Parties in commercial property transactions tend to agree heads of terms in writing and then leave it to their lawyers to polish the wording of the lease before the tenant goes into occupation. This is because of Section 2 of The Law of Property (Miscellaneous Provisions) Act 1989, which requires the contract for the sale of an interest in land to:
- be in writing;
- incorporate all the terms that the parties have expressly agreed in one document, or where contracts are to be exchanged, in each document; and
- be signed by or on behalf of each party.
The situation is rather different in the film industry when it comes to location agreements, which do not create an interest in land. Agreements are often made verbally and are formalised after the filming has started. In the words of a multi-award winning British producer Diarmid Scrimshaw: “When you’re ramping into production, you’re running full pelt on all fronts and the whole thing is a leap of faith, the paperwork isn’t always the top priority”.
What are the dangers of agreeing terms with location owners verbally? The main one is of course that the production company may have already positioned tons of equipment and flown in actors and crew from around the world in reliance on the verbal agreement, when the location owner decides to re-negotiate the terms of the formal contact, threatening to withdraw from the agreement completely with disastrous consequences for the production company’s schedule and budget. The question then arises if the terms previously agreed verbally were binding.
The key elements of an enforceable contract
- offer (which has to be specific, complete, capable of acceptance and made with the intention to be bound by it);
- acceptance (which has to be final, unqualified and must correspond exactly with the terms of the offer);
- consideration (giving or promising to give something in exchange for a promise); and
- mutual intention to create legal relations.
There is no requirement as to the form of a contract for it to be binding. It could be in writing (even if jotted down on a napkin in a bar) or made orally face to face, or by telephone, or email, or by any combination of the above means; though a party may have difficulty in proving the terms of an oral contract if they are disputed. And disputed they often are!
In a standard location agreement, the consideration will usually be paid in instalments, often with the first instalment on signature and the last on completion of the shooting period. What can a production company do, if a location owner reneges on a verbal agreement before the contract is signed on paper and before any payment has been made? The location owner could argue that no consideration has yet been given and no contract has therefore been made. He would then introduce obligations too onerous for the production company, e.g. a higher fee, extravagant hotels for the occupiers while the location is used for filming, complete redecoration of the interior and even replacement of designer furniture and furnishings with equivalent brand new items instead of allowing for fair wear and tear.
The production company may seek to rely on the doctrine of promissory estoppel. This is, put very simply, where no consideration has been provided for a promise, but the courts feel that it would be unjust to refuse to enforce the promise. However, this would involve proving that the location owner made a promise, on which the production company relied to its detriment. It could be a protracted, costly and ultimately an unhelpful process, as it is only used as a shield not a sword - it does not create a cause of action and can only be used as a defence to an action brought by the party wishing to enforce its legal rights, i.e. as a defence against the location owner ordering the production company to vacate his property.
Most location owners act reasonably and appreciate the opportunity to raise the profile of their property. Indeed many properties became iconic having featured in a motion picture, think Alnwick Castle as Hogwarts and Highclere Castle as Downton Abbey.
However, if faced with an opportunistic or capricious location owner, production companies are strongly advised to agree at least the main heads of terms in writing before moving the crew and equipment. Make sure that both parties are clear that these heads are binding and are not ‘subject to contract’.
The important heads of terms to agree
- Responsibility of the location owner for obtaining all necessary consents (e.g. from any superior landlord, mortgagee, insurer or occupier);
- Use of the property in a film of a particular nature (some location owners may be reluctant to have their property feature as a scene of crime or a haunted place);
- Extent of access (with the default position being all interiors and exteriors and all contents of the property, and listing any specific parts of the location or items that will be excluded);
- Shooting period (the company will want as much flexibility as possible, due to weather or actors’ unavailability, and the right to rescind, if the production does not go ahead for whatever reason);
- Restoration (the company would want to limit this to making good any damage caused and, if the property is not in an ideal condition, all pre-existing defects should be documented in a photographic schedule, to ensure that the company is not obliged to renovate the whole property when it cannot prove it did not cause the damage);
- Services and facilities (which the location owner agrees to make available to the company, including gas, electricity and water);
- Fee (ideally payable in stages);
- Copyright (the company shall own the copyright in all products and materials, and the owner should understand that he cannot prevent the company or any other party authorised by the company publicising and distributing any product or material featuring the property);
- Location owner’s remedies for breach of agreement (the company should insist on limiting these to damages after shooting has started; rescission should only be available to the company);
- The production company’s right to assign or charge its rights (this is likely to be required as security by investors funding the film);
- Limit of the production company’s indemnity for loss or damage to the location (in accordance with the company’s indemnity insurance); and
It may be worthwhile for producers to have these 12 terms saved as a precedent so that they could be quickly amended for a particular project and emailed to a prospective location owner, thereby minimising the risk of a potential dispute.