Contract Bank & FAQs

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Click to ExpandWhat is a contract?

A contract is an agreement between two or more parties that stipulates the terms & conditions of their business relationship. Generally speaking, a contract sets out the rights and responsibilities of each party, and in many cases it also stipulates the methods and means for resolving disputes that might arise between the parties in the course of doing business. Finally, a contract can be made either orally or in writing. The preferable form is to have a contract in writing, because oral agreements are more likely to lack clarity and specificity thereby increasing the chances that the agreements will be construed as unenforceable [from a legal perspective], or they will be enforceable in ways that are dissatisfying to one or more of the parties.

Click to ExpandWhy do I need a contract?

The most important reason is to protect a person’s interests in another’s work. History is replete with examples of very talented artists who have been taken advantage of by unscrupulous entrepreneurs whose only concern is THEIR making money from someone else’s talents. Beyond this unsavory possibility, using contracts in business dealings helps to establish a party as a serious and knowledgeable professional. Simply put, contracts help to present a person’s work as professional and worthy of serious consideration and fair treatment. Additionally, many potential markets will not deal with parties without a contract. In fact, people who prefer not to have contracts like it that way so they may keep the upper hand in their dealings with or take advantage of business associates. Insisting to have a contract is one very effective way of avoiding problems in business affairs. Such a request may result in the loss of a sale, or an opportunity, but believe me, those who use contracts will be better off in the long run. Those who shy away from legitimate and reasonable business dealings are likely to be the one’s not to do business with anyway. This being said, remember that, whoever drafts the contract is likely to slant its provisions to the benefit of their client or interests so - READ THE CONTRACT CAREFULLY BEFORE IT IS SIGNED AND IF THERE ARE QUESTIONS DO NOT SIGN IT UNTIL THOSE QUESTIONS HAVE BEEN ADEQUATELY ANSWERED BY A COMPETENT PROFESSIONAL.

Click to ExpandDoes everyone need a contract?

This question might better be asked, “does everyone need a written contract,” because technically any time two or more parties have an offer, acceptance and consideration, in most cases even just orally, a valid and binding contract is formed. In circumstances where a written contract is not required it is probably a good idea to commit the contract to writing in order to avoid any confusion or problems with clarification and to have tangible proof of the burdens and rights of each party to the contract. By reducing all negotiations and agreements to writing, and even better by completely integrating the contract into a single written document, each party knows exactly the contract terms. Any possible dispute regarding the actual terms of the contract will not have be solved by the possibly unreliable memory of a party but rather by looking through the terminology of the contract itself and pinpointing the exact obligations as they are legally enforceable. Finally, in the event of a dispute between the parties that leads to litigation it is probably best to have the contract reduced to writing so that the court or arbitrator is in a good position to determine which party fulfilled what obligation and which obligations were neglected, without having to rely on disputable testimonial evidence.

Click to ExpandDo I need a contract for everything I do?

The simple answer is NO. However, whenever attempting to sell work, have work represented by a professional such as an agent or gallery, have been commissioned to do some work, displaying work for public viewing, performing for pay, or consigning work (leaving work with another for purposes of sale, review, display, or representation) it is best to have a contract to avoid future problems in business affairs. Remember, ART is a BUSINESS TOO. While most artists don’t like to perceive of their professional endeavors as work, the reality is that a person’s talents and the products of those talents are only as valuable as the person willing to make them. Paying attention to the business side of ART is a necessary and crucial element in determining long term success as an artist.

Click to ExpandWhen is it best to have a contract?

Whenever attempting to sell work, have work represented by a professional such as an agent or gallery, commissioned to do some work, displaying work for public viewing, performing for pay, or consigning work (leaving work with another for purposes of sale, review, display, or representation) it is best to have a contract to avoid future problems in business affairs.

Click to ExpandWhat does a contract look like?

