How to Read Your First Contract

Photo Source: Caitlin Watkins

It’s a legal horror story of sorts, especially in the world of entertainment law. Caitlin Sanchez, the young voice actor who originally starred in the Nickelodeon show “Dora the Explorer,” reportedly had only 22 minutes to go over her network contract once she was tapped for the role. She signed the deal, but after discovering the franchise had likely earned more than $11 billion worldwide since 2000, she suspected she wasn’t being paid in full for her work. The teen filed a lawsuit against the network in 2010 with allegations she was promised residuals and earnings from merchandising — and that the network hadn’t paid up. When everything was said and done, Sanchez ended up with significantly less than what she thought she deserved — a $500,000 settlement, less significant taxes and legal fees.

It’s likely Sanchez and her family didn’t fully understand what they were agreeing to in their contract, felt pressured to sign quickly and didn’t get everything in writing that they were promised. And whether you’re a budding or established actor, these are the kinds of red flags you should look out for when going over contracts in your own career. If you aren’t 100 percent clear on terms like “merchandising” and other legalese, never fear. Here’s a full guide for everything you should know as an actor before you sign a contract, whether it’s for a commercial, stage run or feature film.

What is a contract, and in what instances might I sign one as an actor?

A contract is an agreement between different parties that’s meant to be enforceable by law if the agreement is broken. People — including actors — generally want to sign contracts either to bind themselves to what’s outlined in the document (for example, the number of rehearsal hours per day) or to bind the other party to the document (for example, how much they’ll pay the performer). You could end up signing one for any project you work on, be it a regional theater performance, a Broadway show, appearing in a television pilot or starring in a feature film.

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What are the different kinds of contracts?

If you’re an actor who belongs to a union, the contracts you consider will likely be different than other industry agreements. That’s because your union can often claim a sort of “power” over the hiring party and offer you, the performer, a quasi-safety net, says John J. Tormey III, Esq., an entertainment lawyer in New York. The two main unions are the Actors’ Equity Association (AEA), which largely represents live theater performance, and the Screen Actors Guild‐American Federation of Television and Radio Artists (SAG-AFTRA), which mainly focuses on film and television. Both negotiate contracts for members based on the production and budget in question, as well as the role itself (for example, AEA negotiates categories like principal, chorus and stage manager). As for non-union contracts? They tend to be more similar to the majority of industry agreements — since there’s no overarching group aiming to look out for your best interests, there’s more general risk involved. That’s why it’s vital in any case to be very clear on the agreement you’re entering into. For example, if you’re signing a contract to be part of a touring production, you’ll need to make sure factors like transportation, hotel stays and meals are addressed.

In what instances do I need a lawyer?

Many actors negotiate their own contracts on the smaller end, but if you have an agent, there’s a good chance they’ll be the one negotiating on your behalf. Know that you always have the option to hire a lawyer to look over the contract before signing. For larger, non-union deals — or for long-term commitments — this can be a smart investment. Sitting down with a lawyer to review the basic terms of a contract can set you back between $200 and $400 for an hour, says Domenic Romano, managing attorney at Romano Law. He notes it’s especially smart to consider before you enter into a first-time agreement with a potential agency or manager.

As for when to get a lawyer involved in the negotiation process? For a deal less than around $20,000, it might not be worth the legal fees (which could cost around $2,000 and up), says Susan Chana Lask, an entertainment lawyer in New York City. But for larger or longer-term contracts, hiring independent counsel is smart for peace of mind — and to prevent potential headaches down the line. “It almost always costs more in terms of time, money and agita to bring an attorney into the same deal later,” says Tormey. Also important to note: Just because your agency has a legal department doesn’t mean you’ve got a legal professional in your corner. The agency’s legal department represents the agency and your agent, not you or their other clients — that’s who they’re primarily looking out for, says Romano.

If you’re aiming to hire a lawyer, ask people you know and respect in the industry for recommendations, and comb through reviews online. Try calling up at least three and asking about consultation fees by the hour (some lawyers with less experience will offer free consultations, while industry veterans usually charge). You can also check your state’s State Bar Association website for a list of accredited lawyers. (If you’re located in New York City, the New York City Bar Legal Referral Service recommends lawyers that are vetted annually.) Another key point: Remember that no matter who’s negotiating your contract, it’s vital to review the document yourself and know exactly what you’re getting into. There’s a chance something will jump out as important to you while you’re reading that someone else might not think of as consequential.

How do I determine what pay is fair pay?

Ask yourself: What’s my time worth? More established actors often have agents and quotes that are automatically given to production companies that inquire, but if you’re just starting out, use what you’ve been paid in the past to figure out your current pay rate. You can calculate it by the hour, day or week — and whatever it is, aim to make more from your next project. Ask around, and talk to trusted friends and colleagues with similar experience about what you should be asking for. Factor in what you’ll likely get from the arrangement — will it boost your career or significantly increase your exposure?

Unions have pay scales, so whether or not you belong to one, it’s a good idea to take a look at union minimums to get a ballpark idea of the right rates. See if you can dig up any public information on the production budget or what the company recently paid other actors to get a sense of scale. And know how the production company thinks — in the film and television world, a company often uses what an actor made from a recent project to inform their own offer (sometimes an increase of 10 or 15 percent), says Tormey.

What’s most important to keep in mind when negotiating?

