What are some of the common provisions – in addition to the key points – that music creators will encounter in the contracts they sign?
Please note: The information provided on this site does not, and is not intended to, constitute legal advice. Instead, all information, content, and materials available on this site are for general informational purposes only. Be sure to consult with a legal expert before signing any agreement. (See where Canadian music creators can seek free or affordable legal counsel.)
Regardless of the type of contract a music creator signs, it will usually contain—beyond the key points—a fair number of additional terms and clauses that thoroughly address other important aspects of the deal. These may include some of the following:
A termination clause outlines the circumstances under which either side may choose to break off the deal, and how the music creator’s compensation and the other party’s ownership of the rights in the musical work (if applicable) would be affected as a result. Valid reasons for termination often include a significant breach of contract or the failure of either party to fulfill their contractual obligations.
If the deal entails the creation of a new musical work, the creator should ensure that the contract provides that they’ll be paid for all the work they’ve done on the project up to the date of termination. So, practically speaking, the contract should state that any fees that have been invoiced and are outstanding at the time of termination must be paid. Additionally, if work has progressed beyond any dates or “yard posts” that have already been invoiced, the next invoice should be payable on termination as well.
The other party will also wish to ensure that the agreement provides that they will retain any share of the rights and other benefits associated with the partially completed work that the creator may have granted them.
“Force majeure” means “greater force,” and this type of clause is intended to excuse either party from any liability associated with a failure to fulfill (or a delay in fulfilling) their contractual obligations due to factors beyond their control and foresight.
These commonly include natural disasters (“acts of God”), riots, wars, pandemics, labour disputes, supply-chain interruptions, and many other influences. The clause may also detail how the agreement may be terminated due to these factors and/or how it may be resumed once they are resolved.
A reversion clause outlines the conditions under which the other party’s full or partial ownership of the copyright in a musical work or works may be transferred back to the music creator.
Reversion language may be useful in production contracts/composer agreements that provide for assignment of copyright. For example, the creator might bargain for a clause that provides that if the back-end revenue generated by the use of the music doesn’t meet a minimum threshold over a set time frame, the creator may then invoke reversion. It should also be noted that creators should stipulate in their agreements that the rights in any works that are pitched to, but not used by, a production shall be retained by the creator.
Canadian copyright law also provides for statutory reversion 25 years after the death of the creator, at which point the ownership and control of the copyright automatically revert back to the writer’s estate. This is known as the “reversionary right,” and reversion occurs regardless of whether or not it’s referenced in the contract. (While US copyright law does not include such a reversionary right, it does include a “termination right” that allows a writer to reclaim copyright ownership and control from a music publisher 35 years after assignment, provided certain conditions are met.) However, creators should be aware that agreeing to the inclusion of “work for hire” or “work made in the course of employment” language is likely to prevent the application of statutory reversion. It is therefore imperative that creators reject the inclusion of these terms in their agreements.
Representations, Warranties & Indemnities
Simply put, representations are statements made to help convince one party to enter into an agreement with another. Warranties are guarantees, written into a contract, that the representations are, in fact, true. And an indemnity is a commitment made by one side to pay for any damages, claims, or other costs incurred by the other side if the representations and warranties prove to be untrue.
In the contracts that music creators often sign, both parties “represent and warrant” that they have the right and authority to enter into the agreement. The creator may also warrant that the musical work in question is a completely original creation, which they fully own, and that they have the power to grant any rights associated with it to others. And best practice is to ensure that both parties subsequently “indemnify” each other from the financial repercussions that may result from breaching their representations and warranties, rather than only one party doing so.
This fairly standard clause is intended to provide assurance to the client or licensee that the music creator will not have any right to seek to interfere in any way with the production in which their music is being used. This includes seeking an injunction from the courts to prohibit or prevent the distribution or broadcast of the production. Rather, in the event of a breach of contract by the producer, the only remedy available to the creator will be financial compensation (commonly referred to as “damages”).
This clause may also provide that any disputes arising between the parties shall be sent to arbitration for resolution (and not to the courts).
Sometimes also called “Governing Law” or “Choice of Law,” this section clearly identifies which region’s laws (usually a province or territory in a Canadian agreement) shall be used to interpret the contents of the contract and resolve any legal disputes.
Accounting & Auditing
These clauses often stipulate that the contracting parties must keep accurate and complete financial records related either billing or payment. They further state that the creator and/or their representatives will have periodic access to the other party’s pertinent financial records for auditing purposes, in order to verify that any payments provided to the creator are accurate (particularly where the other party is collecting revenue that it’s obligated to share with the creator). They may also require the other party to bear the cost of any audit that shows the creator has been underpaid by a minimum percentage or amount.
Most Favoured Nations
The term “Most Favoured Nations” (often shortened to “MFN”) originated in international trade, but it simply means that, when one party enters into agreements with multiple other parties for similar products or services, they should all be treated the same.
Music publishers and self-published music creators may negotiate the inclusion of MFN clauses in sync agreements and other licensing deals for a couple of reasons:
- To ensure that the fee they receive for the use of their musical work is the same as the master-use licence fee paid to the owner of the sound recording of the work, if applicable. (And vice versa, the owner of the sound recording is also likely to require that the master-use fee be MFN with the sync fee.)
- In some cases, to ensure that the licence fee they receive for the use of their musical work in a project is equal to the fees paid to any other licensors (i.e., creators and publishers) whose works are also used in that project.
MFN clauses aren’t necessarily restricted to matters of compensation either. Favourable terms often include factors like the territory covered by the agreement and the duration of the contract.
Work Made in the Course of Employment, Work for Hire & Buyout Clauses
On occasion, a client may seek to include a clause in a contract that’s not applicable to the music creator or that isn’t recognized under Canadian copyright law. (Sometimes, this happens because a boilerplate agreement is being used for all crew members—but because these contracts don’t sufficiently address music creators’ specific needs or demands, they need to learn to recognize them.) The most important ones for creators to be aware of and understand are “work made in the course of employment”, “work for hire”, and buyout clauses.
If a creator writes a musical work as an employee, the Copyright Act of Canada considers it to be a “work made in the course of employment”, and the employer—not the creator—is deemed to be the author and, therefore, first owner of the copyright in the work. In almost all cases, however, music creators are not employees (who receive a steady paycheck, benefits, paid vacation, have their equipment paid for, etc.) but rather independent contractors. Therefore, they should refuse such language as inapplicable and demand its removal from any agreement they intend to sign. Read more about “work made in the course of employment” and the differences between employees and independent contractors.
The Copyright Act does not currently address what happens to creators’ rights in the face of full-buyout demands. Nevertheless, music creators may be presented with a contract that includes a buyout clause or a “work for hire” clause. It is extremely important that creators understand that accepting either may be interpreted as the creator agreeing to assign the full copyright in the musical work—and all associated rights—to the client in exchange for a one-time fee (and with no additional compensation). Since “work for hire” is not a legal concept recognized under Canadian copyright law, the creator can and should demand the removal of such language from their contracts. This is also the case in most other countries—except for the United States, where “work made for hire” is a statutory provision of the US Copyright Act.