A contract can be unilateral or bilateral, express or implied. A unilateral contract is an agreement entered into by two parties where one party acts in exchange for a promise by the other party. A bilateral contract is an agreement where both parties make promises in exchange for the other party’s promise. Both contracts need valuable consideration to be binding. Oral contracts, though less enforceable (or sometimes not even enforceable pursuant to the statute of frauds), may be express, implied, unilateral, or bilateral. A written contract can look like a “form” contract, which has “boiler plate” language. (An example of this would be a Jiffy Lube contract or credit card application contract). Contracts that are drafted between two parties for specific acts or promises may be drafted and look quite different from general form contracts. These contracts may vary in how they look, but most likely there will be blank lines where the parties enter their names with promises to do or not do something written below. Also, the terms of the contract must include dates, amounts, and/or the consideration necessary to bind both parties to their agreements. Contracts that cannot be performed within one year must be in writing pursuant to the statute of frauds. If the contract involves the sale of goods of over $500.00, or the conveyance of real property, then it must also be a written contract. Often there will be a place at the end for witnesses or a notary public to sign, verifying the parties’ signatures. There may also be numbered sections so that the parties can refer to certain portions of the contract more easily.

Click to ExpandWhat should be included in a contract?

A contract should:

  • address the rights and responsibilities of both parties
  • address the promises/obligations to be performed by both parties
  • include and incorporate both parties’ interpretations of the contractual agreement
  • include as many specific details as possible such as: dates, times, amounts to be paid, etc.
  • use clear, concise, unambiguous language
  • address a method of resolution for disagreement should any disagreement arise between the parties
  • address the consequences should any party breach or engage in other misconduct interfering with or preventing completion of the contract
  • address every potential problem that may occur (as many as can reasonably be foresee)

Click to ExpandAre there different contracts?

A contract is broadly defined as an agreement between two or more competent parties in which an offer is made and accepted and each party benefits. The agreement creates obligations to do or not to do the specific things that are the subject of the contract. Contracts can take on a multitude of different forms from completely written, to partially-written and partially oral, to completely oral. Arizona law requires that some contracts be completely written in order to satisfy the Statute of Frauds, while some contracts may never need to be reduced to writing, depending on the circumstances. Contracts may cover myriad topics and agreements, including employment, sales, and property transfer. In that sense there are countless different types of contracts. But on a more general level, a basic contract between two parties may have some of the following characteristics.

Unilateral v. Bilateral contracts- A unilateral contract is a contract where there is a promise by one party only. In a unilateral contract, the party making the promise is only bound if the other party performs. The promise can be withdrawn by the promisor at any time prior to performance by the promisee. In a bilateral contract, on the other hand, both parties to the contract make mutual promises to do some future act. Consideration of the promise of one party is a promise on the part of the other. Bilateral contracts are preferred over unilateral contracts because both parties are given protection. Void v. Voidable contracts- A void contract is actually no contract at all and no action can be brought for breach. A voidable contract is one in which one or more of the parties have the power to avoid the legal obligations. A voidable contract is valid and binding until it is avoided by the party who is entitled to avoid it. Express v. Implied contracts- In an express contract the terms are written or orally stated by the parties; in an implied contract some or all of the terms will not be expressly stated by the parties but will be inferred from the conduct of the parties and the circumstances of the case. Both types of contracts are recognized by general contract law, but implied contracts have some limits. Regardless of these contract characteristics, for a contract to be enforceable the fundamental elements of offer, acceptance and consideration must exist. If one party makes a promise to another without consideration it may be considered a gratuitous promise and may not be enforceable.

Click to ExpandWhat is a verbal contract?

A verbal contract, known as an oral contact, is a contract that is not reduced to writing. Under general contract law an oral contract has the same validity and binding effect as a written contract except under certain circumstances where the Statute of Frauds requires the contract to be in writing (situations, among others, including a sale of goods valued at $500 or more, or an agreement that is not to be performed within 1 year). A valid oral contract still requires the formalities of a written contract, offer, acceptance and consideration, but it need not be reduced to writing.

Click to ExpandWhat if we have a written contract, then verbally agree to something else?

Under Arizona law a written agreement can be modified orally if there is mutual assent between the parties supported by consideration. To effectively modify a contract, whether it is written or oral and whether implied or express, there must be an offer to modify the contract, assent to or acceptance of that offer, and consideration. These requirements are in place to protect the parties by preventing one party from unilaterally modifying the contract at the expense of the other party. If the parties do decide to modify the contract, the consideration that is exchanged due to the modification cannot be something that a party is already obligated to do. Interestingly a contract can be orally modified even if the contract says it can only be modified in writing.

