Contract Deal between a Rock Band and a Recording Company - Essay Example

Legal Advice (Author’s name) (Institutional Affiliation) Subject - Contract deal between a rock band and a recording company You have sought my advice on the best arrangements for managing your career as a rock band, and in particular how you ought to structure your financial and business interests as a record company wants to sign your group to a specific three album deal, which is to last for three years. Background The rock band is an emerging group with four members. They are considering their options before signing a record deal with a recording company to a specific three album deal, which is to last for three years. Advice Introduction to Contract law A contract is a promise or set of promises which the law will enforce (or a legally binding and enforceable agreement or agreements). It is a creature of the common law, meaning that we need to refer to precedent cases to interpret it. (Angela Taguz v Rebecca Sullivan %& Ors (2000) 50NSWLR 236 p345). According to Statute of Frauds 1677 (Imp), The contract must be in writing as required under the or would be considered void and it does not need to be a formal document, It must contain the names of the parties, subject matter, consideration and signatures of the parties who wish to enforce the contract, To translate a document, including explaining technical terms; To explain an ambiguity; and To demonstrate that a designation is false1 The band should therefore consider having the contract with the label company in writing and duly signed by all the members stating the period through which the contract will run. Elements of a contract: 1. Intention- Proving this exists is not considered necessary where there is commercial activity. 2. Agreement- This is sometimes described as a “meeting of minds. It must be communicated to the other parties intending or intended to be bound such that each is clear on what has been agreed. It does not require a clear and unambiguous declaration but it does require at least two parties, an offer and a free acceptance of that offer. An offer must be distinguished from an “invitation to treat” (such as price lists, circulars and catalogues) and an option, an offer must be communicated and can be revoked at any time before accepting (Dayton, 2003). Accepting an agreement must represent A “meeting of minds. Must be in reliance on the offer (R v Clarke), that is, the recording deal. Must be complete and unqualified (Gilbert J McCaul (Aust) Must be clear and certain- the agreement must not be ambiguous. 3. Consideration- Money or money’s worth, and is required for a legally binding promise, or put more simply – “something for something”. 4. Legal capacity- there parties not eligible to contract: Minors –under the age of 18. the mentally ill intoxicated persons 5. Genuine consent- Must be freely given. Competition and Consumer Act 2010 (Cth) Section 18 also applies with respect to misleading or deceptive conduct 6. Legality of objects- Any contract which has as its objects those prohibited by law is void under both statute and case law Since it is clear what the intentions of the parties are, it will be in order if it is spoken out for confirmation to determine whether both parties understand what they are getting into. The ages of all band members should be verified to avoid a situation where the contract may be considered null and void as it has been entered into with a minor.2 Types of contracts Employment contract- can be where you work for someone on a salary or wage or where you are under a contract to provide a particular service, usually of short term duration. Terms of a contract The terms of a contract are the first point of reference when attempting to interpret the obligations of the parties to the contract such as deliverables, specifications and prices. Terms are binding on the signatories. Terms must be differentiated from: The difference between Conditions and warranties is; Conditions are terms which are vital to repudiate the contract and to treat their obligations under the contractual agreement /or to sue for damages for loss suffered as a result of the breach Associated Newspapers Ltd v Bancks (1951) 83 CLR 322 p472). Warrants are lesser or minor terms which are subsidiary to the main purpose of the contract. If breached, the contract does not come to an end, with the injured party still required to perform their obligations under the contract, but with them having the right to sue for damages for loss suffered as the result of the breach of warranty. (Associated Newspapers Ltd v Bancks (1951) 83 CLR 322 p472). The band members should seek clarifications on the vital elements of the contract breach of which may result to termination of the contract. They should also be keen to determine implied contracts that they may be entering into that may not be spoken out loud by the recording company. Vitiating Elements: 1. Mistake- It can be a common, mutual, unilateral among others.