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Live Performance Contracts 2.0: Common Clauses

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Live Performance Contracts 2.0: Common Clauses

With the increasing legal complexities in the live performance industry, lawyers, agencies, promoters, managers and talent buyers have had to re-examine their template agreements and legal protocols related to performers and entertainment. Learn more about the intricacies of the live performance industry, the primary clauses within the industry’s agreements, how the industry is evolving, and how you can protect your clients in the industry.

Presenters

Lauren Spahn
Partner
Shackelford, Bowen, McKinley & Norton, LLP

Transcript

Lauren Spahn:  Hello, this is Lauren Spahn, and we are back with Live Performance Contracts part two. In the first part, we dissected the different types of agreements that are commonly seen in live performance space. Today we're going to do a deeper dive into the various provisions that we see in these agreements and what they mean. Because of the increasing legal complexities in the live performance industry, lawyers, agencies, promoters, managers, and talent buyers have had to re-examine their template agreements and legal protocols related to performers, venues, and live performances.

   Today we're going to learn about the intricacies of the live performance industry. The primary clauses that we see within the industries agreements, how the industry is evolving, and how you can protect your clients in the live performance industry. We're going to begin by first looking at how the main clauses associated with the live performance industry are commonly used and what's contained in them. We will then learn about the basic legal language in the agency agreements including force majeure, inclement weather, cancellation, insurance, and choice of law. And then we will finish by learning about the increasing legal complexities that the live performance industry is facing and what is being done about that.

   The first common clause that we are going to examine is force majeure. Force majeure is typically defined as an act of God or something that happens that is outside of the control and unforeseeable by either party. Typically, there are a number of examples that could classify as force majeure. Those examples are detailed in the contract language. Examples include acts of God, acts or regulations of any public authority or bureau, acts or threats of terrorism, riots, or other form of civil disorder, labor disputes including strikes, lockouts, or boycotts, shortages of energy or other essential services, failure of technical facility, failure or delay of transportation, death, disability, illness, injury, or inability to perform of artists or artists family members. These specific examples are commonly negotiated, elaborated on, or narrowed in scope within the Live Performance Contracts.

   Other examples would also include pandemic and epidemic both of which we'll get into further discussion on later in this course as we examine how COVID-19 has had an impact specifically on force majeure clauses. Now, in the various agreements, the force majeure clause will typically state that the performance may be canceled by either party due to causes beyond the reasonable control of the parties that would make the performance impossible or make the conditions for the performance hazardous. The provision would then go on to say that such clauses shall include and would list all, or some of the examples that we just discussed.

   Now, the key elements here are, who can make the call as to whether a force majeure event has occurred? Typically, we want language to include that both parties can make that call. Oftentimes you will see in the agency contracts that force majeure starts out as a one-sided provision that only the artists can make a call on. However, if you are the talent buyer or the venue, there are many things that can occur that would render a force majeure event. For example, if you're the venue and there has been a fire or explosion at the venue that was outside of the control of the venue and that fire causes so much damage that it renders the performance impossible such that the entire area that the stage is set up is demolished or a large chunk of the seats are demolished and the venue has hazardous conditions because of that fire, the venue is going to want to invoke force majeure event. They're going to want to be able to cancel the performance because of something that was outside of their control.

   The next key factor would be, what happens if force majeure is invoked? Do the parties have any further obligations to each other? Does the artists get to keep the deposit? These terms are often negotiated directly in the contract. Obviously, if you are the buyer and you invoke a force majeure event, you want to walk away without further obligation to the artist but you also want to collect your deposit money back because the event didn't happen. This is where the negotiations typically take place. The artist is going to want to insert language that says that if the artist is ready and willing to perform, that the artist should be able to retain the deposit and, or receive the full guarantee. Oftentimes this is negotiated in a way where so long as the purchaser has to refund tickets and the purchaser is not making any money that the artist has to refund any and all money received including the deposit and for it goes the right to collect the guarantee.

   Similarly, the two parties will often negotiate exactly what portion of the deposit has to be returned to the purchaser if the event's canceled because of force majeure. In certain contracts, you may see that if the artist has incurred documented non-refundable expenses such as nonrefundable plane tickets, or hotel charges, that they typically will be able to retain a portion of the deposit that equals those non-refundable expenses.