Click to ExpandWhat if we verbally agree on something, and it is not in the written contract - or is different?

If the parties completely integrate their contract, that is they reduce the contract to writing so it is understood that it embodies the complete agreement, then in the event of a dispute the writing will control and no effect will be given to evidence of oral agreements otherwise. The written contract will be presumed to be the complete integration of all negotiations, agreements and relevant discussion between the parties. Outside evidence that the written terms of the contract do not accurately portray the intentions of the parties will not be admitted unless there is ambiguity or confusion within the contract, and even then the outside evidence is only allowed to the extent of clearing up any ambiguity or confusion. Under Arizona law the outside evidence will not be allowed to vary or change the terms of a contract that is understood to be a complete integration of the parties’ intentions. On the other hand, if the written contract is only a partial integration of the contract, outside evidence may be included to prove the part of the contract not included in the written document. Therefore, in the situation posed in this question, if the written contract did not contain certain terms the parties had previously discussed and agreed to and the parties did not intend for the written contract to be a complete and unambiguous integration of the contract, outside evidence may be admitted which proves the part of the contract that is not in the writing. However, if the contract excludes certain items of the oral agreement and is considered by the parties’ to completely include everything they have agreed to, then the outside evidence will not be admitted to prove a different earlier oral agreement. Furthermore, if, as the question poses, the written contract differs from the orally agreed terms then the outside evidence will not be admitted to change the meaning or interpretation of the written contract and the written contract will control.

Click to ExpandHow do we solve a disagreement over a contract?

Discussing with the other party the contract dispute and working it out is recommended; this is a primary reason to reduce the contract to writing so any differences in opinion about the terms of the contract can be confronted head-on. If the dispute can’t be easily resolved and one party is taking advantage of the other party or is enforcing the terms inappropriately, an attorney might need to be consulted.

If a contract dispute leads to a breach, one party may have a cause of action against the other and can sue in court (or some other agreed upon setting) to either have the contract performed or to receive monetary damages to make up for not getting the results of the contract. This dispute may be resolved in court or arbitration or it may be settled by both parties out of court. Parties are free to breach contracts if they wish and generally will face no criminal liability for doing so. But... breaching may lead to a suit to recover monetary damages or force the breaching party to fulfill their obligations.

Overall, it is best to discuss all of the terms of the contract and write out all agreements that result. This is to avoid any possible confusion but also to make sure each party knows exactly what their rights and obligations are.

Click to ExpandWhat do I do for proof if there is a disagreement?

Generally speaking, if there is a disagreement, the express terms of the contract can be used to settle the differences. However, if the terms of the contract are ambiguous, subject to different yet reasonable interpretations, or missing, a witness is often a good tool to use to prove the facts. Negotiations can also aid in settling disagreements. The best remedy, however, is to make sure the contract covers all of the areas that may result in a dispute. Looking at other contracts that other parties have used in similar circumstances and researching how other disputes have been resolved may help in forming a contract. This may help to include all necessary terms in the contract. To prove a version of the facts and thus avoid conflicting points of view, make sure negotiations are as clear and unambiguous as possible. A witness that can validate the facts in the light most favorable to one party’s view would also be a good thing to have at the signing of the contract and even during prior negotiations. Court should always be the last remedy to prove a party’s version of the facts, but sometimes it cannot be avoided. The most prudent thing would be to take steps to avoid ending up having to use court as a last remedy. Other remedies other than court also exist which may include mediation or arbitration.

Click to ExpandCan anything be included in a contract?

The answer is yes. However, remember that, any term or condition that is heavily weighted in favor of one party or the other may be looked upon as what most courts call “unconscionable.” In general, terms and conditions should be as fair as is possible to all parties to the contract, equally weighted as best is possible so that no one party has an inordinate advantage in the dealings, and the terms and conditions should be clear and unambiguous. In other words, they should be stated such that the average person can understand them without having to have graduated from law school. If not, a court may determine either the specific term or condition, or the contract as a whole as unenforceable. If this happens, most of the time, it is the artist who loses most.

