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AVOIDING AMBIGUITY

New York lawyer John J. Tormey III advises producers to be skeptical with contracts – even those from the big studios – when it comes to getting your fair share of the returns.

Just because a US or other film studio or distributor forwards you its "standard form", does not mean that you should sign it. Many studio forms still used today are hackneyed, and have been adopted in whole or in part from form books or other studios’ boilerplate. A number of studio forms read as if they were written in haste - just like Nigel Tufnel scrawled an 18-inch Stonehenge monument on a napkin in Rob Reiner’s This Is Spinal Tap.

It stands to reason that you and your legal counsel should carefully review all forms forwarded to you and your company for signature, prior to ever signing them. Through negotiation, you should interpose more precise language where appropriate. To leave an ambiguity in a contract is merely to leave a potential bad problem for a later day - particularly in the context of an option, acquisition or distribution agreement, wherein hundreds of thousands (if not millions) of dollars might be at stake.

One seemingly indefatigable type of ambiguity that arises in film contracts, is in the context of what I call a "performance clause".

Consider the following:
1. Clause #1: "Distributor shall use best efforts to market and publicize the Picture in the Territory".
2. Clause #2: "The Picture shall be produced and edited using only first-class facilities and equipment for sound recording, film processing, scoring, dubbing, and all other activities relating to the film".

Do not use either clause yourself, and don’t agree to them as written! Both clauses set performance obligations that are, at best, ambiguous. Reasonable minds can differ as to what "best efforts" really means, or what the two parties intended "best efforts" to mean at the time (if anything). Reasonable minds can also differ as to what constitutes a "first-class" facility. If the clauses were ever scrutinized in under the hot lights of litigation, the clauses might well be stricken as void for vagueness, unenforceable and judicially read right out of the contract itself.

Consider Clause #1, the "best efforts" clause. How would the Producer really go about enforcing that clause as against a US Distributor, as a practical matter? The answer is, the Producer wouldn’t, at end of day. If there ever were a dispute between the Producer and Distributor over money and/or the P&A expenditure, for example, this "best efforts" clause would turn into the Achilles Heel of the contract:

  • Producer: "You breached the ‘best efforts’ clause!"
  • Distributor: "No! I tried! I tried! I really did!"
  • You get the idea.

Why leave a Distributor that kind of contractual "escape hatch"? After making a huge investment in a motion picture - say, for example, a film with a production budget only half of the magnitude of Titanic, Air Force One or Tomorrow Never Dies - there would be absolutely no reason for the Producer to put that investment at risk by agreeing to a vague or lukewarm Distributor P&A commitment. And the equities would be on the Producer’s side in this negotiation - the Producer would be entitled to know in advance how his or her investment would be protected by the Distributor’s P&A dollars.

In the context of a performance clause - such as the all-important obligation to market and publicize a picture - it is incumbent upon you to be very specific about what is required. In other words, write out a "laundry list" of each of the discrete things that you want the Distributor to do:

"You will spend ‘x’ U.S. dollars on advertising for the Picture during the following time period: A - B.

"You will hire the X PR firm in New York, New York, and you will cause no less than ‘Y’ U.S. dollars to be expended for publicity for the Picture during the following time period: M - O.

As they say in the States, "if you don’t ask, you don’t get". Make the Distributor expressly sign on to a very specific list of tasks, monitor the Distributor’s progress thereafter, and hold the Distributor to the specific contractual standard that you were smart enough to "carve in" in the first instance.

Consider Clause #2, the "first class facilities and equipment" clause. Note that, unlike Clause #1, this is a promise made by Producer to Distributor - and not a promise made by Distributor to Producer.

  • So, you might ask, "the shoe’s on the other foot, isn’t it?"
  • "‘First class’ is as vague and undefined a contractual standard as "best efforts", isn’t it?"
  • Right.
  • "So there won’t be any harm in my signing onto that clause, will there, because I will be able to wiggle out of it if I ever had to, right?"
  • Wrong. The fact is, a contractual ambiguity in a performance clause is a bad thing in either case - whether in the context of a Distributor obligation to Producer; or even in the context of a Producer obligation to Distributor.

The concept of film "delivery" finds the Producer required to hand over documents to the Distributor, as well as physical materials such as the film itself. Typically, the Distributor will hold some monies back, and not pay them until "delivery is complete". As you might therefore guess, film "delivery" is oft-contested and even litigated. It is incumbent upon you the Producer to prevent the Distributor from drumming up a pretextual "failed delivery" as an excuse for non-payment. "First-class facilities and equipment" could easily become the Achilles Heel of the litigation-tested contract. The Distributor could simply take the position that the delivered materials were not created at a "first-class" facility.

The simple solution is to take five minutes and list out the production and post-production facilities intended to be used. Make the Distributor explicitly agree to the list of facilities in the body of the contract. That is what the contract is for, anyway - when used correctly, a contract is really a dispute-avoidance tool. Also note that a contractual ambiguity could hurt you, regardless of whether it’s embedded in one of your performance obligations, or even in one of theirs! The moral: list all performance obligations. Break them down into discrete and understandable tasks.

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John J. Tormey III is a New York entertainment lawyer, also admitted to practice in California and Washington, D.C. After leaving his post in 1996 as Senior Counsel to Disney-owned Miramax Films, in favor of his own law practice, he now represents companies and artists alike. His self-imposed mandate is to bring affordable legal services to those that need such services; including business start-ups, production counsel work, talent agreements, s*cript and project placements, and option, acquisition and distribution agreements.

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Air Force One


Titanic


Tomorrow Never Dies

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