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CONTRACTS PLAY A CRUCIAL ROLE IN THE MUSIC INDUSTRY. You’ll enter into dozens of contract over the course of your career, binding your professional relationships with managers, record labels, studios and producers, to name a few. Many of these contracts will lay the foundation for a great working relationship, where both parties get and give in equal parts. What should you do when things aren’t working out the way you planned? Can you get a better deal or are you stuck until your current contract expires? While there is no legal secret to break free from any contract, there are a few key factors to consider when dealing with your industry contracts.
What is Contract? A contract is legally defined as (1) an agreement (2) with specific terms between two or more persons or entities (3) in which there is a promise to do something in return for a valuable benefit (this is known as “consideration”). Contracts can be verbal, written, complicated, or simply drawn up on a napkin – as long as those three elements are present, you have a binding and enforceable contract. Note, however, that verbal contracts are incredibly difficult to enforce due to lack of evidence.
Technical Ways to Break Your Contract: There is no magical “gotcha” way to break a contract. Most properly drafted contracts are rigid in their obligations and are not easily escapable without the consent of both parties. That said, there are several ways in which an otherwise binding contract might be invalid:
You were not old enough to sign: If you were under the age of consent when you signed a contract – in most states 18 years of age – it can generally be held void. This is even the case if you lied about your age. If you are over the age of 18 now and signed as a minor – get out now or you may waive your right down the road.
You’ve signed the contract under duress: If you signed a contract based upon coercion constituting duress, you can avoid the duties under your written contract. Examples for duress include: extortion, refusing to do business with a person unless they sign, physical threats of violence and blackmail.
You were mentally incapacitated: Mental incapacity spans the obvious (mental illness or defects) to the less obvious (intoxication). Simply put: if you were drunk at the time the contract is made, you can avoid the duties if your intoxication prevented you from understanding the consequences of the agreement and/or you did not act reasonable due to your condition and the other party was aware of your incapacity. That said, don’t run to the bar to avoid future obligations; if the contract is fair and the other party did not know you were incapacitated, the contract can be considered valid.
You were duped into signing: Legally known as “fraudulent representation,” this includes a situation where someone (a) makes false statements with the intention of inducing you to rely on the information, and (b) knows of its falsity or lack of adequate foundation for the representation. (i.e. a manager who lied about who he/she’s represented to get you to sign).
Other Ways to Break Your Contract: Assuming you’ve entered a valid contract, there are still ways to break your contract or ensure the other party lives up to its end of the bargain.
The other party breaks its promise. “Breach of contract” is defined as failing to perform any term of a contract, written or oral, without a legitimate legal excuse. This can include not completing a job, not paying you what is legally owned or not performing to the extent required. Breach of contract is one of the most common causes of lawsuits for damages and/or court-ordered “specific performance” of the contract (i.e. having the contracting party do what they are obligated to under the agreement).
For example, your manager is required to use “greatest efforts” to promote your career, but has taken on several new clients since your signing and no longer puts time into your band. Or your record company fails to pay you in accordance with the terms of the contract. Remember that not all breaches will result in escaping the contract altogether – often you will only seek “specific performance.”
If you feel you’re not getting what was promised under the agreement, review all of the terms of the contract. If the party with which you entered into the contract fails to fulfill their obligations, you can deem the contract void and refuse to honor its existing terms.
The other party has breached its “fiduciary duty.” This breach is somewhat different than breach of contract and has to do more with trusted individuals (managers and business managers come to mind). People in a position of trust and/or those who handle your finances owe certain duties to you and your band. These relationships rely on good faith and require that the fiduciary acts solely in your best interest and free of any self-dealing, conflicts of interest, or other abuse of the principal for personal advantage.
It is simply not “working out.” As time goes by, circumstances change and there will be plenty of reasons to want to change management, labels or band members. If there are no technical or other legally valid reasons to split from your contract, that doesn’t mean you’re bound forever. If both parties agree to end a contract, you can sign a termination of contract, which will alleviate your duties under the agreement. You can also try to renegotiate the contract – again, this takes the consent of both parties, but can be seen as a middle ground. Finally, you can choose to pay the person off in exchange for termination of the contract.
If you find yourself in any of these situations, it can be beneficial to first write a position statement or demand letter detailing your circumstances and the reasons you feel entitled to your request. This can often be the first step in resolving your issues. If you have questions or want to make sure it’s done correctly – hire a lawyer who has experience in contracts and the music industry.
Adam Barnosky is a Boston-based attorney and writer. For music industry news, entertainment law updates, or to suggest an upcoming Legal Pad topic, find him on Twitter @adambarnosky.
Disclaimer: The information contained in this column is general legal information only. Consult your attorney for all specific considerations.