   Another common question here comes around, well, do we try to make the artists and the purchaser reschedule the date before the deposit has to be paid back? Oftentimes, the purchaser or the artist may try to require a time period in which the artist and the purchaser have to find a mutually approved reschedule date. And if that date cannot be secured, then the artists will be required to refund the deposit money.

   One of the key elements here is the type of event that's occurring. If the event is a once a year music festival that only happens in June of each year and had to be canceled because of force majeure, it's very unlikely that the event is going to occur until the following year. The purchaser often will not set a reschedule date for July or August or any other subsequent months. They will just completely cancel and have the event happen the following June.

   On the other hand, if you have a venue that routinely has shows and has to cancel the event because of force majeure, then they may have the ability to reschedule a few weeks, a few months later. The ability to reschedule within a short time period often allows the two parties to work together to find that mutually rescheduled time. The artist then retains the deposit and the purchaser will pay the remaining portion of the guarantee after the artist takes the stage at that reschedule date.

   The other key element in force majeure clauses is, the last element that I want to focus on in force majeure clauses is how we either broaden or narrow the definition and examples of what classify as a force majeure event. If we take the example of death, disability, illness, injury, or other inability to perform of artist, we can look at it from two different perspectives. If I'm the agency or the artist, I want this provision to be broad, to also include my family member, key personnel of my team and friends so that if someone close to me dies, that I have the ability to invoke force majeure and cancel the event without penalty to me. If I'm the purchaser, I want to make sure that this specific provision is limited so that the artists can only cancel if artist or a key personnel such as if it's a band, a member of the band cannot perform because of one of these causes.

   I want to be weary of any hardships that the artists face. However, I do not want to be out the money that I've spent in marketing and the venue and the individuals that I've had to hire in order to make the event happen if someone outside of the artist and their key family member or someone that's integral to the band has something happen to them. Another example would be failure or delay of transportation. If I am the artist, I want this to be as broad as possible such that if a flight is canceled and I do not have the ability to drive or secure an additional flight that would get me to the event on time that I can invoke force majeure. If I am the purchaser, I am going to want this to be narrowly tailored in such a way that that failure or delay makes it impossible for the artist to get to the performance in a timely fashion.

   If the artist booked the last possible flight to the show and did not provide for wiggle room such that they might've flown in the morning of, or the night before, I do not want them to have the ability to cancel the show and invoke force majeure. Again, for all the reasons that we just discussed in the cost and expenses that the purchaser would have to otherwise incur if the show is canceled.

   So these are just two examples of how we can narrowly define or broaden the scope of the examples listed within force majeure and how they can have an impact on what qualifies or does not qualify as a force majeure event. The key questions that we need to think about with regards to force majeure is, does the artists get paid? If we back up and we look at what happens if a force majeure event occurs, whether or not there is a reschedule clause in there, whether or not the artist gets to retain monies for their non-refundable expenses then that helps us make the determination of does the artists get paid?

   Again, we also have the key language of is artists ready, willing, and able to perform, but for the force majeure event. An example of this would be if the artist is onsite, at the event and a force majeure event occurs. The artists and their representatives would argue that the artist is there and the artist has incurred costs and expenses to get there, and that they should be paid in full because but for the force majeure event, they are ready, willing, and able to perform. If I am the purchaser however, if a force majeure event occurs and the show has to get canceled and I'm out-of-pocket for expenses, or I have to issue refunds, then I don't also to be on the hook for paying the artist the full guarantee.

   Another peak question is who makes the call to cancel the gig? This is why it's often important to have reciprocal and mutual language that allows either party to invoke force majeure if something occurs that's outside of their control that would render the show impossible or hazardous. If I am the purchaser and there is a global epidemic that would... If I'm the purchaser and there was a threat of terrorism to the area that the show was located in and that threat could cause injury and unsafe conditions for the patrons at the show, I may make the call to invoke force majeure for fear of safety of the patrons, the personnel, the employees, and the artist at the event.

