For the third installment of my open-ended series on creator contracts, I want to talk about two important parts of most creator contracts that often get lumped together into one section: term and termination. My working theory is that “term” is the first syllable of “termination,” although I’m still doing research on the subject. Whatever the reason, these two things are not the same, and they’re each crucially crucial in their own right. “Term” in the contractual context refers to the planned length of a contract (a year, six months, whatever) and “termination” covers the ways the contract can be ended by either party before the term is up.
Let’s hit term first. Term can be any length, and there’s no “right” length. It just depends on how long the parties want to be tied together through the contract. The length of a contract is really a business term, so when you’re thinking about how long a contract should be, put your business hat on and think about it as practically as you can. This is especially true with respect to rights contracts, and more particularly licenses. For example, let’s say you license your finished comic to a publisher, and you give them the rights to print it, market it, use parts of it in promotional activities, maybe even make t-shirts or other merchandise, all in return for some percentage of revenues (the cash it makes.) The expectation when you grant the license is that they will actually DO those things, and they will continue to do those things as long as the comic makes money. But what if it doesn’t, or if the publisher doesn’t do a particularly good job of using the property? What if they don’t do anything with it at all? In those cases, you might want to know that the rights will revert back to you after a certain period of time – the end of the term. Some licenses have “perpetual” terms, and those can be ugly – unless they have a good termination clause, which we’ll talk about in a minute. A perpetual license means the person you’re licensing your work to has rights to it forever. In the indie comics world, I would read contracts with perpetual license terms very carefully.
Now, that’s not true for a work-for-hire contract, or a sales contract, where one artist is selling their work to another for an up-front fee. In that case, the term of the contract is by definition perpetual. For example, if you buy a car, the person you sold it to can’t come up to you a few years later and ask for it back. The deal is done, and that’s that. There are sometimes good reasons to provide your work to a third party as a sale as opposed to a license – the price might be right, for one thing.
On to termination. Termination is the way the contract gets cancelled if things go wrong. Sometimes the termination provisions are conditional (“if THIS specific bad thing happens, the contract can be ended”) or they’re tied to time (“either party can terminate the contract at any time upon 90 days written notice to the other party.”) They don’t have to be mutual – the person on one side might have the right to terminate under certain conditions, and the other might be able to do it in completely different situations, or on different timelines.
The most common reasons a termination provision would kick in within the comics context would probably be if someone isn’t getting paid when they’re supposed to be, if someone isn’t doing what they’re supposed to be doing (such as publishing a book, or providing art on time, etc.) or if someone goes out of business. This last point can be very important. It’s a sad fact that comics publishers go under all the time. Let’s say you’re a creator with a project at Publisher A, and that company goes out of business. Unless your contract has a termination provision in case of bankruptcy, the rights to the project remain an asset of Publisher A, and they can sell them to Publisher B – some company you have no relationship with, and might not have wanted to work with in the first place.
So, there’s your summary of the way term and termination work in creator contracts. No contract you sign (or write, you aspiring legal drafters out there) should be silent on either point. Like I said in the first chapter, contracts are about everyone knowing where they stand at all times, and not just at the beginning, when everyone’s hoping for the best. Knowing what happens when things go to hell is at least as important – if not more!
Next time… work for hire. It’s a topic that has some negative associations, but like everything else in law, it can help or it can hurt – just depends on how it’s used.