity, your duties, obligations and entitlements stem from and run to that entity. You might be on great terms with the current CEO of a company, but she might not be there in six months. Therefore, there should be no ambiguity in your agreement regarding the facts of the case and the duties and entitlements between you and the company. At the end of the day, it is what is written into your contract that will prevail, not the personal understanding between the parties that was not captured in the agreement.

Automatic or one-sided renewal clauses

Do not agree to a clause in your contract where the other side can unilaterally renew the agreement at the end of its term. All renewals should occur with the mutual consent of both parties and on terms that both agree to. If you are starting out in the industry, you should not be tied down to terms that may appear too low once you have tasted some success. Therefore, a shorter term for any contract is to your benefit when starting out.

Staying ahead of the payment curve

Given how time-consuming and expensive it is to enforce a contract, the practical way to stay ahead of the system is to have payments collected at regular intervals. If the relationship goes sour, it’s best not to have a large sum of money still outstanding. If you have already collected a fair sum, it becomes easier to walk away from a toxic business relationship. You should therefore ensure that your contract allows you to terminate the relationship on grounds of non-payment and specifies that no refunds of payments already received will be owed by you.

Final cut

While a director does not own any of the underlying works that make up the composite film, her name is prominently associated with the film. Therefore, in any contract where you are appointed as a director, it is important to specify the extent to which you control the final cut of the film. As the person most associated with the film, you would not want the producer to make substantial alterations to your work and still release the film under your name. Either you should have the final say on the film’s final cut or have the option of removing your name from the film.

What a typical agreement looks like

When you are faced with the negotiating and signing of a contract, you will find that an agreement has a certain pattern to it. While some may be written in simple language and others may be particularly verbose and complicated, there is a certain pattern to them. Broadly, they will contain the following:

• Names of parties:You may have noticed that the names and descriptions of the parties are set out at the top of an agreement. These must be factually accurate.
• Recitals:Thereafter, you will find a few paragraphs, often following the word “WHEREAS”. These paragraphs are usually marked by capital letters. It is at the conclusion of these paragraphs that the main agreement begins. The recitals capture the background of why the parties are entering into the agreement. However, critical points of agreement must always be included in the main body of the agreement even if they are referred to in the recitals.
• Consideration:All agreements require some consideration for them to be valid and enforceable. When there is a monetary element in the agreement, this automatically constitutes the consideration and nothing further is required. However, some agreements do not include a financial element. In such cases, it is important to state the following: “The parties hereto agree that the duties and obligations set out in this agreement are deemed to be the consideration for this agreement.”
• Stamping:In India, many agreements must be stamped at various rates set out by different states. An agreement must either be printed on stamp paper of the appropriate value or printed on plain paper and then taken to a stamping vendor who will frank the document for the amount of stamp duty payable. The document must then be signed. A document that has already been signed cannot be stamped thereafter, except in the case of an emergency when it can be stamped on the following day. A foreign document can be stamped at any time within one month of arriving in India. If a document has not been stamped, or has been insufficiently stamped, this can be cured at any time by paying a 100% fine over and above the correct stamp duty payable.
• Penalty clause:It is important to know that an onerous penalty clause is unenforceable. It might feel good to insert this into an agreement, but this punitive provision has little legal value. What should be inserted is an estimate of the damages that may occur if there is a breach. If this amount is reasonable, the courts will enforce it as liquidated damages agreed to by the parties.
• Payments:While structuring payments, it is critical to state the timelines for such payments. The clause should not be open-ended, such as: “XYZ will pay 30% of the profit earned.” The clause should instead state something more precise, for example: “XYZ will pay 30% of the profit within 30 days of the end of every financial year.”
• Profit sharing:Often, talent is offered a profit share rather than a fixed fee. On most occasions I have found that this arrangement does not work well, even for major stars with a substantial share of the profits. While it may sound tempting, there are too many pitfalls. It is very easy for the other side to exaggerate expenses or understate receipts so as to reduce, or even eliminate, any profits. It is almost impossible to detect this. If you must agree to a profit share, you should negotiate a minimum guaranteed payment every month that will be adjusted against the profit share and will be payable even if there are insufficient or no profits. This ensures that you receive at least a basic amount.
• Arbitration:It is common for most agreements to have an arbitration clause. While arbitration is undoubtedly faster than court proceedings, the process can be far more expensive and detrimental to smaller litigants. I would therefore recommend that if you cannot afford these fees, it is better to let disputes be tried through the court system rather than agreeing to arbitration in your contract.
• Jurisdiction:It is important to state where the parties wish any dispute to be tried. Typically, this will be where the cause of action arose or where the parties entered into the agreement or have their place of business or residence. It is best to specify in the agreement that the courts in a particular city will have sole and exclusive jurisdiction to try any disputes that may arise.
• Applicable law:When the parties to an agreement belong to two or more countries, it is important to state which law will apply. For example, if one party is from Australia and the other from India, and it is agreed that any dispute will be arbitrated in Singapore, the parties may agree that either Australian law or Indian law will govern the agreement.
• Signatories and care to be taken at signing:All parties to an agreement must sign the document. For a company or other entity, it is important to ensure that the person signing is authorised to do so. This can be established if a board resolution or power of attorney has been given to that person authorising them to sign on behalf of the entity. I would recommend that each party also initial each page of the agreement. This ensures that no page can be changed surreptitiously at a later date. It is also important to check the final printed version of the document that is being signed. This can be done by your lawyer, and once checked, the document should be in your possession or in plain view. Otherwise, the final version may contain changes that were not agreed to, and I have seen unscrupulous parties do this. There should not be any gaps between paragraphs or before the signing clause, as anything could be added later into these empty spaces.

Excerpted with permission from Who Owns What? The Definitive Legal Guide for Musicians, Writers, Filmmakers and Content Creators, Xerxes Ranina, HarperCollins India.

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