What is a Contract?

What is a Contract?
by Sue Basko, esq.

A contract is an agreement between two or more parties.

A contract can be written or oral.

If you agree to do something or pay someone for something, you probably have a contract.

Sometimes a contract can be implied, such as when someone provides you with a service that people normally pay for. Examples of this are when you go out to eat or go to a doctor.

The parties to the contract are the people or companies, or other entities that are agreeing to be bound by the contract.

A written contract is supposed to say what the parties have agreed to. There is supposed to be a "meeting of the minds" so that the parties are agreeing to what is in the contract.

If a contract says things that you do not understand or that were not discussed, or that the other party told you would never happen or that you could ignore, you may still be bound to those things in the contract. You need to have the contract revised before you sign it. Before. If there is something in the contract that is not agreed upon, it should not be in the contract.

There is no such thing as a "standard contract" that cannot be changed. There may be people unwilling to change a contract. Then, you should decide if you can accept it as is, or if you need to walk away.

A form contract or one taken from a book will almost never reflect accurately upon your agreement.

A contract can look like a fancy form. Or it can be simply written and typed. Or written by hand. A contract can be in the form of a letter. A contract can come in an email. Or by fax.

Or you might agree to a deal on the phone or in person; that may be a contract.

A contract might say "Contract" up on top, and it might not. It might say "Agreement" or "Deal Memo" or "Memorandum." Or it might not have any title.

You don't neccessarily have to sign anything for there to be a contract.

Many contracts are formed orally. Sometimes an oral contract is set in writing in a letter or email. This is sometimes called a deal memo. If you disagree with what it says, you must write that back right away. If you do not, that means you agree that the deal has been accurately described in the letter or email.

A contract may use "Terms of Art." These are words that have a special meaning in that field of law. 

Sometimes the definition of the term is created within the contract, and sometimes they are special words known by lawyers who have studied that field of law. Words that seem normal can have very different meanings in a contract. This especially applies in entertainment contracts. It is very difficult to know what these contracts mean unless you have studied this exact field of law. That is why it can be very dangerous to have a family lawyer or a friend or other musician or manager try to tell you what music or film contracts mean. Often people who have taken a music law course or read a book will tell me what they think a contract means, and they are often very mistaken.

You can never contract to do anything illegal. For example, if you are 17, you cannot agree to be in a porn film. If you sign such a contract, it is not valid. Your parents cannot sign such a contract for you. It is illegal.

A contract must have consideration. That means that both parties agree to do something. One can provide a good or service, and the other can pay. Or both can provide a good or service.

There are many examples of consideration. To give an idea of how varying this can be -- Suppose someone says, "My band has a contract to play at a club." That sounds pretty good, right? But that contract can mean all kinds of different things, such as:

  • The band plays at the club and the club pays the band $500.
  • The band plays at the club and the club pays the band $500 only if 300 people come and buy drinks.
  • The club agrees to let the band play, if the band sells 300 tickets in advance -- and the band gets only the money from CD sales that night.
  • The club agrees to let the band play, but the band must pay the club $500 in advance and is allowed to charge a cover.
  • The club agrees to let the band play, but only if the band is well-known and does promo before the show.
  • The club agrees to pay the band $500, but only if the bar grosses $5000 that night.
  • The club agrees to let the band play that night, but won't pay them anything, but might give them a few free drinks.

These examples show why it is so important to read and understand a contract before signing. You need to know what you are agreeing to, so you are not surprised.

The more stake there is in the contract, the more important it is to know what it says and means. If the contract means your career, you better know what you are signing.