Click to ExpandWho can sign for me?

When one party comes to an agreement with another party and they decide to commit the contract to writing, either the party or an agent of the party that has been authorized can sign the contract contract. An agency relationship is a fiduciary relationship by which one party, the principal, confides to another, the agent, the management of some business to be transacted in the principal’s name or on his or her account. An agent has the power to bring about or alter business and legal relationships between the principal and third persons and between the principal and the agent. Generally when an agent signs for a principal, the signature will bind the principal and not the agent if in the signature or description of the parties to contract the names of the principal and agent both appear and the agent indicates the agency. The agent must be careful to indicate the he or she is singing on behalf of the principal and that the agent is in fact an agent of the principal in order to prevent the agent and not the principal from being bound to the contract.

Click to ExpandDo I need a lawyer to write the contract?

The simple answer is not necessarily simple. The simple answer is NO. However, if a standard form contract is used, or a borrowed a contract written for or by another, or an inexperienced party attempted to write the contract, a person should be knowledgeable concerning the basic components of a contract and what those components mean. If not, it is best to get competent legal assistance in drafting or reviewing the contract. The most important thing is to ASK QUESTIONS if a term or condition is not understood. Otherwise if a problem arises, the relationship between the customer, service provider, vendor, or representative might be harmed.

Click to ExpandDo I need a lawyer to review a contract someone sends me?

When a standard form contract , one that has been provided by another, or one that has been borrowed or been provided with a contract written for another, or an inexperienced person attempted to write the contract, is used, parties should be knowledgeable concerning the basic components of a contract and what those components mean. If not, it is best to get competent legal assistance in drafting or reviewing the contract.

The most important thing is to ASK QUESTIONS if a term or condition is not understood. Otherwise, if a problem arises, the relationship between the customer, service provider, vendor, or representative might be harmed.

Click to ExpandWhat if someone hired me to do the work?

Generally, then the employer owns the copyright. The employer owns the copyright if the employee created the work while in the regular scope of his or her job. If an author is working under contract, or as a freelancer, the author should clarify with the employer who will own the copyright before starting the job. Authors who create commissioned works own the copyright, unless 1) the parties expressly state in a signed written agreement that the organization or person commissioning the work owns the copyright and 2) the work fits into one of the following categories: contribution of collective work; part of a motion picture or other audio-visual work; a translation; a supplementary work; a compilation; and instructional test; a test; answers to a test; or an atlas.

Click to ExpandIf I need a lawyer for a contract, who pays?

Generally speaking a lawyer is paid by the party whom the lawyer represents. However, if one party has provided the contract for use in the second party’s dealings, the second party is normally not obligated to pay for the legal services necessary to its drafting or execution. However, THE CONTRACT SHOULD BE READ CAREFULLY BEFORE IT IS SIGNED AND IF THERE ARE QUESTIONS, THE CONTRACT SHOULD NOT BE SIGNED UNTIL THOSE QUESTIONS HAVE BEEN ADEQUATELY ANSWERED BY A COMPETENT PROFESSIONAL. The reason that this is so important is that often critical and skewed terms and conditions are put into the “fine print” which can obligate a party to all sorts of unreasonable and costly actions. In most cases, if a party agrees to it, whether it has been read or not, the party is bound by it. Remember, a contract is generally considered an instrument of obligation that is entered into willingly and with full knowledge by all the parties as to its terms and conditions. Also, it is possible to share the legal costs with the all parties if they are willing to do so. However, if this is the case, this must be included in the contract itself and it should also stipulate where, how, and when all the parties are to pay their agreed upon share of these expenses.

Click to ExpandWhat if I break the contract accidentally?

