Pre-Production Contracts

Pre-production is the period before shooting begins, when those in charge of making the film finalize everything from the script to financing and putting together the cast and crew. The early stages of pre-production are often called “development”.

The development stage of a movie can take several years. During this time, the people who will create the movie are brought together and finalize agreements. To do this, they need to purchase rights and agree on how the script will be written through documents like option agreements or work for hire contracts. Additionally, to hire cinematographers, Production Designers, Location managers, etc.

The Production Entity – Company

The most common way that producers finance feature films is by forming a production company and then selling interests in that business to others. A production company can take almost any legal form, such as a corporation, limited partnership (“LP”), or limited liability company (“LLC”).

Many recommend that LLCs be used as production entities because they offer the most flexible tax treatment and power allocation among members. This also shields personal assets from being seized to repay debts incurred by the LLC.

You have to file some paperwork and pay a filing fee with the secretary of state in order to form an LLC. Sometimes, like in New York, there is also a publication requirement. People or other organizations (like corporations or other LLCs) can be members of your LLC.

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The LLC’s most important agreement is the operating agreement, which establishes the guidelines that regulate how the LLC functions. This document is similar to a “shareholders’ agreement” for corporations. The operational agreement must address vital topics such as who manages and controls the company, what services or products the LLC offers, how much investors will be paid back (and in what order), and each individual filmmaker’s role and corresponding compensation.

While it is not a step that many enjoy taking, you should always be prepared for the dissolution of your business. The operating agreement should address what would happen in the event that the LLC needs to disband or if new members need to be brought on board because of death, disability or budget issues.

It is of utmost importance to the filmmakers that the operating agreement protects their complete control over management of the company.

Given that films are highly personal to the filmmaker, the operating agreement should include a “contingency plan”. This contingency plan will act as a backup in case the filmmaker is unable to complete the project for any given reason. The consequences of not having a contingency plan can be devastating, so it is important to have one in place just in case.

So that the filmmakers become employees of the LLC and the intellectual property created is owned by the LLC under traditional “work for hire” principles, we also recommend that the filmmakers’ obligations be more specifically set forth in separate employment agreements.

On one side is the investor who wants to negotiators terms that protect his investment and allow for easymaneuvering in case new team members need to be brought in. On the other side is counsel forthe filmmakers who want their clients to maintain creative control throughout productionand distribution stages.

The operating agreement should include the investor’s obligations, such as when and how their money will become available to the filmmakers. Typically, these agreements require that the investor’s funds be released to the filmmaker when there is enough money to make “meaningful progress,” which is defined by said agreement.

Avoid any potential issue by communicating all expectations and outlining possible solutions to problems before they happen.

The next question pertains to how large the LLC’s business will be. Will it produce one film or multiple films, for instance? Usually, LLC operating agreements are drafted so that the company can do any “lawful business.” But if the LLC only focuses on a single film project, it might offer more safeguards to small investors because investing in movies is such a risky venture.

Discussing the eventual end of a business might be considered taboo by some, but it’s crucial to broach the topic before any issues arise. By doing so, everyone will know what needs to happen if dissolution does occur.

The operating agreement may also provide for the repurchase of the investor’s ownership interests in the future. Often, this is due to a production company not having any financing for a certain period of time. By creating an operating agreement and addressing potential issues in writing, LLCs can prevent these problems from arising.

By having an operating agreement that provides guidelines for what all parties should do during filmmaking, it would reduce the amount of stress and chaos typically caused by having to figure out agendas on-the-fly when problems inevitably arise.

The Business Entity – Securities Issues

Since a production entity is a business that sells interests in the company to finance film production, it must meet federal and state disclosure requirements set forth by securities laws. The producers and promoters of the business are responsible for providing full disclosure of all material facts regarding the investment and its risks to their passive investors.

As stated by the U.S. Securities and Exchange Commission, “material information is any information that a reasonable person would want to know when deciding whether or not to invest in a film.” To avoid violating state and federal laws, producers typically hire experienced securities counsel to write an Offering Plan (“Private Placement Memorandum”).

