One of my favorite Marx Brothers skits is the contract negotiation skit in A Night at the Opera. Here’s an excerpt:
Groucho Marx: All right. It says the first part of the party of the first part shall be known in this contract as the first part of the party of the first part, shall be known in this contract—look, why should we quarrel about a thing like this, we’ll take it right out, eh?
Chico Marx: Yes, it’s too long anyhow. Now what have we got left?
Groucho Marx: Well I’ve got about a foot and a half. Now what’s the matter?
Chico Marx: I don’t like the second party either.
Groucho Marx: Well, you should have come to the first party. We didn’t get home till around four in the morning. I was blind for three days.
(You can find the entire skit here. Once you’re done laughing, read the rest of this post so you can avoid contract insanity.)
The point of the Marx Brothers’ skit is to poke fun at needless legal terminology, when it is clear that plain English will do. In my opinion, there is no such thing as “legalese.” There is only bad writing.
That’s why when I work with artists on contracts, I insist on simple declarative sentences using (not “utilizing”) ordinary words delivered in the active voice. It may sound a bit odd at first, but it’s very clear what the contract requires when you name both the actor AND the action they are taking.
Example: “Doe will pay,” instead of, “There will be a payment.”
When you write in the active voice, and eliminate unnecessary words, sentences and paragraphs, your ending contract will be much simpler and much easier to read.
Of course it stands to reason that each deal is unique, so before you write anything, figure out what you want so you can negotiate with your business partner.
Once you are clear about your wants and needs, insist on contract terms that are specific and clear. If the contract is not clear the first time you read it, then it needs more work. If you have written the contract yourself, ask someone without legal training to read it and tell you what he or she thinks the contract says each person is required to do.
If legal terms are new to you, use today’s contract guide to help you understand and translate them.
(NOTE: Many of the following terms can be their own section in a contract, with paragraphs of text underneath explaining the terms of that specific agreement.)
The “parties” mentioned in a contract are the people involved. For example:
“This Contract is made by Jane Doe (DOE) and Richard Rom (ROM).”
Every contract should include the date when the contract was written.
“This Contract is dated for reference on September 18th, 2013.
In the outline, or “recitals,” you present the big picture of the deal to set the context for what is included or excluded. It might look something like this:
a. DOE is a graphic artist specializing in finger painting.
b. ROM is a consignment art broker who operates under the fictitious name of Rom Gallery in Big Smoke New York.
c. DOE has agreed to place ten paintings (“the Paintings”) in the Rom Gallery for retail sale. The Paintings are identified and their corresponding prices are given in Exhibit A to this Contract.
d. ROM has agreed to display DOE’s Paintings in his gallery for sale.
e. The purpose of this contract is to carry out the foregoing agreement.
After you have sketched this big picture, spell out the details under the main body of the contract, usually titled “Agreement.”
This is where you can define people or items that you will be discussing many times within the contract. Avoid using ambiguous terms such as “prominent,” “advertisement,” “consignment,” “installment sale agreement,” etc, in the definitions themselves, or this ruins the purpose of defining something in the first place. Here are a few good examples:
a. “Broker” means Richard Rom, Rom Gallery or any business entity used to market the Paintings that is owned or controlled by Richard Rom.
b. “Gallery” means Rom Gallery located at 999 Tommy Kinkade Avenue, Big Smoke NY.
c. “the Paintings” means ten oil paintings by Jane Doe identified in Exhibit A to this Contract.
Describe the specific terms of the deal for each person involved, like so:
DOE agrees to do the following:
a. Ship the Paintings not later than ten (10) days preceding Saint Swithen’s Day in even numbered years or February 30 in Leap Years. Paintings will be individually shrink-wrapped, crated and shipped to Smallville, via XYZ courier service.
b. Insure the Paintings with an insurance carrier with a Standard and Poor’s rating of AA or better at the values listed in the inventory attached to this Contract as Exhibit A. This is an example, not a template.
c. Supply any documents, photographs or other records reasonably requested by ROM.
d. Assign to ROM fifty percent of the retail sales receipts from sale of the Paintings. (You can add far more detailed payment terms if you’d like.)
ROM agrees to do the following:
a. Use his best efforts to sell the Paintings. This includes, without limitation, hanging the paintings in the central gallery facing Sweet Smell of Success Ave., maintaining advertisements in Rich & Famous magazine and Sofa Painting News, insuring the paintings at the value indicated in Exhibit A as further provided in section __ from delivery date until sold or returned to DOE.
b. Pay DOE 50% of the sales proceeds within thirty days of sale of each painting sold. Payment is to be made by direct electronic transfer to DOE’s account with the Left Bank of Smallville, Account No. 99999999.