(David Securities Pty Ltd v CBA (1992) 175 CLR 353 p526). 2. Undue Influence- Where a person makes an agreement in absence of a free and deliberate judgment, the equitable doctrine of undue influence may allow the agreement so reached to be set aside. 3. Unconscionable contract - Those in which it can be proven that unfair advantage has occurred (Commercial Bank of Australia v Amadio (1983) 151 CLR 447 p435/6). 4. Misrepresentation Situation where the parties have not really agreed that is there is no “meeting of minds or wills”. It can be innocently, fraudulently or due to negligence. 5. Performance- it implies that it is a mutual obligations of the parties to perform efficiently in strict accordance with the contract terms, leaving nothing outstanding. It may be accomplished in either of two ways (terms of the contract): By payment of money, can be: absolute, in which full payment in legal tender ensures the debt is discharged Conditional, in which the payment is made by other means, such as by cheque or money order. (Godfrey v Sevenoaks (1957) WN(NSW) p487). By payment of other than money Legality of Object and Termination of Contracts Illegality, if present, the contract is prima facie void at common law and/or on grounds of public policy. It may also include Discharge by operation of law such as when there is breach of statute (for example, the Bankruptcy Act.(re Moore & Co Ltd and Landauer & Co [1921] 2 KB 519 p503). Band members should therefore avoid getting into unlawful activities that will lead to termination of their contract. Discharge by agreement- It involves the entering into of a further agreement which terminates the original one. This further agreement may be to: Cancel the original contract 3 Vary the terms of the original contract (Noble v Ward (1867) LR2 Ex 135). Frustration- According to Frustrated Contracts Act 1978 (NSW), an unforeseen event can result in a party to the contract being unable to perform in such a fundamentally different situation that the law regards them as being discharged from any further obligation under the contract. Breach by one party may entitle another party to regard themselves as being discharged from performance. This largely turns on whether the term alleged to have been breached is an essential term, and not a warranty. (Bettini v Gye (1846) 1 QB 183 p473) Remedies are the redress available to the innocent party where there has been a breach of contract, and can broadly be divided into two categories where: Damages- Exemplary damages can be awarded- are not only awarded as a means of compensation but to punish the party in default).As a general rule, damages are not recoverable for disappointment, distress, injured feelings or mere inconvenience. (Dillon v Baltic Shipping Co “Mikhail Lermontov” (1993) 176 CLR 344). Injunction- is an order of the court restraining a person from doing a wrongful act. In contract law, this means prohibiting a party from breaching contractual obligations. Contributory negligence is a defence to actions for breach of contract and acts to negative the claims of the other party, either in full or in part, depending on the circumstances. The court apportions damages recoverable in tort actions according to what it judges to be the “fault” of the party. (Wallis v Smith (1882) 21 ChD 243 at 267) Restitution- It may be an amount equal to money paid or the value of goods or service supplied, in which case, the court will assess them based on quantum meruit (as much as he earned).(Pavey & Mathews Pty Ltd v Paul (1987) 162 CLR 221 p527). Business entities: Entities through which a business can be carried on. Examples: An individual (sole trader) Partnership- Section 4 rules: things which don’t, of them, create partnership. Franchise- Attractive to those with little business experience Agency- The agent of the principal so as to affect the principal’s rights and duties in relation to third parties. The band members can appoint a manager who will act on their behalf if need be and get into contracts in the future on their behalf. I would recommend the agency. An agency will offer the band members increased expertise/ resources, as the agent is dedicated to this role and will carry it out to completion and dedicate time to ensure the principle is satisfied. At the same time, an agency will have time for the band members as they can completely focus on what their major role is. Finally, there aren’t many formalities required in the formation of the agreement. It is a simple principle-agent agreement signed between the two parties. However, agency agreements also have disadvantages. The band members will have to bear liability for acts of the agent as long as he was acting on their behalf. The band members will be liable even where the act is unauthorised. Reference Dayton, E. (2003). Legal advice: A compendium of law. Sydney: Marlborough. Read More