All Offering Plans for film projects must include a description of every crucial element involved in the film, such as bios of personnel, risk factors, budgets and projections. They also need to mention where all original agreements about the offering are located and that potential investors can request to see them. One huge risk that has to be revealed is the chance of failing to get distribution and not making back negative costs. For example, independent films that don’t end up getting distributed never receive their expenditures back–leaving investors at a loss.

If the producer lies or hides information from the investors, he can be held criminally liable and the investors may be refunded in full.

According to the Securities Act of 1933, any sale of securities needs to be registered with the SEC or meet an exemption. Regulation D (“Reg D”) has three rules providing exemptions from registration requirements, which lets some companies offer and sell their securities without having to go through SEC registration.

For more information on these exemptions, please read the following publications: Rules 504, 505, and 506 of Regulation D. Further reading on film financing and securities issues can be found in Jon Garon’s book The Independent Filmmaker’s Law and Business Guide: Financing, Shooting and Distributing Independent and Digital Films or by consulting a local securities attorney.

Screenwriter Agreements

Rights Purchase Agreement

When a producer wants to buy a script or story from its writer or other owner, they use a rights purchase agreement. These agreements are typically called “assignment of rights” and often include the sale of “the sole and exclusive motion picture, television, photograph record, merchandising and commercial rights throughout the universe in perpetuity.”

A rights purchase agreement allows the buyer to obtain all intellectual property associated with a motion picture, not just the screenplay.

While agreements may convey certain rights, these same agreement often exclude other rights.

The amount of control the writer retains over their work generally falls to their bargaining power and what the buyer is looking for.

A rights purchase agreement is the most common and broad type of agreement used to buy a story or other written work from its owner. They can be used to purchase anything from a movie script to a book, and can easily be customized for various purposes.

Life Rights

A life rights purchase agreement is comparable to a rights purchase agreement. If a producer wants to make a biography about someone, they may buy that person’s story with this type of deal.

The copyright to a work can be bought from someone who holds the rights, most often when the original author is no longer alive.

If that’s the situation, then the life rights can be bought from the subject’s nearest and dearest who inherited these mementoes after their relative passed away.

You might think that some story rights of dead people are considered “public domain” if the person didn’t capitalize on their right to publicity while alive. However, there are risks in making a “bio pic” without having an actual verified story from the subject.

If you slander a deceased individual, you could be sued by their estate and/or prosecuted criminally in some jurisdictions.If you want to obtain errors and omissions insurance during the distribution process, it is crucial that you clear these issues first.

Option Agreement

An option agreement is a contractual agreement in which a producer buys the right to purchase a screenplay from either a writer or other owner. Unlike the Rights Purchase Agreement, an option agreement does not actually involve purchasing the right to use the screenplay.

The producer instead buys the “exclusive right to purchase” the screenplay later, for example, when they secure funding.

Option agreements are tools that producers use to put a property “on hold” while they conduct additional research and explore other options for making the film.

Options are usually less expensive than Rights Purchase Agreements because writers often receive a few thousand dollars for their work.

Options are popular in Hollywood, and it costs significantly less to option a screenplay than buy it outright. An option agreement is beneficial when a producer is hesitant about whether or not their financing will go through.

By doing this, you are essentially protecting yourself in the event that financing falls through as planned. If you were to purchase the rights to the property outright and then be unable to finance the screenplay, you would lose money on your investment.

With an option agreement, you can allow the agreement to expire and “cut your losses” if things don’t work out the way you wanted.

Writer Agreement

A writer agreement may be needed in two specific instances. One reason a producer would use a writer’s agreement is when a producer has an idea for a film (for example, based on a book or a Broadway play) and wants to convert this idea into a screenplay.

A producer would utilize a writer’s agreement in order to formally engage the writer’s services and adapt his idea into a screenplay.

A producer would use a writer’s agreement when they want to bring on a screenwriter for an final rewrite of an existing screenplay.

A writer’s agreement is not only useful for businesses wanting to engage a writer, but also for film and television producers when contracting writers from the Writer’s Guild of America. WGA contracts contain additional provisions that protect writers managed under their organization, so it’s important that these are taken into account when drafting any agreements.

