Contracts 101: The What and Why of a Contract
We’re sharing insights from attorney Laura Levin-Dando’s “Intro to Contracts” course via CreativeStudy.
Contracts are important business and relationship management tools for creatives—insurance in both the best- and worst-case scenarios. Learn more about them here in easy-to-understand terms from Laura Levin-Dando, Staff Attorney at Volunteer Lawyers for the Arts New York.
This post draws directly from “Intro to Contracts,” a two-part course led by Levin-Dando via CreativeStudy (Fiscally Sponsored by NYFA). CreativeStudy is a subscription-based resource for artists where industry experts help navigate business topics including funding, finance, law, and more. Each self-paced course consists of videos, worksheets, and helpful links and references.
Please note, the information provided does not and is not intended to constitute legal advice. It is presented for general informational purposes only. It is always worth speaking to an attorney before signing a contract.
“Contracts help us manage relationships and minimize the risk inherent in working with others,” says Levin-Dando. These relationships can all look different and apply to any artistic discipline. Here are a few examples:
- You’re working with a friend on a short film or a YouTube video
- You’re a visual artist or designer who may be consigning to a gallery
- You’re licensing a design to a multinational ad agency
- You’re a music engineer working on a new single
- You’re a dancer cast in a music video
Says Levin-Dando: “A contract won’t prevent things from going wrong, but a well-crafted contract can help mitigate the fallout when things do go wrong.” She advises that when there’s more on the line (money, time, reputation), the more important it becomes to memorialize your agreement in writing through a contract.
A contract is defined as an enforceable agreement between parties that creates mutual obligation. It can take many different forms, and might not always be called a contract. It can also be known as an agreement, a deal memo, or a statement of work. It is formed when three things are present: an offer, acceptance, and consideration.
The offer contains reasonably clear terms and shows an intent to be bound to the terms of that offer. For example, paying a designer $500 to license a design for a website for one year.
Acceptance is when there is a clear intent to accept the offer—whether through words (“sounds good”) or conduct (contract is signed). This clear intent typically signifies when the contract is made legally binding. Levin-Dando suggests not obsessing over identifying legally-binding offers and acceptances, but it is helpful to keep an eye out to manage your expectations.
Consideration is legal jargon for “something of value.” Value commonly comes in the form of monetary compensation, but it can be anything of value. Both sides must give and receive something of value for the contract to be valid.
Here is a link to additional key terms that you might find in a contract.
Written vs. Verbal Contracts
A written, signed contract is ideal from a legal perspective; in some cases, some contracts do need to be in writing (exclusive licenses, assignments of intellectual property, works made for hire, and real estate purchases, for example). However, contracts aren’t always written.
There are risks to verbal contracts, namely that it is difficult to prove the existence of a purely verbal contract. If you can, try to get something down in writing that the other party agrees to. A contract does not need to be in formal writing or contain legalese to be binding. “Generally speaking, simplicity and clarity are key,” says Levin-Dando.
One way to get written confirmation on a verbal contract and to avoid future misunderstandings is to draft an email outlining the key points you discussed. It can begin “As per our phone call, we discussed points A, B, C, D, and so on.” Then ask your collaborator to respond confirming that they agree to the terms listed in your email.
“As long as those terms contain an exchange of something of value, you have yourself a legally-binding contract that’s also written and memorialized,” says Levin-Dando.
You could also consider having a standard agreement that you can present to the person that you’re working with. Levin-Dando acknowledges that standard agreements won’t always work for every situation, but are good to have if there are terms that are non-negotiable for you.
What to Consider When Reviewing Contracts
“At its core,” says Levin-Dando, “a contract should answer five essential questions: ‘Who, What, When, and How,’ we might also deal with ‘Where’ in certain situations. Before you start drafting a contract, or reading one that you’ve been given, it’s helpful to do some preparation which includes how you would answer these questions.”
Levin-Dando provided the example of a company wanting to hire you to produce a video. In this case, she advises you consider:
- Who is hiring you, Who is going to be using the work, and Who will cover costs associated with the project
- What services will you provide, being as specific as possible (i.e. 3 rounds of video edits) to avoid “scope creep”
- How much are you going to be paid and how you will be paid (i.e. as a lump sum up front or with royalties in the future)
- When things are supposed to happen (relevant deadlines/deliverables) and When you will be paid
- How/Where will they be using the video (i.e. website only or social media)
- How long they will be using the video
You’ll also want to consider questions relating to intellectual property ownership, crediting, and approvals. Levin-Dando says that it is important to be aware of what rights you might be giving away, and what rights you’ll keep to yourself.
If you receive a contract but do not see that it addresses key questions, you might want to ask them to revise it to include key points. If the terms are not acceptable to you, you can try to negotiate, reject the deal, or accept the deal even with terms that are less favorable to you. If you don’t see something covered in the contract, do not assume that you and the other party are on the same page. “Make sure they are clarified in the agreement, if possible,” says Levin-Dando.
Levin-Dando emphasizes that this is a process, and that there is a learning curve. “Just like you worked hard to hone your skills as an artist, you can and you will get more comfortable with contracts. You’ll continue learning from experience.” If there is a Volunteer Lawyers for the Arts or similar resource in your area, contact them for support when needed.
When to Work with an Attorney
“You don’t need to have an attorney to enter into most legally-binding contracts,” notes Levin-Dando. However, she highlights that in some cases it is advantageous to have an attorney in your corner. “They can potentially draft language more skillfully and strategically, making your contract that much more clear and effective,” she added.
There are affordable and free options out there, including Volunteer Lawyers for the Arts, which exists to give creatives access to legal services that they would not otherwise be able to afford at full price. Levin-Dando especially suggests budgeting for legal expenses when dealing with contracts that need to be in writing or that need to follow certain laws and regulations.
A Healthy Perspective on Contracts
Levin-Dando encourages artists to think of a contract as a relationship management tool. “First of all, discussing a contract can create common ground by giving everyone an opportunity to talk about their expectations and clarify issues early on,” she says. “Now is your time to negotiate onto the same page or walk away before anyone gets hurt,” she added.
Taking the time to put the terms of your agreement in writing is a great sign of common buy-in and trust.
And while some may view contracts as insurance for worst-case scenarios, you can also look at them as a way to protect yourself in best-case scenarios. “Legal and business tools can help ensure the highest level of success when things go right,” says Levin-Dando.
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