This article is written by Akshaya M. Kshirsagar and Oruj Aashna, pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from Lawsikho.com.
Table of Contents
Introduction
The idea is locked in, actors decided, crew finalized, location set, props and costumes ready! Oh wait! What about Contracts? The film industry needs contracts too. Yes, you heard that right. The film industry is like a melting pot of IPRs floating everywhere. From a costume design to a hook dialogue repeated again and again, there are a plethora of intellectual property rights waiting to be infringed. Apart from the intangibles, there are so many financial and specific performance/obligations to be met for a film to come together. And the hands and minds (not to forget the animals!) who help all this come together have a different set of rights that need to be protected by putting on paper.
What are the three important contracts used in the Film Industry?
Pre-production/development contracts
What are Pre-production Contracts?
Pre-production simply means the period before the production of a film is initiated. This is the period where the conceptualization of the film takes place, right from finalizing the script, putting together the cast and crew members to when the shooting of the film begins. As all the above ingredients are assembled and put together at this stage, it is also often called the Development stage.
What are the different kinds of contracts/agreements needed at this stage?
This stage consists of acquiring/purchasing rights, hiring writers and skilled individuals for creative development of the scripts. The following are the types of agreements that play an important role in pre-production stage:
The Production Entity
For the purpose of raising finance for a film, it is a general practice to form a film production company so as to call upon investors to buy shares and interests in the company. Such a production company can either be in the form of a Limited Liability Company (LLC) or a Partnership Firm.
The most preferred form of business entity for film production entities is an LLC. This is because an LLC assures:
- greater flexibility in terms of tax benefits and allocation of losses and gains among the shareholders/members as compared to any other forms; and
- protects the investors/individual members from being held personally liable for any debts of the company.
What constitutes an LLC?
In order to form an LLC, the most important agreement that is necessary to be drawn up between the production entity and the members is the Operating Agreement. Some of the essential provisions of such agreement are as follows:
- scope of the business of the company;
- functions of the filmmakers;
- duties and obligations of shareholders;
- a contingency/backup plan;
- terms of winding-down of business.
The Business Entity-Security Issues
As the film production entity is a form of business organization, it is bound by the applicable securities and investment laws and has to adhere to regulations of disclosure of information regarding investments in the company. This has to be carried out by the producers as well as the promoters of the entity.
Production entity, as mentioned above, is a business, requiring a huge investment by the investors. This investment is feasible to the risk of loss. The interest of the investors is protected under Securities Law which obliges the producer and promoters to set forth all the material facts concerning the investment and the risk it may bring about. Private placement memorandum (“PPM”) is a legal document provided by the producer to the investors when selling securities. PPM involves information about the selling of a security, terms of the offering and the probable risk. However, PPM may vary subject to the complexity of the terms of the offering.
Rights Purchase Agreements
Why are these agreements needed?
When a producer hires a writer for developing the script or story of the film, he intends to purchase such script or acquire the rights to the script. In order to do so, the producer needs to enter into an agreement with the writer for assignment of rights which is called a Rights Purchase Agreement. Apart from scripts, a producer can also take recourse to such agreements for purchasing a book or story. These are limited purchase agreements, meaning, only certain limited rights are subject to purchase and not all. This wholly depends on the negotiations between the producer and the writer.
What is the purpose of these agreements?
These agreements act as a safeguard against future claims of infringement of rights. We often come across many incidents wherein the producer of a film is accused of or sued for infringement of copyright or plagiarism. To avoid landing in such troubles, it is pertinent and necessary to enter into these agreements.
Life Rights
What are life rights?
Contrary to how it sounds, these rights are actually a misnomer. Life rights are not rights to a person’s life but simply purchasing the rights to use the story of that person’s life for producing a film.
You might have noticed the disclaimer of the movie where it shows “based on a true story”. These stories are brought in the motion to showcase the life of a real person. The filmmaker might know about the personality and end up making the film purely based on his knowledge. But what if the concerned person didn’t connect with the depiction of his life story? Or what if he didn’t like how he was portrayed in the film? The subject may sue the producer or director for the same. This is where it is important to go to the subject and get the agreement signed. The agreement is called the life rights agreement where the subject grants the right to the filmmaker to produce a film based on his life.
The agreement involves two parties, i.e. the filmmaker and the individual who is the owner of the right. Life rights agreements shall include provisions such as the grant of the right, term of right and exercise of the right. The right conferred must be exclusive as to ensure that the subject is not granting the right to some other filmmaker. Additionally, the agreement may include a “Project Promotion” clause, which means that the subject will actively participate in the promotional events of the film.
In a circumstance where the subject is not alive, the filmmaker can reach his relative or person who knows the subject well for the grant of such right.
When is it necessary to enter into a Life rights Purchase Agreement?
It is necessary to enter into this agreement when a producer wishes to produce a Biopic or Biography on a certain person’s life. This agreement is crucial if the producer wants to protect himself from any future accusations for slander or defamation by the heirs of the deceased. Such accusations often delay the production of the film and results in heavy costs being incurred by the production entity.
