Negotiating contracts

Who drafts the contract?

The original agreement (and the clauses it contains) is the starting point. You are immediately at a disadvantage if you are adapting someone else’s draft proposals. The discussions are unlikely to have focused on every individual topic that is to be in any agreement. If your company drafts the licence or other contract then you can add whatever terms you wish provided that you broadly keep to the parameters of what was agreed.

Do your homework on the business and understand how they are structured. Examine their website, marketing, corporate section and annual report. What do they actually do and where?

If the whole contract you have been sent is not even the right type of agreement or is illogical or without definitions or cannot be broken down into broad headings. You may wish to insist that you will issue a new contract that the other side can review instead. Even if that means ripping apart their agreement taking elements of it and reconstituting a new document.

In any document there will be clauses you definitely want to retain, those you are willing to adapt and those you would happily delete. It has a very powerful effect where numerous clauses are conceded to the other side which have little impact on the overall agreement. Always draft the actual words of a clause you want – otherwise the other person will draft a more limited version. You may need to ask that whole clauses are deleted and new ones which you have drafted are substituted.

Negotiating strategy

The take it or leave it approach – this is the way we do business – or the charm offensive are both outdated. They will only work where someone is so desperate they are likely to agree to whatever you suggested anyway. A professional, detailed and knowledgeable approach with a clear message that you need to be persuaded with good reasons if you are to concede any points works best. Being tough in negotiations does not mean there should be no room for manoeuvre.

In any negotiation it is not just about stating what you expect financially, but also eliciting as much information as you can about the business, their expectations, how they produce and market their material, and the stages at which you can have some input into the creative process.

Try and listen to what they have to say and digest those facts before you make any firm proposals. Their disclosures may have an impact on the terms you are willing to agree.

You may have a rough idea of what you want to achieve, but if you put those exact financial terms forward it is very unlikely that they will be attained. You must endeavour to reach for more than you want and then be negotiated down. You can be certain no one will offer to pay you more if you ask for a low price. Even where you are negotiating with a large corporation, recognise and value your own product and endeavour to find the arguments or facts which would justify asking for what you want.

Be willing to walk away from any agreement which is not in your best interests. Many artists and musicians have assigned the rights to their own original material or allowed their livelihoods to be totally controlled by an agent because they took the first offer on the table – namely a badly drafted draconian agreement.

What is the impact of a clause?

If you are signing a licensing agreement, limit the duration of the licence and do not assign any rights to the distributor. Allow royalties to be increased as a reward for success – so that where the distributor has sold an agreed number of units you will receive an increased percentage royalty on the next volume of sales.

Make sure there is a clause which states that where the technology or rights did not exist at the time of the agreement those matters belong to you, the creator, they are not granted under the licence and they must be subject to a new agreement.

Limit any undertakings, warranties and indemnities as you will be liable for the financial consequences. So edit the scope of the subject matter and the duration, set a monetary limit and specify in which countries it will apply.

All payments should be linked to specific dates, not just to events that may never happen. What other expenses, costs, insurance, gadgets, products, travel and accommodation can the company pay for?

If you are the company acquiring any rights you want to be able to set-off any payments which have not been recouped against any other contract with the person through a clause in the contract. Whereas as an individual you want a clause which prohibits such set-off.

The creative process and owning the rights

What is being created for the project? List all the types of formats, services, products and marketing. Is new material commissioned or completed within the company? Match that list to the question – who will own all this material? There may be a new domain name registered, an app designed with a new title and software; sound recordings, music and lyrics, promotional characters; scripts, images or a new prototype.

Any licence should state who will own all the intellectual property rights, trade marks, computer software rights and copyright. You may discover that the rights are a very valuable asset at a later date.

Where new material is commissioned or designed and content is created, the copyright and intellectual property rights may need to be assigned in a formal document to the correct owners.

There are also rights, technology, gadgets, materials and methods of exploitation which do not exist when the agreement is signed. Make sure that those rights and materials belong to you not the company. Many people have never received any payments for their performances in films and videos either because the rights were bought out or because there was no percentage specified and no mention made of new formats and rights being developed in the future.

Where an event is sponsored or created through a collaboration it is important that it is stated who owns any title, trade mark and logo and what authorised marketing and promotional uses are permitted. Consider whether a company who has sponsored an event can use the name of the organisation or event, the logo and slogan on their other products or their website months afterwards.

Deborah Fosbrook is the author of Contract and Copyright Drafting Skills, The A-Z of Contract Clauses, The Media and Business Contracts Handbook and The Complete A-Z of Contract Clauses Pack

The views expressed in this article are those of the author.

Written by Deborah Fosbrook

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