The answer to this question may depend on what is meant by accidentally and on who the other party is. If the contract is breached due to non-performance or insufficient performance, that is if one party fails to uphold it’s end of the bargain, the failure to perform can result in the other party suing for performance of the contract or for monetary damages to make up for not performing. If by accidentally it is meant that the performance did not completely meet the requirements of the contract, but still substantially performed, it is still possible to recover the contract price minus allowances for defects or variance from the strict contract itself. A determination may have to be made regarding whether or not the contract was substantially complied with. Of course if the contract specifies that the parties will only accept strict or complete performance this does not apply then the breacher may be liable for damages. If by accidentally it is meant that one party is only able to partially perform and not complete the contract, the other party may retain, without paying for the partial performance, the benefits conferred until performance is completed. If by accidentally it is meant one party is unable to complete the contract and therefore have to breach because difficulty, hardship or financial loss, the party will generally still be bound to the contract. This is so unless the contract cannot be completed due to impossibility, or something such as an act of god, which prevents the party from fulfilling its obligations, in which case the party may be released from its contractual obligations. This question would probably be better and more narrowly answered if the reason for the accidental breach were more specific.

Click to ExpandCan I be charged with anything criminal because of a contract?

Generally speaking, no. In most cases, any disputes that arise out of contractual dealings result in only civil ramifications. This means that the normal, and usually the only remedy offered to the party who has been harmed (according to the court’s ruling), are money damages, and in some rare cases something called “specific performance.” Specific performance is a remedy that requires the party who has violated the contractual term or condition to rectify such violation by fully and completely performing their obligations under the contract according to the specified terms and conditions so that full performance is achieved. The party who is harmed usually gets one remedy or the other, but not both.

Please note however, If a party fraudulently misrepresent itself or its work, or it accepts money without performing to the full extent of the terms and conditions in the contract, it is sometimes possible that those actions may constitute a criminal offense that is in addition to any civil matters or remedies that are otherwise available to the party who is harmed. Whether or not a party would be charged with such a criminal offense, if one does apply, is generally up to the State’s authorities not the party who is harmed as criminal charges are considered offenses against the State (the people), not against any one individual or entity. The nature, scope, and necessary elements of any particular criminal offense would be spelled out in State or Federal criminal statutes.

Click to ExpandWhat is a non-disclosure agreement (NDA)?

A nondisclosure agreement, or a confidentiality agreement, is a document that defines the conditions under which proprietary information is exchanged between the parties. The agreement sets forth what information of a party’s, a party’s intellectual property, a party wishes to remain private and undisclosed to other parties. In short, it keeps secret the information a party wants kept secret.

Click to ExpandWhy do I need an NDA?

A nondisclosure or confidentiality agreement will allow a party to create work that is solely that parties and remains that parties. By signing the confidentiality agreement any secrets or information that a party wants to remain undisclosed will not be shared with anyone else besides the party that is being contracted with unless the party wants them to be. It benefits a party from preventing others from taking and using the party’s unfinished work and claiming it to be their own.

Click to ExpandHow will the contract dictate my future income?

Because contracts list the terms of the agreement, whether being paid by salary or by contingency, the contract should state the terms of what the payor pays or the payee receives. These terms are set forth during the negotiations so one needs to be very careful when entering into a contract when payment is involved. One can limit themselves to whatever they decide or agree to during the negotiations to that contract. ALWAYS HAVE SOMEBODY REVIEW THE PAYMENT TERMS OF THE CONTRACT!

Click to ExpandHow will my percentage of sales be calculated and what will the venue receive for services rendered?

These items should be set forth in the terms of the contract. These are all negotiated prior to the execution of the contract. The standard percentage of sales varies depending on what industry of entertainment one is in. The venue (or house) will receive its share based on the terms set forth in the contract. Again, this might be a fluctuating scale whereby the more money brought in the higher the amount the house takes. Some venues may operate on a fixed basis. For example, a couple of years ago, the Great Western Forum in Los Angeles, California would receive a flat rate of $200,000.00 per night for concerts given. When Guns ‘N Roses (GNR) sold out five nights there in 1992, GNR paid $1 million for the five nights. Other expenses were paid out and the band kept the net profits after the house was paid.

Click to ExpandWhat are the conditions of the contract, such as how long will my work be on display? Under what circumstances will the work be displayed? What obligations must I fulfill as the artist so as to not violate the terms of the agreement? What obligations must the venue/producer fulfill?