The Parties mutually agree to the following:
a. DOE will retain the common law copyright and may establish a statutory copyright without ROM’s consent.
b. After a Painting is sold, DOE may make and market limited editions of the paintings without permission from or obligation to ROM or the buyer
c. ROM may return the Paintings in the manner described in section __ at any time at ROM’s expense without obligation to DOE.
The beginning and end dates of the contract. You can put as many or as few qualifiers in this section as you’d like.
“This contract begins on the earlier of: a) when ROM places an original signed copy in the U.S. mail, postage paid, b) the date indicated at the beginning of the contract, or d) when DOE receives the fully executed contract. It will end on the earlier of: a) twelve months from execution, b) when DOE receives payment from ROM for all of the paintings, c) upon return of the unsold paintings to DOE in the same condition as when shipped to ROM, d) thirty days after either party delivers a notice of termination to the other party, e) death or disability of either party, or f) when ROM Gallery files a proceeding in the Bankruptcy Court. . .” etc.
Specify the type of insurance you require for your artwork, including policy limit, deductible amounts and who will pay for it. Ask for proof of insurance in a document called a “certificate of indemnification.” Be sure that your art is continuously insured, especially when the work is in transit while it is being transferred between you and the other party.
“From and after receipt of the paintings, ROM agrees to maintain comprehensive insurance coverage for the Paintings insuring against all casualties including, without limitation, theft, fire, negligent loss or damage, water damage and hostile critical review, especially in Sofa Painting News. Policy limits for such coverage shall be not less than the agreed retail price listed in Exhibit A. Deductible amounts may not exceed ten percent (10%) of the retail sales prices in Exhibit A. DOE must be named as an additional insured on the insurance policy(s).”
Contracts are generally considered to be assignable to another person unless the parties agree they are non-assignable. Do not allow your customer, agent or gallery to transfer his or her contractual obligations to someone else without your permission.
“Neither party may assign their rights or obligations under this contract without the prior written consent of the other party. Consent to assignment may be withheld for any commercially reasonable reason. Standards for denying consent to assignment include, without limitation, whether the assignee has the necessary financing, experience, sound business reputation, training and credit rating.”
Dispute resolution and attorneys’ fees
Since only the rich can afford to litigate their disputes, choose another way to resolve yours, and put it into the contract.
You may also want to include an attorneys’ fee provision. If you do not include such a provision, you will not recover any attorney’s fees you end up paying, and that can be a lot. Litigation will almost certainly cost more than the value of the art in dispute.
Some artist contracts available on the Internet say the right to recover attorneys’ fees goes to the “aggrieved party.” That is bad contract writing. By the time two parties to a lawsuit exchange nasty looks over courtroom pews, they are both well and truly “aggrieved.”
Attorneys’ fees should go to the winner. That person should be referred to in the contract as the “prevailing party” not the one who is the most angry or “aggrieved.”
Agreements to Agree
The phrase “agreement to agree” refers to a term in a contract calling for later definition. In other words, an agreement to agree is NOT an agreement.
To be enforceable, a contract must say what the terms of the deal are. It is insufficient to say the parties will later settle on such things as price, delivery dates, payment terms, advertising, promotion etc. Unless those critical terms are spelled out there is no contract.
Because some artists like flexibility, and are eager to have their work represented, they may favor agreements to agree. But a good lawyer despises flexibility in contracts. When lawyers see dangling, unresolved wishy-washy terms in a contract, they know trouble is brewing because each side is anticipating an eventual resolution that favors them, and not the other party.
The term “indemnify” means “insure against.”
You are not in the insurance business. Do not sign a contract in which you agree personally to indemnify, defend or hold the Buyer harmless from contract related claims. It will look something like this:
“Artist shall indemnify, defend and hold Buyer harmless from all liability, loss, damage, or injury to persons or property resulting from Buyer’s participation in this contract. “
If you must indemnify the opposite party from lawsuits or damages caused by your own negligence, then be sure you are covered by insurance, and that the indemnification is reciprocal so have you the same protection if they are negligent towards you.
Keep in mind that the terms you include in a contract are only as good as the bank account of the other party. If you’re making a contract with a broke person, and you would be unable to collect anything from them if they break the contract, then they are said to be “judgment proof,” meaning that no one gets paid.
Here’s the bottom line:
If someone asks you to sign his or her contract, read every single word. If you don’t understand the entire agreement, don’t sign it until you do. If you don’t like a term, negotiate what you would like. Negotiations are perfectly acceptable!
Just by discussing the terms and working towards something that is agreeable to everyone involved, you’ll improve the business relationship immensely—and that’s well worth the price of a little insanity at the start.