Businesses enter into contracts each and every day. Contracts are formed when customers make purchases, when suppliers deliver materials, or when contractors place orders. Contracts are a critical element when it comes to operating a business, and when contracts are not honored, disputes arise.

What Is Required to Form A Contract?

A contract requires five basic requirements, and if any one of the requirements is missing, no legal contract can be formed. The requirements for a contract include:

1. Parties Capable of Entering a Contract. The parties to the contract must be legally capable of entering the contract in the first place. This means that each party to the contract must be fully aware of what they are doing by entering the contract and must understand what the contract means. As a general rule, minors are not legally capable of entering into a contract due to their inexperience, nor are individuals who are considered insane capable of understanding what it means to enter a contract.
2. Offer and Acceptance. In order for a contract to exist, an offer to contract must be made by one party, and the offer must be accepted by another party. The offer must be clear and the acceptance must be definite and unqualified.
3. The parties must exchange something. Each party makes a promise to the other or gives something of value to the other party. The consideration does not necessarily have to be fair or proportional: one party could agree to pay a single dollar in exchange for a motor vehicle, and so long as both parties agree to that arrangement, it can be binding. Consideration could also take the form of not doing something, or foregoing something a party normally would do or has a legal right to do, such as waiving certain rights. This is sometimes referred to as “bargained for exchange” or “bargained for detriment”.
4. Legal Purpose. The contract must be for a legal purpose. To say this another way, the contract cannot violate the law. The parties cannot negotiate terms for the contract that break the law, or are illegal.
5. Mutual Assent. Both parties to the contract must have a meeting of the minds, meaning both parties have a similar understanding of what the contract means, and both agree to be bound by it.

If any of the above requirements is lacking, then it is unlikely that a contract has legally been formed. Furthermore, specific types of contracts might have additional requirements in order to successfully form a valid contract. For instance, for many types of contracts encountered in business, the contract must be made in writing, identifying key terms of the contract, and signed by both parties. For instance, California Civil Code Section 1622 notes that all contracts can be made orally, unless the contract is specifically required to be made in writing by law.

Additionally, certain states may impose additional requirements for a contract to be legally binding and valid, and these laws should be taken into consideration if a specific state’s laws govern the contract.

These elements are fairly straightforward, yet when a contractual issues do arise it can be very difficult for the parties to understand and navigate the legalities in contract law.  Please contact our office if you are facing a contractual issue, dispute, or simply have additional questions relating to contracts.

On Monday, May 11, 55-year-old Craig Stevens of Newport Beach pleaded not guilty in a scheme allegedly designed to bilk investors out of more than $4 million by selling ‘bogus’ In-N-Out Burger franchises in the Middle East, according to an LA Times article.

Stevens, who was in federal court in Santa Ana, pleaded not guilty to wire fraud. Prosecutors allege that in January of 2014, Stevens contacted potential investors via email, peddling the franchises for approximately $150,000 per location. Royalties would cost an added $250,000 annually, according to the article.

Charge documents filed by the U.S. attorney’s office claim that through his email scheme, Stevens solicited about $4.27 million. Court documents also allege that in June of last year, Stevens passed off a fake licensing agreement for an In-N-Out franchise via email to a Lebanese investor, who was not identified.

While Stevens made claims to investors of partnerships and franchise agreements, In-N-Out Burger Inc., based in Irvine, has been in business since 1948 and is privately owned. The company says it has no such agreements with third parties. Stevens is scheduled to go on trial on the wire fraud charge in July.

As seasoned Los Angeles business attorneys, it is sometimes difficult to believe how gullible some individuals are, particularly when it comes to email or other schemes on the Internet – but it happens every day.

Before you invest in any franchise, it is vital to have a skilled attorney review all agreements, restrictions, rights, purchase or sales agreements, and other relevant documentation regarding the purchase of a franchise. Franchise law is complex, particularly given the fact that so many businesses are crossing into countries outside of the U.S. today.   Franchises are also subject to numerous regulations, so it is essential to have every detail analyzed with a fine-tooth comb.

If you’re considering investing in a franchise opportunity, speak with the professionals at Spotora & Associates first.

There are a lot of challenges and unknowns when getting a new business venture off the ground. Am I ready for this launch? How long will it take me to recoup my capital? When will the customers begin rolling in?

If you are operating the business with a partner, one of the things that can save you a lot of headaches later on is putting together a partnership agreement. A partnership agreement clearly outlines each partner’s responsibilities and rights, therefore preventing disagreements in the future. It is not uncommon for disagreements between partners to sink new business ventures, destroy friendships and cause long, drawn-out legal battles.

A partnership agreement can be tailored to each venture’s specification, yet they all should include a section detailing each partner’s individual job duties. Consider life without a partnership agreement: If each party is under the impression that the other person is handling a particular task and it is not completed, the new business venture can crash before it has a chance to get off the ground.