Never forget that you’re always going to be the most trustworthy person looking out for your own best interests. It’s important to do your research, pay attention, make sure you understand everything that’s going on and not be afraid to ask difficult questions. Try to avoid commitments denoted as “in perpetuity” (essentially forever), giving away your intellectual property, making promises you can’t keep and deals where you’ll only be paid after the fact, says Tormey. Be prepared ahead of time with the items you’d like to address, and if you’ve got the career leverage, ask for more than you’d be happy with (the result everyone ends up settling on will likely be somewhere in the middle). Know that any agreement you see is typically going to be very pro-production company — the more leverage you have in your career, the more potential you’ll have to reverse that balance. Exhibit A: If you’re “Clooney or Pitt or Angelina,” you’ll likely be able to push back and have the document drafted mostly in your favor, says Romano.

How do I stay focused while reading? What if there’s vague terminology within the contract that I don’t understand?

First, follow the age-old advice for increasing focus: Get a good night’s sleep. Then, review the contract on both your computer screen and in printed hard-copy form — it’s likely items will jump out at you from the physical document that you didn’t notice via your screen. Be sure to read the entire contract, even if you need to take periodic breaks to get through it. Grab your highlighter, and dedicate yourself to marking everything you think is vague or don’t fully understand. Reach out to legal counsel or do your research online to translate the terms into plain English. “Usually, when someone inserts jargon into a contract, they are doing it as a substitute for their own real knowledge and their own real understanding,” says Tormey. “Any time jargon pops up in a document, delete it and insert the real definition instead.” (In the event you ever needed to take the contract to court, you wouldn’t want a potential jury to be confused by jargon, either.)

We defined a few key terms to give you a head start:

Exclusivity: This provision usually means you won’t be providing the same (or maybe even similar services) to another party, at least within a specific geographical area and a specific period of time. For example, let’s say you’re acting in a romantic comedy series in New York. If your contract had an exclusivity provision, it might, say, prohibit you from acting in comedies for one year within the Northeast.

Back-End Payment: This condition implies you’ll be paid after the fact instead of upfront. “Think of it as J. Wellington Wimpy’s favorite phrase [from Popeye]: ‘I would gladly pay you Tuesday for a hamburger today,’” says Tormey.

Representations and Warranties: This translates to promises and statements you’re making in the contract. “Many people will blindly agree,” says Romano — instead, take the time to be certain that the promises you’re agreeing to are promises you can keep.

Term of Agreement: Term is the duration of the agreement, which often comes into play if you’re signing with an agent or manager.

Merchandising: In this case, the other party is requesting permission to use your likeness on merchandise sold to others — think action figures, t-shirts, video games and books. If merchandising is part of your contract, hiring independent legal counsel is a smart idea. Backstage delves into more on merchandising here.

While I’m reading, what are some common questions I should ask myself and red flags I should watch out for?

“The main question is: ‘Will I be happy when I re-read this contract two months from now?’” says Tormey. On the flip side, think: “‘What could possibly happen that would make me very much regret having signed this contract two months from now?’”

If there’s an exclusivity provision, ask yourself if the amount you’re getting paid is enough for what you’re giving up (potential opportunities to work for competition). If you’re expecting to be credited in a certain way for your performance, make sure that’s in writing, too — sometimes projects are acquired partway through, and a new company coming in won’t be bound by oral promises the former company made. Something else to watch out for in a contract? Commitments that aren’t specifically laid out. “A performer should always know how long a period of time is being committed before signing,” says Tormey. Know that “perpetuity” essentially translates to “forever,” but even if that word isn’t included in the contract, an open-ended time commitment can be just as ambiguous. (And vagueness is something you absolutely don’t want in a contract.)

If there’s a back-end provision — or the contract states you’ll be paid in a “reasonable timeframe” after the project wraps — tread carefully. Other wording to watch out for here? “To be negotiated in good faith” or “to be determined later.” “TBD is always a red flag in a written contract,” says Romano. Aim to always be paid on the front-end (right away) instead. If that’s not possible — and if it’s a film or television production — try to make sure you’re documented as a party (or at least a beneficiary) under the Collection Account Management Agreement (CAMA), says Romano. Under it, gross revenue from a production is collected into a production-specific financial account — once agreed-upon expenses, commissions and advances are paid out, the rest of the profits are paid to producers, investors and other beneficiaries (like actors). Remember there’s “no guarantee of any entertainment product, even if it’s an A-list director,” says Romano.

Watch out for short contracts — they’re likely missing important provisions and suggest the production company might not be as legitimate or experienced as you might think. “Anything under two pages is suspect,” says Romano. And if you’re a union member, don’t let the idea that it’s a standard union contract stop you from reading with a skeptical eye. Sometimes, companies add “riders” — additions to the end of a contract — to modify the agreement. And after a contract is finalized? Make sure you receive a final copy of the agreement — after it’s been signed by both you and the other party.

Why shouldn’t I sign on the spot?

“There’s no reason to sign anything on the spot,” says Lask. “Never sign on the spot.” It’s for the same reason experts advise against filling out and submitting your tax return in the same sit-down session: It’s important to let it marinate. You might have forgotten to look for some important aspects that should be included in the contract — or there might be items you glossed over originally that stand out after a second or third reading. If you’d like someone to look it over or give you a second opinion, you’ll need to allot time for that. Plus, “sleep on it” is an oft-cited mantra for a reason — never underestimate the value of a fresh, well-rested eye when it comes to an important decision.

And if you’re feeling pressured to sign on the spot or worried you’ll lose out on the offer? Don’t give in, and that’s a red flag, says Lask — if the company doesn’t value you enough to wait a reasonable amount of time for your decision, there’s a good chance you won’t get the respect you deserve during the production process, either.

Are you ready to get to work? Check out Backstage’s TV audition listings!

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