SEALED WITH A "KISS" - Nigerian Music Industry Contracts

Introduction

Introduction

Is an 'unfair' contract illegal or invalid?

Can an artist quit a contract if a lawyer didn’t look at it on his/her behalf?

Does a label have an obligation to secure/approve features (both inward and outward) for its artist?

These and many more questions have been floating around in the ether in the wake of the ongoing Kiss Daniel and G-Worldwide Entertainment Ltd (G-Worldwide) contract dispute.

Based on available media reports and statements from the parties the pertinent facts are that Kiss Daniel entered into a seven year agreement with the entertainment company, but then a few weeks ago - whilst the agreement still subsists (according to G-Worldwide) - he unilaterally announced his termination of the agreement and the launch of a new music company under which he would be releasing his future recordings.

In light of the inevitable attention this case is receiving, it has presented a useful opportunity to reiterate the importance of understanding the terms of agreements and more importantly the ramifications of same, BEFORE signing on the dotted line.

The importance of such understanding cannot be overstated given that once pen is put to paper, it is in most circumstances almost impossible to undo - and even where a good attorney can conjure some 'magic’, this is usually at a significant financial cost.

This article explores the various grounds on which contracts can be unilaterally terminated, or declared void by the courts, and the importance of having specialist legal advice and representation during the negotiation of agreements.

Termination for Breach of Contract

The most common instance in which a party can unilaterally terminate a contract is where the other party has materially breached a condition of the agreement and, after being notified of said breach by the non-offending party, has not rectified same within reasonable time.

Without knowing the exact terms of the agreement one cannot say what G-Worldwide’s obligations are, nor if/how said obligations were not fulfilled. However, the usual obligations of a music company in a recording agreement with an artist include paying the artist an advance, marketing/promoting the artist and their recordings, and providing tour support or sponsorship.

Music companies usually prepare the agreements between themselves and their artists and as such generally include provisions - such as 'reasonable endeavour' terms - that offer some contractual protection.

Furthermore, where a party wishing to unilaterally terminate has commenced steps to do so, the offending party would normally then make one or two (superficial) gestures - simply to prevent the right of termination from becoming exercisable.

Duress/Undue Influence/Restraint of Trade

In a situation where a party to an agreement has been pressured, threatened or coerced into entering an agreement, a court can be persuaded to nullify a contract.

However, to convince the court, the party alleging the coercion must place strong enough evidence before the court as a mere allegation is not enough.

Likewise where it is a case of a party to a contract taking advantage of the other party, such instances of undue influence are also capable of rendering a contract void from the outset. However, each case must be assessed on its merits taking into account factors such as the relative bargaining power of the parties to each other and market competition.

As an aside, it should be noted that the much cited UK decision in the 1974 case of Schroeder Music Publishing Ltd v Macaulay - as the authority for courts dismissing contractual restrictions on these grounds - was based on a distinguishing set of facts.

One of said facts was that under the agreement - which was a non-neogitated standard form agreement - Schroeder (the publisher) had no obligation to publish or promote Macaulay’s works after it had taken sole control of them. This meant that despite Macaulay having no right to license the works himself, Schroeder had no corresponding responsibility to maximise their licensing activities in respect of the works. The court deemed this as an excessive restraint of trade and thus unenforceable.

It would be a different case entirely where the agreement has been subject to negotiation, the publisher/label has made expenditures and actively marketed its acquired works, and remunerated the authors/artists - however small one may deem such remuneration. In such circumstances the Schroeder decision would very likely not apply.

Where agreements have contained restraints on trade, courts - in deciding the enforceability of such provisions - have generally looked at factors such as the proportion of the restriction when compared to the purpose/objective of the restriction. If deemed disproportional or unreasonable it will likely be unenforceable.

Nigerian Courts and Music Contracts

Although there is not much jurisprudence in the Nigerian legal system in relation to breach of contract issues in the entertainment sector, decisions and rulings in the few cases/applications that have arisen in this specific area show that our courts are generally inclined to follow the established principles relating to such disputes.

