Wednesday, February 28, 2007

Contracts: Never Settle for the Standard Agreement

Just because a standard agreement is standard, doesn't mean it's a good agreement, except for the side that drafted it. Never settle for the standard agreement (SA from here on in). An SA is designed to optimize the rights of the party that drafted it, not to protect your rights. With that in mind, read the contract and look for ways that you can get screwed over. Look for words like exclusive, recoupable, net, penalty, termination, integration. These words usually cluster in areas that promote the interests of the drafting party over yours.

I can tell your eyes are glazing over already. Legal stuff, that's what lawyers are for, you're thinking. Correct. Get a lawyer, a good lawyer, nay, a great lawyer, one that you can trust. However, no one is as interested or understand your business as well as you. If you're negotiating industry specific contracts, you should be able to identify problems areas as well or better than your lawyer. It's your world, you should be able the think through the ramifications of royalty clauses (or whatever) in a direct and visceral way.

Having said that, don't rely solely on your own judgment with legal stuff, you should just be a second pair of eyes to supplement your lawyer's.

I just spend the last hour breaking down a DVD distribution agreement for a friend of mine. He runs a small production company and he's looking for a distributor for his latest film, Ex-mas Eve. A few distribution companies have indicated interest in the film, and he's begun to receive their standard distribution agreements. Man, those things suck. As a small independent producer, my friend doesn't have much leverage for negotiation, so he's mostly stuck with what they give him. I still advised him to negotiate, because if you read my previous post, you never know what you'll get until you ask for it.

So remember, when someone hands you their standard agreement, that's when the the fun part begins.

Note: If you interested in this legal stuff, there's an excellent piece on Gamasutra that has three games industry pros analyzing a development contract for Call of Duty: Finest Hour. Very interesting, even if you're not a game geek.