Advertiser trade body ISBA may be in ‘wait and see’ mode, but bodies representing ad agencies and production companies have started using a new ‘standard’ form of agreement covering the production of commercials for TV and cinema. What’s changed?
Topic: Contracts
Who: The Institute of Practitioners in Advertising (“IPA”) and the Advertising Producers’ Association (“APA”)
Where: The UK
When: Now
What happened:
A revised form of “Agreement for the production of TV/cinema commercials” has now come into general use, replacing the earlier version introduced in January 1997.
The 1997 form was approved by the ad agency trade body, the Institute of Practitioners in Advertising (“IPA”), the production company trade body the Advertising Film and Videotape Producers’ Association (AFVPA) (now re-named the Advertising Producers’ Association or “APA”) and the advertiser trade body, the Incorporated Society of British Advertisers (“ISBA”). The new agreement so far only has the approval of the APA and the IPA, with ISBA reportedly waiting to see how the new standard works before jumping on the bandwagon.
Format changes
The first and most noticeable difference between old and new is that instead of there being a separate production and insurance briefing specification (“PIBS”) this has now become “part 1″ of the Agreement as a whole, “part 2″ being the contract. From now on we will focus on the differences between the new “part 2″ contract and the old 1997 agreement.
Another format change is that in the “Contract” we have a helpful sidebar of “Notes,” which give helpful guidance on various points arising out of the main text.
For instance, Note 1, which appears alongside the section for the insertion of the parties, states that agencies should give verbal authority for the production company to go ahead as soon as possible and immediately confirm by e-mail or fax. The agency should then issue the Agreement for the production of commercials within 24 hours after that confirmation.
New attachment catered for
A revision to the “Responsibilities” clause allows for a copy of the script for the commercial in question to be attached to the contract, as well as a copy of the PIBS and the front page of the quote.
Upper case schizophrenia
The document also belatedly adopts general commercial drafting practice by introducing capitalised defined terms such as “Commercial” and “Completion Date”, but it does a u turn on the capitalisation front when it comes to the terms used for the main parties. These have been changed from the rather pompous “Practitioner,” used previously for the advertising agency, to just plain “agency” and from “the Company” to “the production company”. However it will be noted that the “agency” and the “production company” do the ee cummings thing and do not start with capital letters, whereas, “Practitioner” and “Company” did in the previous form.
Key individuals
Another change is that instead of the names of the director, producer and agency’s authorised representative being part of the “description of the commercial,” these individuals now feature in a “Key Individuals” clause.
This clause also features new provisions which forbid the substitution of the director or producer for any part of the production of the commercial without the agency’s consent. However, the agency is required to not unreasonably withhold its consent to change if the non-appearance or incapacity of the director or producer occurs “due to any unforeseeable reason including but not limited to illness”.
Payment
In the “Payment” clause 5, (whose title has changed from the previous and rather legalistic “Consideration”) there is some unnecessary drafting in that Commercials (which has already been defined) is otiosely followed by the words “described in clause 2 above”.
There are also new optional terms which allow for situations where there is a foreign currency element in the price and cater for currency exchange rate fluctuations.
A helpful side bar note also reminds agencies here that they are contracting in this context as principal, not as agent for their client, so that the production company must be paid irrespective of whether the agency has been put in funds by the advertiser.
New pretext for withholding payment
When it comes to the possible withholding of 10% of the price, a further pretext upon which this can be withheld is added to the existing “dealing with a query” or provision of a “certificate of access.” The new pretext for withholding is the provision of a valid assignment of copyright or licences from third party suppliers.
Ad agencies (and their clients) should take note that they have this new withholding right and production companies should also take heed.
Fast track payment
The fast track production payment provisions have been slightly changed. The initial 75% down-payment used to be payable not later than 7 days after receipt of the agency’s invoice. It is now payable 3 days before the first day of shooting if this is sooner.
The “payment” clause is then rounded out by a completely new section on “overseas shoots and other shoots requiring the production company to meet most of the production costs prior to the completion of filming.”
