The entertainment industry today is fundamentally broken and I must state importantly at this point that the entertainment industry with respect to regulation of law -I mean entertainment law, is largely based on the fundamentals of contract and contract law; which explains why there is no singular/uniform legislation that we may come to know as “Entertainment law or Entertainment Act” like we have in Tax law, Company law, Criminal law regimes e.t.c.
This is because ‘Entertainment law’ itself is a blanket name for various sources of law, that come to play in entertainment activities. The backbone source of law on which entertainment law or activities rest is Contract law, after which the IP law, tax e.t.c may be spoken of.
To buttress this, the entertainment industry is a commercial hub -a place of commerce and the only difference is that you don’t sell and buy physical goods; you rather sell and buy creativity and creative services. Therefore, as an aside, the first point of know for any entertainment lawyers or enthusiasts is a mastery of the law of contract (not forgetting that the law of contract is itself another bottomless pit to which there is almost no end in scope).
This is essential to lay a background on why we raised this discourse on ‘UNCONSCIONABLE CLAUSE’ in the first place.
RECENT EVENTS
Before you proceed with this piece, it will be useful to remember recent shattering events in the industry, caused by either a breakdown of contract or no use of contract:
a. Mohbad’s fall out with Marlian records
b. SAG-AFTRA strike
c. Berry-Tyga v. Carter Efe
d. Joeboy v. Tiwa Savage
WHAT ARE SUFFOCATING CLAUSES IN ENTERTAINMENT DEALS?
The choice of using the word “suffocating clause” distinctly depicts the reality of contract deals that most artists and creatives get entangled with in the industry -contracts meant to suffocate the party with weak bargaining strength; typical of record labels when dealing with artistes. However, I’ll rather use a synonymous expression to “suffocating clause”, that is, “unconscionable or unfair term/clause”. This appears more formal in discussion.
In simple parlance “unconscionable/unfair terms”, mean those entrapping contract terms/clause in an Agreement/Contract which cause manifest unfairness or inconvenience such as to deprive a party of fair benefit of the contract. More simply, it is a one-sided term/clause which is unfair and oppressive.
TYPES & ELEMENTS OF UNCONSCIONABLE TERMS
- Procedural Unconscionability
This is otherwise known as the “bargaining unfairness”. These are unconscionable or unfair acts during the bargain of a contract. One party(strong party) acts unfairly and in oppressive manner during the bargaining process such that the weak party contracts helplessly. For example, where the weak party is made to enter a contract by undue influence or durress. Focus is on the bargaining process that created the contract and the bargaining behaviour of the party alleged of unconscionability.
2. Substantive Unconscionability (Unfair or oppressive terms)
Focus here is on the terms of contract at the time the contract was written. Courts in advanced jurisdiction have developed the principle of “Unconscionable terms” by which, court will not hold a term of contract as binding if it is oppressive, unfair and unduly favourable to one party. This principle is more developed in the United Kingdom and the United States.
Usually, court determines if the terms are harsh, unfair, oppressive or unduly favourable to one of the parties. Essentially, the principle is one for the purpose of preventing oppression and unfair surprise and not to disturb the allocation of risks because of superior bargaining power.
Therefore, what this means is that, it is fine that one party has superior bargaining strength- that there is no equality between parties, but there must be equity.
(For instance, it is trite that in a Recording Agreement between a Record label and an artiste, the label usually has all the resources, money to invest on the artiste, which puts them in a stronger bargaining position.) Hence, the essence of the principle is to check if there was gross inequity of bargaining power and not that there existed a stronger bargaining power.
To state more simply, the key concern is not whether one party to the contract was more powerful or knowledgeable than the other party, but whether the stronger party abused its power to impose its will on the other party. It may also occur where a party enjoys monopoly in the industry (Remember until recently, Netflix enjoyed such monopoly in film).
Court of equity is likely to find a contract unconscionable if one party has so much control over the market place as to prevent any real choice of the other party; if such control has resulted in oppressive and unfair terms.