As far back as 1975 in the case of African Songs Limited v Sunny Adeniyi (aka Sunny Ade) wherein the court upheld what was arguably an extremely unfavourable agreement to Sunny Ade - albeit Sunny Ade was able to recover his master tapes and damages after the Federal High Court (FHC) declared that the agreement had expired. Another example is the more recent 2013 case between Brymo and Chocolate City (CC) where the court was inclined to grant CC and injunction preventing Brymo from engaging commercially in music without CC’s approval in light of a subsisting agreement between the parties.

Given the decisions of Nigerian courts over the years on such contractual issues in the entertainment business, it is unlikely that a court will interfere with the terms of a contract especially in the absence of any substantive evidence of duress, undue influence, fraud or misrepresentation. In the case of a purported termination it would have to be shown that such termination was not in accordance with the contract terms and is as such invalid.

It will thus be for G-Worldwide to establish that the purported termination is invalid and of no effect, whilst on the other side Kiss Daniel will have to prove that terms were breached and as such his right to terminate the contract has arisen and become exercisable.

Curiously, Kiss Daniel - through his legal representation - yesterday issued a statement in which it was stated that he had previously filed a suit against G-Worldwide at the State High Court (SHC). According to the statement the said suit was still pending and G-Worldwide had entered appearance and filed court processes in the matter. Questions then arise as to why G-Worldwide brought an action at the FHC as opposed to addressing what is substantively the same issue in the ongoing case at the SHC?

This also raises issues of forum jurisdiction ie which court - whether the FHC or SHC - is the appropriate forum for such disputes. The general position is that copyright related disputes are heard exclusively by the FHC and contract disputes are heard by the SHC.
It is thus likely to continue to be a feature of music industry contract disputes that the breach and validity aspects of the agreements are heard at SHC whilst the copyright aspects are determined by the FHC.

Importance of Competent Representation

The brief overview of the legal landscape in relation to resolving disputes that arise from music contracts should serve to underscore the importance of parties seeking and obtaining the best possible legal advice to guide them through the negotiation process and terms.

With the Nigerian entertainment industry reaching a critical stage in its growth trajectory - coupled with the need for increased levels of investment in the sector to spur the next stage of growth - it is imperative that the sector secure the confidence of the investment community.

Such confidence is severely undermined by a seeming lack of respect for contractual obligations and a disregard for honoring agreements in good faith. Investors cannot be expected to take the necessary financial risks if they are not assured that their 'investments' will not just one day (still during the term of the agreement) simply decide they’ve had enough and walk away.

On the flip side, artists can avoid entering into detrimental agreements that they will not realistically be able to adhere to and that are overly one-sided. It is better to go into agreements with both eyes open. Even if the agreement is more favorable to the other party, so long as the artist is aware of where all the dangers lie, it is more acceptable than otherwise.

Conclusion

With the right legal advisors artists can negotiate for more tangible performance obligations for the label. Obligations related to issues including features, marketing budget and expenditure commitments, milestone royalty escalations, and tour support/sponsorship minimum guarantees amongst others.

Provisions in entertainment agreements (and IP agreements in general) are extremely fluid and have a wide variety of negotiating options as compared with traditional contracts.

Terms can thus be negotiated and structured in such a way as to ensure that both parties benefit or at the very least that neither party suffers too adversely under the terms. Either way, the likelihood that the contract will be fully performed by both sides increases exponentially.

Competent and specialist legal representation must therefore become standard practice for parties negotiating and entering into deals on the music industry and wider entertainment sector as a whole.

It is the integrity of these transactions that form the basis on which all the talked about growth is built. Good legal advice for both parties will strongly increase the likelihood that parties can fully perform their obligations and contracts run their course without always suffering abrupt and premature endings.

Although the G-Worldwide Kiss Daniel saga has raised a number of other issues, such as who owns his image rights — including his name and likeness, amongst others, those are beyond the scope of this piece - however they are also pertinent in the ongoing dispute. Save to say that where possible (independent) artists should find a way to trademark their stage names before entering into agreements and then licensing same to any potential labels or other investors as part

If nothing else, this dispute has raised awareness amongst entertainment industry business owners and entrepreneurs. Contracts are very serious matters and the terms of same can determine the trajectory of an artist’s career, so significant care and attention must be given to negotiations and agreeing to enter into any agreements.