November-December 2014 … The Global Online Magazine of Arts, Information & Entertainment … Volume 10, Number 6
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Levy & Miosek

Primer on Contracts:

Know What You’re Getting Into

 – And With Whom

 

By Mark Levy & Ryan Miosek

We attempt to cover topics having the greatest interest for as many artists as possible. Many of the legal concepts that apply to one type of artist also apply to others. Although we try to discuss topics that matter to all artists, including but not limited to visual artists, graphic artists, sculptors, composers, photographers, moviemakers, writers, and dancers, certain topics are clearly more appropriate for specific artists and their work. For example, musicians are concerned with performances, while visual artists are interested in showings at galleries. But be patient. Over time, we will discuss topics that concern every artist.

 

Beginning Basics of Contracts

In the coming months we will cover all of the contractual concepts that must be considered before executing a contract.  In this column, it is important to provide the beginning basics of any contract.  In most situations, contractual terms will be moot as both parties will perform as they have provided theywould under the contract.  In cases where one party fails to hold up their end of the bargain (i.e. breach), it will be very important to have the black-and-white contractual terms to fall back on.

It may seem elementary, but the one of the most important terms of any contract is the names of the parties (to the agreement) forming the contract.  In the event of a breach, knowing who the parties to the contract are will save a lot of time and money determining who the proper party to the suit is.  As an artist, you want to know who it is that you are entering into business with.  Is it the individual who owns the gallery, or is the gallery owned by a corporation?  Is the person you are contracting with the person who will ultimately be on the hook for a breach, or is this person a representative of a larger group?  In that case, does that person have the authority to enter into a contract on behalf of the group?  As you can see, knowing who is entering into the contract is not a trivial item, and one that must not be ignored.

The second term that can be overlooked or over simplified in the contract is what exactly is being contracted for?  Recently we met with an artist who was contracting to sell prints of original works for $5 a piece.  This particular artist had drafted a very well written contract laying out all the intricate details, many of which we will discuss in future articles.  When it came to what was being contracted for, however, the contract failed to mention the works to be sold were prints. In the end this simple mistake could have resulted in that artist contracting to sell original works for $5 a piece.  Without specificity of what was being contracted for, a court considering the contractual terms may have read the ambiguity in favor of the buyer.  This is especially so when the artist contracting to sell work is an emerging artist and does not have a reputation in the art community, or another verifiable basis from which the court can determine reasonable selling prices.  

Such a potentially unsavory result leads us to the moral of this section: Never, ever, ever leave anything to chance, or to the interpretation of the court.  If it seems too basic to include in the contract, chances are it will be the term you wished you had included when you find yourself fighting for your rights.

Types of Property

As mentioned in our previous conlumn, the three classes of property are real property, personal property, and intellectual property (IP), which, simply stated, relates to what comes out of your head. You, as creator of an artistic work, can transfer your rights in your creative work by assigning those rights, much like a real property owner can sell a house, or a car owner can sell a car. Or, you might decide to maintain ownership, but allow others to enjoy the work, as would occur when you sell someone a photographic print or a DVD. The latter situation is more like an apartment owner who leases an apartment, or a car owner who rents a car.

Similar to compensation for real or personal property, as the IP owner you have options for receiving payment. First, you may desire objects or services that are valuable; or, (much more often), you may want to be paid in cash. If that’s the case, a one-time payment or lump sum might be agreeable to the person who buys your artistic work. That person is known as the “assignee” – or the “licensee” in IP parlance. Alternatively, the licensee may be able to afford only a portion of your asking price. In that case, you might consent to receive payments over time. Such payments are known as “royalty” fees or “royalties.” An analogy to royalties is the fee a car renter pays to a car rental organization. The driver may pay by the mile, by the day, or a flat fee for a week or for a year. Similarly, the licensee of your artistic work can also pay you a flat, lump-sum fee or a given amount for each unit of time. If your licensee intends to make recordings or prints or postcards or bumper stickers from your work, with your consent, of course, you may decide to receive a royalty fee for each product sold to the public.

Royalties are considered taxable income, and that’s all we’re going to say about that.

If you are promised sufficient payments, you might agree to grant an exclusive license to the licensee. That is, only one party will have the right to enjoy your work. Exclusive licenses are usually considered more valuable than licenses granted to two or more parties simultaneously, a so-called “non-exclusive license.” In other words, non-exclusive licensees usually realize that they may have competition from other licensees, so they will offer you less money for the non-exclusive license. 

In addition to an ongoing royalty fee, you might also ask for a down payment. In this way, even if your licensee does not follow through with his or her promise to sell many copies of your work, you still end up with money in your pocket. How to determine the amount of a fair down payment requires research based on supply and demand. Here is where an attorney who acts as a negotiator can help you arrive at a reasonable offer.

There is more to the subject of licensing, some of which Mark Levy has included in a short paper: “Should I Consider Licensing?” For a free copy of that paper, please contact Mark at mlevy@hhk.com.

Mark Levy & Ryan Miosek are attorneys with the Binghamton-based law firm of Hinman Howard and Kattell. They specialize in trademarks, copyrights, and the general protection of intellectual property. You can telephone Ryan Miosek at (607) 231-6804 and Mark Levy at (607) 231-6991, or contact them by e-mail at rmiosek@hhk.com and mlevy@hhk.com.

 

1 comment

1 Joseph Lindsley { 01.06.10 at 10:38 pm }

An excellent article usefull for a broad range.
It will become a handy tool for all artists and entrepreneurs.
With the promise of detailed material in the coming months.