Here a new concept of “Accelerated Payment” is introduced. This will only apply if the parties have agreed to it in advance on the PIBS and agencies are reminded in the side bar that they should ensure that their accounts department bills the advertiser and arranges payment to the production company as agreed. The accelerated payment provisions apply to the balance payable after the first 50% has been put down, but the wording only provides for the production company to request the agency to accelerate payment on terms to be agreed in the PIBS.
Agency reps on the shoot
There have been some tweaks to the provisions dealing with the attendance of the agency representative on the shoot. The agency now has a right to arrange for this, not only during shooting or recording, but also during post production.
Also, whereas the representative was previously only allowed a right to be involved in consultation and decisions “relative to the advertising content of the commercial,” this has now been changed to “consultation and approvals as may be necessary relating to the content of the commercial.” Since it is unclear which part of the commercial is going to be the “advertising content”, one can only applaud the deletion of this wording. Another agency-friendly new provision here obliges the production company to provide the agency representative with a monitor or other agreed means to view live pictures.
The balance then shifts in favour of the production company when it comes to circumstances in which the agency representative is not present on the shoot. Now the “prior agreement” and “advertising content” qualifiers have gone so that the wording is now: “If the representative is not at the shoot at any stage, the on-the-spot decision of the production company as to execution will be accepted.”
Safe keeping
In the “Safe keeping and ownership of negative/video tape” clause, the category of items for which the production company is responsible for safe keeping is now expressly extended to “colour master interpositives” and “colour reversal internegatives and any other derivative material.”
Legal and technical requirements
A new “legal and technical requirements” clause 10 replaces the old and separate “technical requirements” and “copy clearance” clauses (m) and (p). On the clearance front, the old provision, which said that the production company “shall not be responsible for the acceptance by the Independent Television Commission or by a programme contractor or by cinema exhibitors of the commercial produced hereunder except as provided [in the technical requirements provision],” has been swept away.
In its place appear the words “the agency shall be responsible for ensuring that the commercial complies with any legal or regulatory requirements relating to content and post-production, if the latter is undertaken by the agency.” The side bar here indicates that agencies should refer to BACC guidelines, the ITC code and ITV’s general requirements for the production and delivery of commercials on television.
New permit and visa section
There is then a completely new “Permits and visas” section at clause 11. This states that the production company shall be responsible, unless otherwise agreed in writing, for obtaining all relevant UK and foreign permits, licences or other official authorisations relating to any aspect of the shoot, including any necessary visas or work permits in respect of personnel employed by the production company.
The production company is also required to give the agency “early advice” of any such requirements relating to advertiser and/or agency personnel or to artists for whom the agency is responsible. The clause concludes by providing that where artists are employed by the agency direct, the production company will not be responsible for delays, difficulties or inability to obtain visas or work permits.
Copyright and other rights
The side bar here sets the scene by stating “ensure all parties, including the advertiser, are aware of what copyright and licence details have been obtained and that all parties are aware of any restrictions.” The wording here is slightly odd and it might have been clearer to say that parties should be aware of what copyright clearances and other rights licences have been obtained. However, the general drift is pretty clear.
Directors’ rights
In the context of the copyright in film footage that is owned by the director (which is separate from the copyright that is in the first instance owned by the production company) there has been a change. In the 1997 agreement, the production company warranted that it would procure from the director and pass on to the agency an assignment of the director’s interest in the copyright. Now, similar wording appears, but only in the context of the production company commissioning a third party to create animated cartoon characters or models.
We wonder whether there has been a typographical mistake here. Was it not intended that this wording should apply generally to all material produced pursuant to the contract? The mistake is somewhat offset by the clear assignment by the production company to the agency of “all copyright” in the commercial, but agencies might have preferred to see the specific wording requiring the director’s interest to be assigned to have general application rather than only in the context of third party produced cartoon characters and models.