“This legal document can minimize the number of risks that new business ventures face, creating a better chance for success,” said Anthony Spotora, a Los Angeles-based business and entertainment lawyer. “Included in the agreement are specifics on what authority each partner has when it comes to borrowing or lending money, buying supplies, executing lease agreements or entering other types of legal contracts.”

Perhaps certain business transactions can only take place with the consent of both partners. Perhaps Person A exclusively handles the purchasing of supplies while Person B exclusively handles the hiring of new employees. Whatever the arrangement, it is important to make the rules of the game clear to all.

The partnership agreement might also want to include procedures if one partner wants to leave or passes on, how profits will be shared, how an additional partner would be added, management responsibilities, how each partner contributes cash flow, management restrictions and other decision-making protocol.

Each state has a uniform business partnership law, but a partnership agreement can override this law to suit your particular needs. A partnership agreement is a small investment in time and resources that can often mean the difference between success and failure.

There is a lot to consider when putting together a partnership agreement so it is best to consult an attorney with experience in such matters.

To learn more, visit https://www.spotoralaw.com/

Have you ever seen this brief legal ditty? Sure you have. And whether you know it or not, you likely accept contracts containing this language on a weekly, maybe even daily basis.

Ever valet park your car or use the services of your local dry cleaner; or, maybe you have attended an amusement park? Well then, without signing anything, you have just entered into an “adhesion contract”.

Adhesion contracts are contracts between two parties that do not allow for negotiation — it’s take it or leave it! However, can you realistically leave it? What would your options be anyway? Should you park your car elsewhere or take your clothes to a different cleaner? Won’t you just be faced with the same issue there? And what about that pocket size agreement? Will it really limit their liability? I mean really, who can even read that boilerplate it’s so small?!

And how about the long-form adhesion contract that you actually sign; a residential lease agreement, for example? Were you afforded the opportunity to negotiate its terms or, did the landlord stand in a position of such superior bargaining power that you signed it, knowing also that it would not be any different down the street?

Theoretically, the common debate relating to contracts of adhesion have reasonably focused on whether or not courts should enforce them. On the one hand, they undeniably fulfill an important role of efficiency in the marketplace. These standard form agreements can substantially reduce transaction costs by eliminating the need for buyers and sellers to negotiate the terms of every sale of goods or services. However, they may also consequently result in unjust terms being agreed to by the accepting party. Few would disagree that it is simply unfair for the seller to avoid all liability or to unilaterally give themselves the right to terminate the agreement.

So then, are these contracts enforceable?

In common law jurisdictions, these standard form agreements are treated like any other contract and a signature or other manifestation of acceptance and intent to be legally bound will bind the acceptor. This reality, however, has caused for many common law jurisdictions to develop special rules that govern such situations. As a general rule, courts in these jurisdictions will interpret the standard form agreement contra proferentem which, literally means — ‘against the proffering person.’

Most of the United States, however, follows the Uniform Commercial Code which, similar to the common law jurisdictions mentioned above, has provisions relating specifically to standard form contracts and; when a standard form contract is found to be a contract of adhesion, it is given special scrutiny.

For a contract to be treated as a contract of adhesion, it must be:

1. Presented on a standard form and on a “take it or leave it” basis; and
2. Give the consumer no ability to negotiate because of their unequal bargaining position.

Next, the “special scrutiny” may be performed in a number of ways, a few of which are:

1. If the term was beyond the reasonable expectations of the “adhering” party, the court can find it to not be enforceable; or
2. Under the equitable principles of the Doctrine of Unconscionability, unconscionability may be found and the contract held unenforceable when there is an “absence of meaningful choice on the part of one party due to the one-sided contract provisions, together with terms which are so oppressive that no reasonable person would make them and no fair and honest person would accept them.” (Fanning v. Fritz’s Pontiac-Cadillac-Buick Inc.)

So…the good news is: recourse may be available for the underdog!

The bad news is: both parties will have to expend time and money for a court to determine if the adhesion contract is enforceable.

Selling show ideas in Hollywood is no easy feat. It not only requires the ability to create a great pitch, but also the know-how and willingness to follow established procedures for selling a show.

In order to sell a show idea, it’s necessary to create a great pitch. There are several elements that should be included in a pitch: a logline, a synopsis, and a treatment. A logline is a one-sentence description of the show. A synopsis is a brief summary of the show including information about the main characters and the theme of the show. A treatment is much like a synopsis of a show idea but is a more inclusive document which includes detailed descriptions of the characters and the show’s plot. Writing a treatment is an essential step as it is the primary medium through which show ideas are typically presented to TV producers and executives.

