Understanding any type of contract in any engagement is key. More so, understanding contracts for creatives is of utmost importance as they often are the make or break factor. Contracts are the primary tools that entities in the industry use to enter into business relationships with one another. This makes it important to have a general sense for how they work. In understanding how contracts work, there are several conditions that need to be met for a valid contract to exist and these are generally referred to as contract law basics.

By Israel Sebenzo

Offer

The first aspect that validates a contract is the offer itself. Put simply, one of the parties must make an offer with the intent that the contract will be a binding agreement if signed. For example, record labels offer artists contracts to record a certain amount of music for a certain amount of time, in exchange for an advance and royalties, as well as marketing and promotion.

Acceptance

Once the offer is made, a party can then choose to accept an offer by assenting, with intent, to do so. This means that they must make a concrete action to accept, and they must be fully aware of the offer at hand. Acceptance can take many forms; signatures, verbal affirmations, and handshakes can all be valid. It is generally the most prudent, however, to have any formal agreement memorialized in writing. In some cases, emails can be legally binding offers and acceptances of agreements, be cautious of this.

Consideration

What each party brings to the table in an agreement must be something of value, and this piece is called the consideration. It can be money, or it can be the simple promise to do (or not do) something.

Legality

The terms of the deal must be within the scope of the law. If the parties have a deal
outside the legalities, the agreement would be considered invalid. In agreements that are not law abiding, if one party breaches the terms set forth, the other party would have no legal recourse. There was never a valid contract formed to begin with.

Capacity

The parties to the agreement must have the capacity to enter into it. For example, a minor under age may void any contract into which they enter because they are seen in the eyes of the law to be unable to make a rational legal agreement in some scenarios. This is always subject to the specific facts of the case in question.

Unilateral vs. Bilateral

There are generally two types of contracts: unilateral and bilateral. Bilateral contracts are probably the most familiar – these are agreements that are entered into by different parties, and they require some type of performance on the part of both. Unilateral contracts, on the other hand, require a promise from one party and performance from the other. For example, clicking a box to signify that you’ve read the terms and conditions on a website is entering into a binding, unilateral contract.

Interpretation and Definitions

Sometimes the terms of a contract can be ambiguous, in general courts try to discover the intent behind the agreement. Courts try as much as possible to adhere to what the contract actually says, as opposed to bringing in outside evidence. The definitions of terms within the agreement are also important. Many contracts contain a “definitions” section, which explicitly state what significant words mean with respect to the agreement. Other times, however, terms are simply defined within the flow of the writing, or left undefined. It is important to take note of any concrete definitions or ambiguities in any contract.

Breach

When a party fails to fulfil all promises made in an agreement, a breach of contract occurs. Courts may find evidence of either partial or full breaches, depending on the circumstances and terms of the contract. Breaching a contract comes with severe consequences and it is therefore important to honour agreements one gets into in the industry to avoid penalties and most importantly so, to uphold one’s reputation in the industry.

Power of Attorney

Power of Attorney gives a party the right to sign documents in place of another. It is common for creatives to give their personal and business managers power of attorney. Although this is common, it is however critical to only give power of attorney to someone you fully trust.