Animated cartoon characters or models
Here there are more detailed provisions in the new version than in the old. In the 1997 version, rights in specially created animated cartoon characters or models were retained by the production company, so that their use outside the commercial being produced was to be subject to the prior written consent of the production company. Wording to this general effect remains, but the new contract goes further than this by stating clearly that if the agency has purchased the copyright from the production company by agreeing and paying a separate fee for copyright as per section D(2) of the PIBS, then the copyright in such animation shall be assigned to the agency on the same terms as the remainder of the commercial.
The new contract then provides: “if the agency acquires the right to use the animation for additional use and requires work to be done for such use, they shall ask the production company to provide a quote to carry out that work but may contract to have the work done by a third party if they can have the work done at a lower price and/or quicker time and notify the production company of that”.
A point worth noting in passing here is that whereas the previous provisions of this kind applied to both animated cartoon characters and models, the wording now only extends to “animation”.
Third party materials
Previously, where third parties were commissioned by a production company to supply materials to be used in the production of a commercial, or where existing material from a third party was to be used in the commercial, the production company had to use its “best efforts” to obtain an assignment of the copyright in that material to the agency.
In the new version, the commitment to use “best efforts” to obtain an assignment has gone. Now the production company undertakes to obtain from the third party either an assignment to the agency of such copyright as might exist or, if an assignment cannot be negotiated on reasonable terms, a licence on terms to be approved by the agency to use the materials in the commercials. A similar scheme now applies to third party-produced animated cartoon characters and models.
Recycling the ad
The terms governing the recycling of a filmed advertisement, either for a different product or for a different advertiser, have been slightly tweaked. Before, this was made expressly subject to the director’s prior written consent, regardless of the general waiver of moral rights of the director which the production company was obliged to supply to the agency. Now, the prior written consent required is that of the production company not of the director, and the only type of recycling that this applies to is the re-use of the commercial for a different advertiser, not its re-use for a different product.
Other clearances
New sub-clauses (g) and (h) provide that whichever party supplies copyright or trademark material or is responsible for the engagement of actors, other performers or models, it is that party, namely either the agency or the production company as appropriate, which has the responsibility to ensure that appropriate permissions and consents are obtained.
Indemnities
New provisions here place a cap on either party’s liability to compensate the other if there is a breach. The cap is in both cases the amount payable under the contract. Also certain types of loss are excluded from recoverability by express wording for the first time. These are liability for any consequential loss, loss of business profits or other pecuniary loss.
Indemnity and insurance
The provisions here are broadly similar to those in the previous version, although there are some changes, including a specific provision that the agency must indemnify the production company and insure itself effectively for all actions, claims, losses and demands arising out of the death of or bodily injury to artists and other persons caused by or arising out of the negligence of the agency or its representatives.
A similar provision applies to the production company insofar as any such death or bodily injury occurs as a result of its own negligence, although the production company is expressly stated not to be responsible for insuring non UK domiciled personnel who are subject to other compulsory insurance arrangements against death or bodily injury which can only be made by the employer of record. In such cases it is that employer who has to be responsible for providing the relevant insurance.
Here a side bar note 13 encourages agency and production company to discuss with their brokers the feasibility of sharing liability cover for local crew and artists. In such cases the agency shall become a named party to the policy and this should be less expensive than the taking out of separate cover by the production company and agency.
Weather insurance
For the first time weather insurance has its own clause. This is much more expansive than the previous wording, which appeared tucked into sub-clause (vii) of clause (k). The side bar notes underline that losses incurred due to adverse weather delaying the completion of exterior builds will be the responsibility of the production company, and that losses incurred due to adverse weather delaying the arrival of any artists, agency personnel or agency facilities will be the responsibility of the agency. There is also a reminder to check the deadline for confirming weather insurance with one’s brokers and that if insurance is not available and/or the agency does not request and pay for the insurance, the agency will be responsible for delays/additional costs.
In the pre-production and production periods, the production company is required to meet additional costs (excluding air time costs) which result from delay on the part of the production company in reaching a location to perform its duties because of any adverse weather conditions. The production company must also insure against such risks.
Conversely, if because of any adverse weather conditions, the agency cannot deliver any artists, key props, personnel, products or facilities which they have agreed to provide, it is the agency that is responsible for such additional costs or the liabilities which arise and the agency must insure against such risks.