   On the other side, if I'm the artist and there are riots or another form of civil disorder in and around the venue and I think that those riots would yield to an unsafe environment for me to play in, then I may invoke force majeure in fear for my safety and the safety for the individuals at the show.

   The last key question is, does the promoter or artists have insurance to cover its expenses here? Do those expenses include the artist's fee? We will get into the different types of insurance and what they cover later on in this discussion, but oftentimes whether or not an insurance policy covers expenses and covers the artist's fee will depend on the exact situation and whether or not it falls within the specific type of insurance that either party has.

   The next common clause that we are going to take a look at is inclement weather. Inclement weather is typically defined as rain, hurricane, tornadoes, high winds, electrical storms, or floods that are directly caused by the weather. When an inclement weather provision is invoked, it's typically invoked because the performance is unable to happen due to one of the weather elements that we just discussed in the event that that happens, the performance maybe excused on either party side.

   A typical inclement weather provision would state that the performance may be canceled by the artist if inclement weather occurs. And increment weather would be an adverse weather or climate condition like we discussed before that renders the performance to be hazardous and, or economically impractical, but often doesn't result in a government mandate evacuation or cancellation, which would then heighten the situation to the level of force majeure. So when looking at the difference of inclement weather and force majeure, we're looking at whether or not the event is truly being canceled because of the adverse weather condition or whether it's being canceled as a result of an after effect of a weather condition.

   In the scenario of inclement weather, either party can typically cancel but the artist, if they are ready, willing, and able to perform, will be able to not only retain the deposit but they will also be able to collect the guarantee from the event. This is especially true in the situation of an outdoor show where the purchaser is acknowledging and having an outdoor event that it is likely that weather can occur. It may rain, you may have a tornado or high winds that come through and if these types of weather conditions make it unsafe for the artists to perform at the event or for the patrons to attend the event then again, the inclement weather provision may be invoked.

   A few key questions to ask here, the first is, does the artists get paid? Again, this will depend on the information that is contained in the contract. If the contract says that artists must be paid the full guarantee then that's what is owed to the artist even if the purchaser is invoking cancellation because of inclement weather. Sometimes as the purchaser you may want to go in and make it so that only the deposit is able to be recovered by the artist in this situation, but it will all depend on the language that's contained to the contract.

   The second key question is who makes the call to cancel the gig? Obviously, the artist does not want to put themselves in an unsafe situation nor do they want to put their team, their band mates, the musicians in that type of situation either. On the flip side, the purchaser does not want to be liable for situations that may occur because of the inclement weather. They do not want to be liable to their independent contractors, to the patrons at the event, and so at the end of the day both parties are trying to balance what is in the best interests of the event and the artist and all of the attendees as a whole.

   So the purchaser may put in language into the agreement that states that they have the right to delay a show for a reasonable time period in the event of inclement weather. In that particular scenario, the purchaser would be making the call whether or not to try to delay the event. But ultimately, both parties are going to want to act in the best interest of the individuals and the people that are part of and attending the event and they want to make sure that they're not opening themselves up to liability by putting those individuals safety at issue.

   The third question is, does the promoter or artists have insurance to cover its expenses here and do those expenses include the artist's fee? So typically, a purchaser has inclement weather insurance. Inclement weather insurance may just be what we call rain insurance. It may also go as far as to extend situations outside of rain such as tornadoes, high winds, electrical storms, and hurricanes. So yes, the purchaser often does have this insurance in place. The artist may have it as well. At the end of the day, both parties don't want to be out a large amount of money because of inclement weather that occurs.

   So if I am an event who has an outdoor venue and I'm in a location where we typically have a lot of rain or we typically have tornadoes that come through, I am going to make sure that I have insurance in place that covers those types of scenarios. The artist's fee is often built into the insurance but it depends on the insurance policy and the specific language that is contained within the insurance policy.

   The last key question which I think is the question that's most often debated is, when is inclement weather considered force majeure? And let's take this specific scenario for example, if I am having an event in South Florida, an outdoor event in August and we're under a hurricane warning and I have to cancel the event because of a hurricane that is supposed to hit South Florida, would that be considered inclement weather or force majeure? Oftentimes people categorize hurricanes as force majeure because it's an act of God. But the key distinction between inclement weather and force majeure is whether or not it would have been foreseeable.

