Disputes and mistakes: Understanding Contracts Part 3

Contracts can be scary. When confronted with one, it might be easier to close your eyes and hope for the best, but most lawyers will advise you against this approach. It’s important to spend some time trying to understand any contract thrust in front of you as an artist or arts organisation before you sign it.

To help decipher the legalise, we spoke to Michael Park, Partner at Norton Rose Fulbright (Regional Arts Victoria’s pro bono lawyers). Because he had so much gold to share, we’ve broken this information up into three articles, which we’ll post online over the coming weeks.

This is the third and final article in the series. To read the first, head to this link. To read the second, head here.

Dispute Resolution and Common Mistakes

Contracts Image 3 - Photo by Joe Toohey

Everyone makes mistakes. When it all goes wrong, you want to make sure your contract outlines a clear process to dig you and the other party out of any holes you may fall into.

Park suggests clarity is key – and lack of it is the most common mistake made when drafting a contract.

Often, he says, “you’ve got two parties who know exactly what’s going to happen, and when they come to put pen to paper, because they both know what’s going to happen, they typically don’t put detail in. They typically will write things in a pretty brief and summary manner, because they all know what’s going on.”

Of course, that doesn’t help when one or both of those parties move on. “People come and go,” Park cautions, “ (but) at the end of the project, or the end of the tour, or whatever it happens to be, when you want to get paid, somebody else is in the driver’s seat holding on to the cheque book.”

This is obviously a problem when this party claims you haven’t met your side of the bargain according to the contract. It’s not enough to say “but we all knew what I was planning to do.” You must, says Park, “objectively and with a degree of certainty, set out exactly what needs to happen, then how you’re going to get paid.”

Dispute resolution clauses are also key to dealing with issues when they do arise. Park divides these in two categories: optional and mandatory:

  1. Optional dispute resolution clauses usually mean both parties need to first agree to use the processes outlined in the contract when a conflict arises. In the event of a dispute, say Park, “that tends to be not very helpful, because in the event of a dispute, it’s very unlikely that the parties are going to be agreeing about very much at all.”
  1. Mandatory dispute resolution clauses are more formal, and outline a process by which both parties must comply in the event of a dispute. They will usually require you give the other party notice of a dispute, before outlining a step-by-step process to follow if and when the dispute escalates.

Though Park suggests the later approach is the more useful of the two, he adds that “the nature of how you want to do these things in terms of dispute resolution depends very much on the nature of the deal, the nature of the project and the nature of the parties. You might want to leave it reasonably informal, or might want to go down the path of having a much more formal dispute resolution process.”

He also offers a tip for when the parties are based in different geographical regions, or when working in regional Victoria. “Quite often you’ll see in the contract a clause which says, ‘if there’s a dispute, then the law of Victoria will apply’ and that ‘if you have a dispute then you need to have the arbitration conducted in Melbourne.’ for example,” he cautions.

As a regional artist or organisation, it might be difficult to get to Melbourne, or interstate, for this kind of process, so watch out for this in your contract.

 

Nothing in this article should be considered legal advice. You should seek the advice of a professional lawyer should you require specific advice, or contact one of these very helpful organisations:

 

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