A contract should cover all of these questions. The questions herein are really up to the two parties entering into the contract and should be discussed at length during the negotiations prior to execution of the contract.

Click to ExpandWhat can I expect from the buyer once they purchase my work? How will the piece be cared for, displayed, restored if necessary, as well as re-sale royalty rights?

Generally speaking, once the art has left the artist’s hands and the artist has been compensated for his work, the owner can do whatever he wants with the work, regardless of what the artist says. A few years ago, Garth Brooks tried to receive royalties when used record stores were selling his CDs used. His argument failed. Generally, an artist does not receive royalty payments after their art is sold for the first time. It was only recently that actors at the studios began receiving residual payments for re-runs of episodes or movies they acted or participated in. All of these were negotiated as part of their contracts. Royalties is a topic that should be addressed in the contract or likely it will be lost. If artwork is sold, the artist generally does not receive payment when a third party buys the work second-hand or "used."

Click to ExpandHow will my work be protected while in transit or on display in a venue?

These are also issues that should be addressed in the contract, i.e. who bears the burden of loss if the artwork is not protected and something happens to it. Expenses of how artwork is to be protected and to what measures must be taken to protect the work or transport the work safely should all be addressed during negotiations and put in writing within the contract.

Click to ExpandWho is responsible for the costs of delivery to the gallery to exhibit works of art?

The terms of how the consignment is to be allotted should be spelled out in the terms of the contract. Generally speaking, the artist is responsible for the cost of delivery to the gallery and the efforts involved in displaying the work. From my inquiry, I have found that the art houses receive a portion of the art work sold, but that the artist “fronts” the transaction by contributing to get the artwork to the store. Pertaining to Question #28, the burden of protecting the artwork would likely rest on the shoulders of the artist, however, a well drafted contract in favor of the artist could assign this duty to the displayer or promoter of the artwork.

Click to ExpandUnder what circumstances will my work be purchased and who is responsible for the sale of the work?

The art dealer is responsible for the sale of the work. A written contract is required by Arizona law whenever an art dealer accepts a work of fine art on consignment from the artist who created the work to use or display the art. The art dealer then becomes, with respect to the work(s) of fine art, the agent of the artist. The work of fine art becomes trust property and the art dealer is trustee (legal title belongs to the art dealer for the benefit of the artist) until the work of fine art is sold to a third party or returned to the artist. An agreement usually specifies that the dealer will make all reasonable and good faith efforts to promote and sell work(s). In addition, the agreement can specify the duties of the dealer in exhibiting and selling the art work, such as whether or not the work is displayed with other works, if it is displayed in a group exhibition, allowance of reproduction of the work(s), and other advertising and promotional efforts. Additional clauses can outline the exhibition, opening, and promotion of the work(s). In this case, all the costs of such exhibitions should be spelled out in writing in the agreement, or prior to any purchases.

Click to ExpandCan I dictate the price of the work and the terms of sale while the work is in a venue?

In Arizona the written agreement for consignment must state the minimum price for the sale of the work of fine art. However, once the art dealer accepts the work(s) of fine art on consignment, the art dealer becomes responsible for the price and terms of sale while the work is in a venue.

Click to ExpandHow long is the agreement valid?

Where an agreement specifies the period of its duration, it terminates on the expiration of such period. The agreement should specify the duration, including when the agreement is to commence (typically when the agreement is signed) until a certain date. Where the time for an agreement’s duration is not specified, the court may inquire into the intent of the parties and supply the missing term, if duration may be fairly and reasonably fixed by the surrounding circumstances and the parties' intent.

Click to ExpandHow do I end an agreement?

Typically agreements cannot be terminated without consent of both parties. Termination without cause is a breach. To end an agreement before the expiration date, or before the terms of the agreement have been performed, a clause can be added for unilateral termination. This would allow a party to terminate the agreement without consent of the other party, and vice versa. To do this, add a provision in the agreement for unilateral termination which typically specifies that either party can terminate by giving written notice within a certain amount of time. Furthermore, the agreement should anticipate contingencies. An escape clause can be included, (a provision that allows the parties to be relieved from (get out of) any obligation) if a certain event occurs.