UNCONSCIONABLE CLAUSES IN THE ENTERTAINMENT INDUSTRY
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A. CAUSES
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Oftentimes, the cause of procedural Unconscionability are:
a. Lack of realistic alternative by the weak party
b. Not engaging an experienced lawyer
c. Social relationships
d. Undue influence
e. Durress
f. Ignorance
g. Anxiety.
B. COMMON OPPRESSIVE CLAUSES.
There are numerous unfair and oppressive clauses that can be found in a contract; even standard form contracts. Often, these oppressive clauses are packaged as traps hidden in a line or two of the contract. It requires skills and experience to uncover these traps and pitfalls.
Focus here is placed on music contracts based on standard form contracts (SFC). Some of such terms to look out for include:
- Royalties for Foreign sale
- Prohibition of punitive damages, costs, or legal remedy
This is common in both film and music contracts.
- Prohibition of equitable remedies
- Terms preventing artiste from terminating the contract or one-sided termination privilege solely in favour of the Label.
- Auditing of Royalties
Some SFC only allow artists to object to a royalty statement within a short period of rendering account. (That is if accounts gets rendered at all). Artists can only view account book/record two times during the duration of the contract. This limitation is excessively unfair to the Artist but, yes, these are common clauses you find in music contracts.
Some term of contract, prevent Artist from auditing and compel artists to take accounts as rendered. Quite sardonic, most labels design a “catch-us-if-you-can” game with artist royalties, thereby taking advantage of artist by concealing millions of royalties that artists are entitled to. For instance, in 2001, Hole of Universal Records and Dixie Chicks of Sony Records filed lawsuits accusing their labels of engaging in “systematic thievery” to swindle them out of millions of dollars in royalties.
- Labels earning from Artists’ publishing
This is one talk that often brings disaffection from amongst music executives. It is a delicate one to pitch on but truth is that, with the trend of 360 music deals, labels now take as of entitlement Artist’s publishing when they render no publishing services. It is now so common a term, that it has assumed a trite state which makes it difficult to kick this clause out in Recording contracts.
- Copyright Ownership
One of the most oppressive and outrageous clause in music contracts is one, inducing Artist to assign away all their prior catalogues. Similarly, ownership in perpetuity, although appears to have come to stay, still remains an unconscionable clause, in instances where adequate compensation is not being paid to the Artist.
- Term of Contract
The use of Options clause to extend duration of contract to decades of years, and these options are automatically renewable. Consequently, Artist is stuck to a relationship against his will, whether toxic or not. Under California law, no personal service contract may extend beyond 7years. It is hoped that Nigeria replicates a similar provision to correct this unfair contractual practice
Other common unconscionable clauses
- Non-inclusion of commitment clause
- Denial of a Key-man provision
- Conduct in the event of M&A or Dissolution of label.
- Assignment of the contract.
NIGERIAN PERSPECTIVE ON UNCONSCIONABLE TERMS
Unlike other juridctions, no particular law expressly regulates unfair terms in Nigeria. The Federal Competition and Consumer Protection Act (FCCPA) 2019 is the first Act to make a significant attempt at statutory regulation of unfair contract term (Part XV). However, the provisions of the FCCPA suffer limitation as they were promulgated from the perspective of consumer of goods.
Beyond the FCCPA, common law and equitable principles in contract law have served a reference for the court to ease the pangs of unconscionable terms.
In other climes, the United States for instance has the US Commercial Code while the United Kingdom has the Unfair Contract Terms Act. Case laws have also been instrumental in the development of the principle of unfair or unconscionable terms. Hence, courts have found some Agreements contrary to public policy because of unequal bargaining strength; see SHROEDER MUSIC PUBLISHING V. MACAULAY; CLIFFORD DAVIES MANAGEMENT V. W.F.A RECORDS. See also the Nigerian case: AFRICAN SONGS LTD V. SUNNY ADENIYI.
It is important that, with the current age and stature of the entertainment industry, the flames of judicial activism be increased to develop a strong doctrine of unconscionable terms for Nigeria. Also, the FCCPA need be further expanded to take on a wider scope as it affects unfair contract terms.
Olufowose Samuel Esq.