   I would argue that if the event is outdoor in South Florida at the height of hurricane season, that it is foreseeable that a hurricane could hit that particular area and cause us to have to cancel the event. In that scenario, it would be considered inclement weather. And so very likely, depending on the contract, the purchaser is going to be on the hook for the full guarantee because of the foreseeability of this situation. Taking the hurricane as an example, but now putting an event in Massachusetts in October, would it be foreseeable that my outdoor show in the middle of the state in Massachusetts at the end of October could have a hurricane take place that would cause me to have to cancel the event? In this situation, it is more likely that the purchaser would try to invoke force majeure.

   Again, the reason for this would be that it's not foreseeable and it's very unlikely for a hurricane to have large enough winds and rain to have to cancel the event in that particular geographic location and during that particular time of year. And so that would be a situation where the purchaser would say it was not foreseeable for this to happen at this event therefore I am invoking force majeure because this was an act of God that was outside of my control and wasn't foreseeable on my part. By invoking force majeure like we discussed before the purchaser is less likely to be on the hook for the artist's guarantee as well as other types of costs and expenses.

   The next clause that we're going to discuss is cancellation due to death or illness. Oftentimes, the agency agreements will contain a provision that says that an artist may cancel the performance if certain conditions are met that prevent artists from being able to perform. This would include artists illness or accident that renders them incapacitated from being able to perform. It could also include death or terminal illness of a member of artists' immediate family. It could also include essential crew members' illness or accident that renders the performance impossible.

   All of these provisions are typically negotiated, fine-tuned, made more specific so that the illness or the death or the accident would have to completely prevent the event or the performance from being able to be completed by the artist. If a artist video monitor employee is unable to make the event because of an accident that renders their ability impossible to perform at the show, it would be very likely that the purchaser would push back and say that the artist should be able to find a new video monitor individual to complete that specific task. And that that role in itself does not render the artist's ability to perform impossible.

   A lot of times this becomes a big question when there are multiple band members or when there are key musicians that are within the artists band or the artists performing members. And so again, that's why this is typically a very important point that is flashed out in specifics on the agreement. In this scenario, payments are typically refunded back to the purchaser. So any deposit that was made, any fees or expenses that they've paid directly to the artist but that opens up the big question of who's liable for costs or expenses that were incurred.

   So if the purchaser has incurred marketing, promotional, radio ads, costs and expenses that specifically were allocated to this artist and they have to then go out and redo all of the marketing, promotional, radio ad assets because they now have to swap in a different artist, is the artist responsible for those costs or losses? Typically not. Typically, the is only entitled to get their money refunded back to them and their money being the money that they pay directly to the artist. And from that point, both parties assume their own costs and expenses that are associated from that point moving forward.

   Another key clause that is found in Live Performance Contracts is indemnification and indemnification broadly details which parties will and will not be liable in the case of damages that are outlined in the agreement. Oftentimes the agency contracts are very one-sided when it comes to indemnification, they often put all of the responsibility of indemnification on the purchaser. And so a purchaser will often go in and make this language mutual as applicable. As in typical indemnification language, if something occurs because of a breach of contract by one party, or if an action occurs because of the negligence or willful misconduct of one party, that party will typically be responsible for indemnifying the other party for any claims or damages or expenses that are incurred because of that other party's actions. Here the question of negligence is often the most negotiated point and the purchaser and the agency will routinely try to define what actions would bring about indemnification of the other party.

   I typically see this divided into two categories. The first category is, indemnifying the other party against claims brought by third parties. This would include patrons at the event and whether or not either party is responsible for indemnifying the other when these third-party claims are brought about. A great example would be if a patron sues the artist because of a security issue or a unsafe condition at a show. So let's say that the venue, the purchaser did not adequately tape down wires that were on the grounds that the patrons were walking across and a patron tripped over a wire and broke their arm, that patron then decided to sue both the artist and the purchaser for their injury.