Life rights can be purchased in the following ways:
- from the family members or heirs, if the subject is deceased;
- from persons who knew or were close to the subject.
There is no need to purchase the rights to a subject’s life story if it is already out in the public and no has raised any objections or claims regarding the same.
Option Agreement
A producer generally enters into this kind of agreement with a writer to purchase rights to a script for future use. Such an agreement enables the producer to purchase the right to purchase a script exclusively at a future date. This usually happens when the production entity has not received sufficient financing for the film and the producer can hence keep the script on standby.
Filmmakers have often adapted the author’s work in their films. This adaptation of work must comply with prior consent of the concerned author or owner. Option agreement grants the producer to use the author’s work or screenplay in the film for a specific period and consideration.
Option agreement in a generic way is a contract which gives the buyer an advantage to buy the asset/shares/right sometime in the future. The option agreement is the most preferred agreement for most of the producers as they do not need to put money on the author’s screenplay entirely. Simply put, the filmmaker would pay the author for optioning the screenplay (option payment is considerably low) and later on he would decide whether he would make a film out of it or not. This is the most advocated agreement when the producer is not sure about the successful outcome of the film. It allows the producer to research more about the screenplay and look for other options too. Not only that, but it also allows them to hold on to the purchase till the producer secure financing. The producer can later cancel the agreement if he is not able to get financed.
The option agreement is made between the producer and the author of the screenplay/book/ other source material. The clauses must include:
Option period: This is the specific period when the filmmaker can hold on the property and inspect whether or not he can buy the same.
Option payment: It is the price given to the author for optioning the work.
Purchase price: It is the price paid when the work of the author gets selected for making the film.
This agreement is highly negotiable, but once it gets negotiated and the producer approves to the author’s script, it is a win-win situation for both the parties.
Writer Agreement
Writer Agreements are needed when the producer wants to engage a writer to convert an idea into a script or wants to change or modify an already existing script. These agreements are a form of “Work for Hire” agreements as the producer hires the services of the writer to develop or modify a script.
It is established that without a good script, no filmmaker could make a successful film. Thus, engaging a writer is something that most filmmakers will do. A writer is taken on board in two scenarios firstly when the filmmaker has an idea about the story and needs to put it down on the paper and secondly to revise the existing screenplay.
Drawing writer’s agreement has always been a tough nut to crack as it comprises a series of negotiation between the writer and producer. Writers nowadays have become very vigilant about what they are being paid and what recognition they would achieve. Most of the writers back out when they are not being paid fair remuneration. Thus, a well-negotiated agreement shall be made in a way that the interest of both the parties is secured.
Director’s Employment Agreement
A director is in charge of choosing the crew members and cast, the sets, locations, costumes and props etc. Basically he/she controls the creative and artistic aspects of the film and is the one who brings life to the script of the film. He is supposed to ensure that every person involved in the film is carrying out their respective duties. In essence, a director is the soul of the film while the producer is the brains behind the film.
Why is it important to have an employment agreement for a director?
As the director is the person who is in charge of the creative part of filmmaking, an agreement between the director and the production company ensures that the role, duties and obligations of the director towards the film and the producer are binding.
Production Contracts
Production means the period when the shooting of the film begins and the script comes alive. The agreements required during the production phase are service agreements to hire the services of actors and crew members, renting shoot locations, etc.
After the post-production procedure, it’s time for light camera action! The time when sets are made, and principal photography begins. This is the most engaging as well as expensive period of filmmaking since the camera is rolled, henceforth allocating cast, crew and location. Everything and everyone at this point of time must be conversant with their position and shall adhere to the terms and conditions of the agreement settled.
Agreement are made for the following purposes:
- Crew
- Cast
- Location
Crew
There are two types of crew member (i) crew above the line, and (ii)crew below the line. Above the line crew is a higher level crew member having upper hand in the process of filmmaking including director, screenwriter, producer and lead actor. Whereas below the line crew has the most limited creative power. Some of the Below the line crew are background actor, script supervisor, light and sound technician.
Crew above the line
Crew above the line refers to persons working on the creative aspect of the film such as the producer, director, principal cast, screenwriters, cinematographers and the like. These crew members are considered irreplaceable and essential to the film. They are paid a fixed cost and such agreements contain much more detailed provisions as to their rights and obligations than the agreements for below the line crew members.
Members of above the line crew have the most consequential creative hand in filmmaking. Agreements associated with this group include but not limited to producer employment agreement, director’s agreement and actor agreement. Terms and conditions outlined in Agreements are very complex. For instance, agreement with the director consists of a large number of clauses, some of which are employment, rights & obligation and compensation clauses. Compensation paid to the above line crew is generally fixed. Once the compensation is decided in the agreement, it cannot be reconstructed no matter what. The agreement may also include the share of part of profit if it makes good money in the box office. Additionally, this agreement gives the power to the director to choose or replace a cast member.
Likewise, director agreement, producer agreement and actor agreement also confer a number of rights and obligations.