As regards weather risks to exterior builds, including damage or destruction of builds and delay or prevention of their completion, if insurance is available and the agency so requests and pays the insurance premium, the production company will be responsible for indemnifying the agency against and insuring itself for all actions, claims, losses and demands which may arise. In all other circumstances, for instance where the agency has not specifically requested that insurance be taken out, the cost attributable will be met by the agency.
If bad weather prevents both the production company and the agency from reaching the location or supplying personnel or equipment to that location, then the new “joint losses” clause will apply and each party will share the cost in equal proportions.
Regarding “weather days,” a relatively limp-wristed agency obligation in the 1997 Agreement to “use its best endeavours to ensure that the insurance assessment is dealt with within a period of 90 days….” has been changed to a much stiffer obligation on the agency to meet resultant additional costs within 45 days after relevant invoices have been supplied.
Force majeure
A helpful side bar note here recommends that the agency ensure its advertiser client understands that weather day costs must immediately be paid to the agency in order that the agency may pay the production company.
The old “any causes beyond its reasonable control” general opening wording has been replaced by “an event of Force Majeure shall be defined as any event that is not reasonably insurable.”
The types of event included within this term have also been significantly amplified. New disasters on the block are “any act of terrorism, threat of terrorism, any hostile or warlike action in time of peace or war, the use or threat of use of any weapon or war employing atomic fission or radio active force, any insurrection or rebellion or revolution or civil war or usurped power or any action taken by any governmental authority in hindering or combating or defending against regulation or confiscation by order of any government or public authority or risks of contraband or illegal transportation of trade, any civil commotion assuming the proportions of or amounting to a popular rising or riot or martial law or the act of any lawfully constituted civil law authority (except to the extent that certain acts of civil authority may reasonably be insurable from time to time) and for official days of national mourning.”
Phew! We suppose it is a sign of the times!
Timings have also been changed here. Before, if Force Majeure delays continued for less than 21 days then all dates in the agreement would be correspondingly postponed. If a delay extended to more than 21 days “the party not in default” was entitled to terminate the agreement altogether. This wording has now gone and the trigger period is now not 21 days but just 7 days, with either party being able to terminate if the delays are for 7 days or more.
Finally here, the old wording that neither party was to be under any liability to the other if the agreement was terminated on grounds of Force Majeure has been swept away. In its place is an obligation on the part of the agency to pay the production company the costs they have actually incurred in making the commercials up to that point and such part of the total mark up as is attributable to the work they have done to the date of termination. No doubt agencies will now be checking their insurance cover.
Termination
For the first time we have a “termination” clause in the standard contract. This allows the agency to terminate forthwith by written notice if the production company commits any serious breach of the agreement, including without limitation any failure, other than for reasons of Force Majeure, to comply with any of the delivery dates or the completion date set out in the agreement. There is then a fairly standard provision allowing termination by one party if the other party becomes insolvent or approaches insolvency.
Disputes procedure
This section of the contract has been radically revised.
The previous, detailed wording setting up an escalation and conciliation procedure, followed if necessary by the processing of the claims by a disputes panel, has gone.
In its place is a completely new set of provisions. These oblige parties having a grievance, claim or complaint to raise the issue within 12 months from the date of the second 50% invoice being issued. This must be done through the party’s relevant association (either the IPA or the APA) and an indication then given as to whether the complaining party wishes to go for mediation or arbitration. There are then detailed provisions dealing with the mediation and arbitration procedures to be followed.
Why this matters:
After seven years, it was certainly high time that the previous standard agreement was updated. Many of the changes are very welcome, including the radical surgery to the disputes procedure section, as it is understood that the old “dispute panel” rarely sat, if at all, to deal with a dispute. A disadvantage is that the advertiser’s trade body ISBA has not as yet signed up to and approved this standard form, and it is therefore incumbent upon agencies who are using this form of agreement to ensure that their advertiser clients are fully aware of the new terms governing production work that they are ultimately paying for.