   In typical indemnification language, the purchaser in this scenario would be required to indemnify the artist because the artist had no wrongdoing here. The safety and security of the event and making sure that the conditions were safe for those that were attending was the responsibility of the purchaser. And by not taking adequate steps to tape down these wires, it was the fault of the purchaser and not the fault of the artist. And so the purchaser would be required to indemnify the artists from this particular claim.

   Now, on the flip side, if the artist is performing at the show and the drummer is throwing drumsticks into the audience and nails a patron who's in the standing pit in the eye and causes them to have an eye injury. Now, in that scenario, you have to have ask the question of who was responsible. It would be likely that because of the drummer who by default would be defined as part of the artist here, took a drumstick and threw it into the audience they would reasonably know that doing that could cause harm to someone, especially because there was a standing pit where people were standing up and closely congregated. In that particular scenario, the purchaser would require the artists to indemnify the purchaser because this action was due to artist's negligence. And so the third party claim that's being brought against both parties is due to the sole action of artists and not through the fault of the purchaser.

   So in that scenario, the purchaser would point back to indemnification language that put that indemnity burden on the artist in that scenario. So other than third party claims that can be brought against either party where indemnification is required, there is often language around damage or loss or expenses that are brought specifically by the artist or someone within the artist camp. This is often a situation where either the artist is personally injured. The artist has property damage. And so the claim rather than being brought by a third party is brought by the artist themselves. And the artist claims that these injuries occurred because of the fault of purchaser. Oftentimes these scenario cover safety concerns where the artist may get injured because of the actions or lack of actions by the venue. For example, they don't have a proper stage in place and the stage collapses and the artists or members of artists camp fall and have injuries.

   It could also cover a scenario where the artist as part of the contract requires that the purchaser have a room that's capable of being locked and that has adequate security around it in order to protect the artist equipment. If the equipment is stolen or damaged because the purchaser does not have adequate security in place, then the artist will often point to the indemnification provisions and require that the purchaser indemnify the artist from the expenses that they incur because of the damage to that particular equipment.

   Now on the flip side, the purchaser often will insert language into this scenario that says that the only way that the purchaser has to indemnify the artist in this scenario is if the damage or the theft was not because of artist's negligence. For example, if a lock room was provided but the artist did not actually lock the room when they walked away, then the purchaser would point to that action as a reason for why the theft or the damage occurred and claim that they do not have the responsibility to indemnify the artist in this situation. So obviously all of these scenarios depend on specific language within the agreement and it depends on the specific facts of the situation at play or the claim that is brought against the other party.

   The next common clause is choice of law. Choice of law typically details which state law is going to be the governing law that is used to interpret the contract in the event that there is a dispute. Oftentimes the agencies put in the location of their principal office as the choice of law. Sometimes the artist may have the choice of law as the state in which their loan out company is incorporated. Oftentimes the purchaser is going to push back and instead put in the state in which the event is taking place. And so this becomes a common point of discussion or negotiation in agency contract.

   A few key questions is the first deciding which state law is going to govern the agreement. Obviously, if I am the event, I want it to be the state in which the event takes place, potentially the state that the purchaser is their primary place of businesses. The reason for this is that the purchaser does not want to have to file claims in a state that is not where they're located. They don't want to have to incur the costs and fees associated with traveling to that out of state court in order to either bring a claim against the artist and, or defend a claim that's brought against them. They also will often be more familiar with the states in which the event is taking place. And so rather than having a contract that's interpreted by a state law that they are not familiar with, they will push to have it be the state in which the event takes place.

   The same argument is often used on the agency side. Obviously, they're the ones issuing the contract. They want to be familiar with the law that governs it, and they also don't want to have to encourage the costs and expenses to travel out state if they are bringing a claim or defending a claim. So the state that's listed or that's ultimately listed in the agreement is a very important component of really deciding where, when, and how claims can be brought against another party. And so it's an important thing to consider when taking a look at these contracts.