Crew below the line
Crew below the line refers to the crew members who deal with the day to day activities of film making such as the technical aspects or backend works such as editors, music composers, sound and light technicians, hair and makeup crew, costume designers, camera crew and the like. These members are usually paid on hourly or daily basis unlike crew above the line. These agreements do not contain elaborate provisions and the crew below the line members may even be replaceable.
Unlike crew above the line which is governed by the agreement set out, crew below the line do not need such agreement. These groups are supporting the process of filmmaking such as lighting, sound and background. They are usually paid hourly for their work.
Instead of a full-fledged contract, the deal memo is the document made for the below the line crew. The document consists of all information of the worker such as his name, address, contact number etc.
Cast
The cast of a film refers to the principal and supporting actors/actresses whose services are engaged by the producer or the production company. The actors have to enter into a contract with the producer so as to lay down certain specific terms such as the number of shoot days, term of agreement, payment, scope of services, number of working days and hours and nature of engagement; whether exclusive or non-exclusive.
The cast is the performing actor of the film which includes principal performer, background performer, supporting actor, minor actor etc. Since these actors are arranged differently, the agreement which follows up is also different. For instance, the contract for supporting actors differs from the principal actor and so from the minor actors.
In Bollywood, actors have to go through several auditions for getting the role, and the casting director is responsible for the final pick. However, this may not be the case for famed actors as the director himself communicates the actor and shows script. Once the actor gets chosen, an Employment agreement is made for the same. Parties to the agreement are the producer and actor. The clause of this agreement includes compensation of the actor, the term of the project, amenities provided to the actor, rules of production, health and safety of the actor. This agreement also outlines the indemnification clause, which bars actors from performing in another film project for the period defined in the employment agreement.
Locations
Locations are intrinsic to filmmaking. Now-a-days, more and more films are being shot at beautiful scenic places rather than a studio. Such locations are rented by the producer by entering into an agreement with the owner of the location. These agreements are important in order to lock in dates to use the locations. They are most beneficial from the viewpoint of the owner as they contain provisions to indemnify the owner against any damage or loss caused to the location while shooting.
A location which complements the scene not only influences acting presence on screen but also results in overall impactful film. Generally, an independent filmmaker shoots out of the studio in locations which compliments the narrative they want to showcase. This does not imply that they invade the area and start shooting. They need prior consent from the owner of the land where they are rolling the camera. The agreement is signed between the filmmaker and owner of the land to acquire permission to use the land for shooting.
Agreement for location shall include how long and for how long the location shall be leased, indemnification in the event of any destruction caused to the owner’s property due to the shoot. The agreement also includes circumstances on which the filming needs to be rescheduled. The producer can also specify in the agreement to use the location for the further film project.
Post-production Contracts
Once the shooting of the film is complete, the film has to go through editing and for this the producer requires editors and film composers.
Editor Agreements
These agreements are entered between the producer and an editor for editing the finished film. They are usually in the form of “Work for Hire” agreements and therefore the producer has the right to retain the edited work. Some of the important provisions included in this agreement are regarding the term, compensation and ownership of rights.
Composer Agreements
Good music and background score uplift the mood of a film. The producer usually approaches a music composer who will compose the original music tracks and background score of the film. A composer agreement determines the ownership of the music. The producer shall be the owner of such music but the revenues generated through the use of the music will have to be shared by the producer with the composer.
Film Distribution Agreement
After the editing and music is in order, the next and the final step is promotion and distribution of the film. A distribution agreement is executed between the producer and the distributor for granting the distributor the right to market the film through various platforms such as Theaters, Television, CD-DVD, pay per view web streaming such as Netflix, Amazon Prime, Hotstar etc. This agreement grants an exclusive or non-exclusive license to a distributor to promote and exploit the film in any medium. However, the distributor has to consult with the producer or company before doing the same.
Conclusion
From the vast array of contracts, general/specific, the above mentioned may just be the tip of the iceberg for the ever changing dynamics of the film industry. The process of filmmaking, as we know it, may seem as simple as making a short video on your phone. However, the largest contributing factor to its magnitude is the vast number of people involved; from a spot dada to the director and everyone in between, each person is roped in towards his responsibilities and is similarly protected by the same rope when a question of his right arises.
The specific nature and depth of a contract may vary from film to film, i.e., animation, docu-drama, sound footage or even stop animation. Also, the entry of web series’s dawns a new chapter in this industry, not just within India but all over the world and new sets of responsibilities/rights arise and pave way for newer forms of contracts that are being introduced each day. We cannot even fathom how the nature of contractual obligations in the entertainment industry may change in the coming future.
References
- https://www.filmdaily.tv/template/film-contracts-and-agreements-protect-your-film
- https://blog.ipleaders.in/important-contracts-used-film-industry/
- https://www.forbes.com/sites/schuylermoore/2019/03/14/what-type-of-entity-should-i-use-in-the-film-industry/#185e60d74279
- https://www.legalzoom.com/articles/why-do-film-companies-form-an-llc-for-a-movie
- https://www.independentfilmmakercontracts.com/product/music-composer-agreement/
- https://movielaw.net
- www.filmtraining.mb.ca
- https://chrisjonesblog.com
- https://www.independentfilmmakercontracts.com
Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.
LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join:
