Tuesday, January 31, 2012

Music Business/Law Tips - "Breaking A Record Contract" (Part 7)

Since recording agreements first came into existence, an oft heard clarion call by an artist is that the contract is patently unfair. A record contract that is one-sided and skewed heavily in favor of the record company could be argued to be a contract of adhesion. A contract of adhesion is a standardized contract which, if imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it. Generally, a contract of adhesion would be valid unless it is ambiguous, or it is "unduly oppressive or unconscionable under applicable standards of equity." In conjunction with this scenario, an artist who was not represented by an attorney before signing the adhesion contract could also argue that he/she was too unsophisticated to understand what he/she was signing.

In a pertinent dispute, singer George Michael filed a suit in England to get out of his long-term recording agreement with Sony. His argument was that certain practices in the music industry were so obnoxious that they amounted to a restraint of trade. These practices included tying up an artist for a long period of time at the company's option, and computing royalties in ways that pay the artist far less than the royalty rate implies. The court held that the terms of his deal were reasonable, and thus there was no restraint of trade. Apparently, the court agreed with the argument set forth by the label that current deals are for a term of six to eight albums at the company's sole option because a label cannot afford to promote new artists unless they are assured the benefit of the artist's success in later years. The foregoing court's rationale in the Michael's matter is evidence that unfairness alone may not be enough to allow an artist to jettison a contract.

[part 8 next time]

Ben McLane, Esq

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