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Everyone knows they should read and understand a contract before they sign it. You don’t need to hear the horror stories of people who lost the rights to a lucrative project because they didn’t know what they were signing. The advice is so universal it often feels insulting to bring it up.
But the reality is many freelance professionals and small business owners don’t read what they sign, even when there business depends on it. There are a lot of reasons this happens, including:
- Time pressure by the other side (If I waste time reading this, they’re going to give the deal to someone else)
- A perceived lack of experience (I won’t understand it so why should I waste time reading it?),
- A perceived lack of leverage (_I won’t be able to change anything so why should I bother to ask?) (_See Negotiating Power in Creative Contracts)
- A general faith in the decency of their business partners (Bob is my friend. Bob would never screw me with a bad contract, so why do I need to worry about it?)
In some instances, an unread contract is signed and the world does not end. But information is power, even after the contract is executed. Creative people of all types can benefit from a thoughtful analysis of their existing contracts for three reasons.
1. Managing expectations
It is normal to expect payment for work. But the structure, timing and amount of payment can be controlled by different provisions of the agreement. Carefully evaluate the payment terms and be sure that you understand when, how and for what you will be paid (See Artistic Fantasy vs. Financial Reality).
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2. Managing usage of your work
You may have created your story, song or invention, but you might not have control over it depending on what the contract says. Copyright and usage terms can contain clauses in which artists effectively sign away underlying elements of the work. Partnership agreements can also cede intellectual properties to one of the business partners. It's important to evaluate how much ownership you're willing to surrender before entering into any agreement. (See Treat Your Art Like an Investment)
3. Understanding the process
Just because you sign one bad contract doesn’t mean you have to agree to the same detrimental terms with every project you do. If you use your bad contract as an educational experience, you can be better prepared to make a more lucrative deal for your next property. But you can’t avoid bad contract language if you don’t know what it is. Sitting down and coming to grips with your current deal will make you a better professional in the long run.
I counsel my clients to understand all their contracts before they are signed, while they still have the ability to accept or reject the deal (See How to Turn Down a Bad Contract) , but there is value in understanding an existing agreement, even if you’re not in a position to change it. The worst thing you can do is stick your head in the sand. (See Don’t Wait Until It’s Too Late)
PLEASE NOTE: THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. IF YOU HAVE SPECIFIC CONTRACT ISSUES OR QUESTIONS, DISCUSS THEM WITH YOUR LEGAL ADVISOR OR CONTACT C3 AT firstname.lastname@example.org FOR A FREE CONSULTATION.
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Gamal Hennessy is an attorney with a background in contract negotiation, entertainment licensing and business development. He has worked for large companies like MetLife and Marvel Enterprises, and freelance contractors of all types. You can find out more about the services he provides by visiting www.creativecontractconsulting.com