   The last key clause is insurance. We could take an entire session to just talk about out the different types of insurance that come into play and what level of insurance is required by each party, and who's liable if an incident takes place and insurance doesn't exist. Oftentimes the agency puts the burden of insurance and providing evidence of insurance and securing it with certain named parties on the... They put this burden on the purchaser and the purchaser routinely has to provide a variety of insurance including general liability, potentially weather insurance like we discussed above. And there are thresholds for claim amounts for these types of insurance policies. The artist also typically requires that the purchaser name the artist as well as other entities and, or individuals on the insurance certificate and that the insurance certificate is provided to the artist before the event to show that the artist has taken these steps and gotten all these things in place.

   There are a variety of insurance types, workers comp, automobile, pyro, rain, event cancellation, non appearance, etc. So there are a number of things to consider. It is very, very important that the purchaser has an experienced broker in this field so that they can make sure that they have the insurance policies in place that will protect them in the event of the cancellation due to inclement weather or force majeure or any of the scenarios that we previously discussed.

   Some key questions when deciding what type of insurance to get the first is the size of the event. Obviously the larger event, the larger amount that you're going to want to have the insurance cover. The same with the types of artists that are performing at the event, if you're getting not appearance or cancellation insurance that covers the artist's guarantee, the size of the artist and how much you're paying them is a big factor in what that insurance policy looks like.

   Also, what are the relevant exposures. Like we discussed in the inclement weather scenario, if I'm in Florida and I'm having an outdoor event during hurricane season, I definitely want to make sure that my insurance covers that scenario but if I am in the middle of Massachusetts and my event's in late October outside of hurricane season then that may not be on my radar as much. So as you're looking at these questions, the relevant exposure, the size of the artist, the size of the event, it makes you consider the type and the total amount of insurance you need in place because if a typical slip and fall tenders $100,000 claim then you have to think about how soon will you run out of insurance and what happens after that.

   Now that we've covered a number of the primary and key clauses in Live Performance Contracts, I want to take a few minutes to discuss how COVID-19 has had its effect on the live performance industry. Many festivals and live events were planned and paid for months in advance. This is on both sides. A lot of artists incurred costs and expenses relating to travel and transportation and hotels and securing to tour buses and things like that in order to plan for, and make the live events that were on their schedule, festivals, incurred marketing, promotional, insurance, artists deposits, independent contractor fees for sound, light production, you name it, right? They had a number of expenses that they had already paid for as well. And so the question was left with who's carrying the back? Who is going to be responsible for these costs expenses?

   The question or the answer to that question often depended on how the force majeure clause was drafted. Did the force majeure clause contain pandemic or epidemic in it? Did the clause cover local or state mandated actions? Did the area that you were in or that your event was taking place, was there a state or local act or mandate in place that would allow you to point back to that particular cause? Again, people were relying on the language that was in their particular contract to decide who was responsible and what was supposed to happen if the event had to be canceled. Did the artists have to refund the deposit? Did the parties have to find a mutually rescheduled date? Were they even able to invoke force majeure? All of these things came down to the language in the contract. Fortunately, all parties were majorly impacted by COVID-19 and their ability to have any types of shows. And so for my experience, I found that people, instead of trying to take legal action against each other were trying to work together to figure this out.

   We are still navigating COVID-19 and its impact in the live performance industry. We still are seeing developing issues in the contracts. There are a number of concerns and considerations on the purchaser side, if they have any type of restrictions over the number of people that are able to be at the venue, whether or not they have to operate at full capacity, half capacity, whether or not there's poor ticket sales due to people not feeling comfortable and coming to a show. All of these topics are things that are being discussed between all the parties that are involved in the live performance shows and is still developing.

   So COVID-19 has made us look harder at our contracts, look harder at the cancellation provisions, at the force majeure provisions in order to make sure that our clients are protected, whether our clients or the agency, the venue, the buyer, everyone has taken a hard look at these contracts in order to foresee how they can protect themselves in the future.

   So as you all can see, there are a number of clauses to consider. There are a number of scenarios to consider and to make sure that are covered within your agreements. And so it's important to look at the language within the common clauses we discussed and really all of the different paragraphs within the live performance contract because simple tweaks to the language, making something more specific, adding a word such as pandemic or epidemic, restricting liability in certain scenarios can really have a big impact ultimately on how the contract is interpreted and enforced and can either be a great detriment or a great protection for your client.

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