contracts #2

For  years, 28 year old Lou Sohn has been trying to make it as a musician.   He has played bars from Maine to California.  He has had some songs he  wrote and recorded played on college radio.  He was a first round  contestant on American Idol, but was cut before making it to Hollywood.   He is getting ready to give up the business when a friend arranges an  audition for Lou with Ashley Alan Dicker, of ADD Records, a twenty year  old record label that has had a few hits, but never broken into the big  time.
Lou’s  audition seems to go well.  Ashley called Lou up a week later and gave  him the good news.  “Lou, baby,” Ashley said, “I think you’ve got “IT”  ADD is going to make you a big star.  Who are your manager and lawyer.
Lou  tells Ashley he has never had a manager or lawyer before.  “That’s a  good thing,” says Ashley, “they just waste time and money.  Trust me  baby, I will be the one looking out for you.”
Lou  can’t believe his good fortune.  Ashley hands him a 15 page contract  and says, “Just sign it baby.  It is a standard contract.  We advance  the money for the recordings, we distribute, you get the first $5,000  gross income and then we split everything down the middle .”  Ashley  hands Lou a shiny gold pen.  Lou hesitates.  “What’s the matter baby?”  Ashley asks.  “Well, honestly, I am broke,” says Lou, “Is it possible to  get any money up front?’
Ashley  pulls out his checkbook.  “I like you baby, we are going to do great  things.  Sign right now and I will give you a $500 advance.”  That was  all Lou needed to hear.  He didn’t even read the contract, he just  signed it on the spot.
Lou  recorded his first CD for ADD, “Out of My Cave.”  It got some  alternative rock air play, but never caught on with Itunes.   After six  months, total sales were only $8,500.  Lou wasn’t thrilled, but still,  he could use the money.  He wrote to ADD and asked for his $5,000 in  first royalties plus 50% of the remaining $3,500 for a total of $6,750.   ADD’s accounting department responded by sending him a bill:
Recording costs
Studio time $   3,700
Engineers             $   2,700 
Producer advance $   5,000
Total Recording costs             $ 11,400 
Promotion costs                        $ 3,700 
Total Costs                              $15,100
Less credit for sales $  6,750 
The  hottest movie this summer is the block buster super hero film “The  White Knight Ascends.”  Lou goes to see it and is shocked to find that  “Out of My Cave” is played several times in the movie.  It appears ADD  licensed Lou’s song to the film for $100,000.  When Lou calls ADD to ask  about it, he is told that all the licensing money belongs to ADD.  
Lou  comes to you asking for help. He brings his contract with him.  By now  he has tried to read it, but cannot make heads or tails of it.  In  looking it over, you see that some of the relevant provisions are as  follows:
 “17 C – Sohn agrees to pay, or to reimburse ADD, for all recording  costs including, without limitation, all costs related to the use of the  studio, hiring of engineers and producers, and all promotion costs.” 
“41  F – Sohn grants ADD all rights to the songs written by artist and the  Master recordings of such songs as are included on any recordings  produced pursuant to this agreement. Without limitation, this shall  include the right to license such masters and underlying songs for use  in motion pictures.  And Sohn hereby waives any claim to the income from  such license”
What can Lou do (with your help, of course)?  Analyze the strengths and weaknesses of his case.

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