As an artist, you will want to determine which networks to submit your show idea to. You will want to consider the nature of your programming and whether or not it is in alignment with the types of shows each network produces. Once the appropriate networks have been identified, you should learn the submission guidelines for each. Some networks may accept unsolicited treatments and show pitches but, these are of the minority. The majority of networks require artists to have an agent or even an entertainment lawyer acting as his or her representative. Knowing and following the proper procedures for each network is an essential step in increasing an artist’s odds of having their show idea accepted.

Now, it is no secret that securing an agent can be a very challenging task. In order to overcome this challenge, artists must be willing to network; they should consider engaging a credible, proven manager and they would be wise to also consider developing a more formal, strategic plan for success with their entertainment attorney.

For artists who are able to secure an agent, he or she can help connect them with development executives – individuals who have the power to turn ideas into paychecks. When meeting with a development executive, artists must be able to accurately convey the concept of their show in a manner that is simple yet intriguing. This is where a well-written logline, synopsis, and treatment come into play. If an artist has taken the time to prepare these documents properly, the executive will be able to see the show’s potential.

Once an artist successfully pitches a show idea, it is more likely to be optioned for purchase. At this stage, an artist should utilize the expertise of their entertainment attorney to help negotiate the specific terms of the agreement. Most often, the writer will be paid an option fee up front for the company to have the exclusive rights to sell and/or produce the project with a network or third-party buyer. Once the option is exercised, the writer will then receive the negotiated purchase price and may additionally receive a small percentage of participation in the fees received by the production company for producing the show.

Navigating these negotiations can be difficult and an experienced entertainment attorney can offer artists the guidance they need to successfully sell their show ideas.

To learn more, visit https://www.spotoralaw.com/.

This past spring, one of the Department heads we work with at FremantleMedia invited us to attend the live performance of an “American Idol” taping. This taping, or rather, pop-hysteria, led to conversations relating to the management of those that do not win the title of the next “American Idol”.

Now we all know that the winner is locked into a contract with Music Label/Management Company, “19”, but what of the other near-Idols? Who gets to run their proverbial show? This question, in accompaniment to some of the surrounding conversations and eager talent managers, reminded us of a piece of legalese that has come up time and time again in our practice. The issue: Managers vs. Agents.

Whether you are a bona fide Talent Manager, a Stage Mom, or the girlfriend who listened to her boyfriend’s band play one night at the local pub and decided to serve as its manager, you should understand the differences between the roles that managers and agents are legally entitled to play. . . for your own good!

For starters, agents are licensed by the state they work in and most commonly earn their money by negotiating deals for their clients. Typically, they also enter into a client agreement which is, in pertinent part, regulated by industry labor unions such as, the Screen Actors Guild (SAG), the Writers Guild of America (WGA) and, the Directors Guild of America (DGA). Through these regulated agreements, the commissions that agents charge their clients are legally bound to a prescribed percentage. Furthermore, it should be noted that agents may not serve as a producer on their clients’ projects.

On the other hand, managers are not commission-regulated, do not need a license to ‘manage’ and, can charge their clients 15% or more. . . and often do. Moreover, managers may produce film or television if they wish to and so of course, they are also afforded the ‘glamour’ element in that they might find themselves in the spotlight one Award evening with an Emmy or an Oscar in tow.

In light of these representative differences, and as you might imagine, the ever-evolving entertainment industry has shifted gears over the years to accommodate and benefit from both of these roles. Without surprise to anyone, these specialty services have impacted not only the way talent pursues work, but the manner in which movies and television are actually made.

So what’s the big deal!? We all have a job to do, right!?

Well, one common issue arises from infuriated agents who argue that managers who attach themselves to their clients’ projects as producers are not legitimate producers and are consequently driving up production costs. Subsequent to such a contention, agents have put pressure on industry guilds by lobbying to either deregulate agents, or regulate managers. And, while no exact resolution has been reached to date, SAG has begun to pay closer attention to the black letter law and has consequently cracked down on the procurement of employment by managers for their clients. On the what you ask? On getting the talent a gig!

In California, Labor Code Sec. 1700.4(a) defines “talent agency” as “a person or corporation who engages in the occupation of procuring, offering, promising, or attempting to procure employment of engagements for an artist.” Moreover, Sec. 1700.5 provides that “[n]o person shall engage in or carry on the occupation of a talent agency without first procuring a license…from the Labor Commissioner.”

Therefore, ATTENTION ALL MANAGERS: Be Weary of The Services You Provide!

Procuring employment for your artist-client is not only illegal without proper licensing but, should you attempt to collect any unpaid fees, you can rightfully not only be denied those monies for having performed a service you were not licensed to perform but, you can also be ordered to return any fees already received!

So what’s the bottom-line? Both forms of talent reps are still widely used and widely needed in the ‘industry’. However, it is important that Managers know their role in their clients’ professional lives and also know the potential consequences they may face if they knowingly (or even unknowingly) provide services reserved for licensed Agents.