Crew Contracts

The production of a movie is when the “magic” begins, and actors are brought in to start filming.

Preproduction planning usually requires enters into agreements for hiring cast and crew, renting shooting locations, and other essential elements.

Crew – Above the Line

There are two types of crew members: those who control the aesthetics of a movie (known as above-the-line crew members) and those who handle everything else (below-the-line crew members). Above-the-line crew members include the director, producer, and cinematographer.

The contracts of above-the-line crew members usually entail a flat fee. These are generally more intricate than what below-the line counterparts need because of the differences in work volume and nature between the two types of positions. For example, a director’s employment agreement would consist of payments for development and production stages, depending on when the director was originally hired. The agreement might also include profiting from box office sales if the movie does well.

Above the line crew are also given a daily allowance, called per diem, to cover any on-set expenses. These agreements usually include how above the line crew should be credited in a film as well, which can become controversial sometimes.

In addition, this type of agreement could give directors the right to hire other crew members and decide on the cast list.

A director’s control over a film project should be detailed in their employment agreement, this includes aspects such as the editing process and final cut.

A “right of first refusal” provision in an agreement with a director might give the director a right to choose whether to direct any prequels or sequels of the film before the producers can hire another director. Like writers, many experienced directors are members of the DGA.

All agreements between the DGA and producers are subject to the DGA rules and Basic Agreement, which outlines the most important terms of employment such as a description of producer obligations and compensation. The agreement should also include how prominently the producer will be credited on the final film product.

It is often more prudent to have a long and all-encompassing list of terms in the agreement, so as to avoid any issues during production that could be disastrous, namely near the end of filming.

Crew – Below the Line

“Below the Line” crew members are those who deal with hands-on aspects of filmmaking, such as lighting and sound technicians and script supervisors.

The biggest difference between “below the line” and “above the line” crewmembers is how they get paid: hourly vs. a flat fee. This distinction usually makes below the line agreements simpler than above the line contracts.

A deal memo can be used instead of a contract for below the line crewmembers. This includes personal information such as their name, address, emergency contact information, and social security number.

The deal memo also discusses each crewmember’s job title and rate of compensation, expense reimbursement, and credit.

Having a one-page deal memo is often a good idea because it concisely provides all the relevant information to everyone involved in the project.

With its brief and concise nature, a deal memo is simple to refer back to, an necessity in the event of a conflict.

Cast Agreements

The contracts for each cast member will differ based on their type. For example, a SAG actor will have a unique contract from a Non-SAG actor because the requirements set by the Screen Actor’s Guild (SAG) differs between the two.

In addition, if you’re thinking of hiring any minors or extras, you’ll likely need a different agreement for each group. A SAG actor’s standard contract includes common terms such as compensation.

SAG, however, requires that actors under their protection are guaranteed a certain amount of compensation. In return for this payment plan assurance, the producer gets to use the actor’s likeness in their film exclusively.

Not only does the producer have to agree to cover any SAG membership plans, but they also must pay for things like health and pension contributions. Most importantly though, is that agreements with SAG actors generally identify how they will be credited in the production, which can make a big difference down the line. Additionally, these contracts often include a section that reviews rights to dressing rooms and other necessary amenities.

Furthermore, a SAG contract establishes what types of promotion and publicity an actor must do. Also, producers often need approval from the actor before using any photos or other promotional materials.

Non-SAG cast members can have their agreements documented in a cast deal memo, just like the deal memo for below the line crewmembers.

A cast deal memo is a one-page agreement that includes the contact information, job responsibilities, compensation terms, and other benefits (e.g., travel and accommodation expenses) for an individual cast member.

A non-SAG actor’s contract memo will also state what type of credit the actor will receive and if they’ll be paid for future promotionals that use their pictures or likeness.

Non-SAG actors do not have nearly the same amount of protection as SAG actors because they are not represented by a union. This means that when these actors negotiate their employment contract terms, they have less bargaining power and legal knowledge than a SAG actor or his representative would.

A standard contract clause for all actors, SAG or non-SAG, is that their services are unique. If an actor were to breach the contract by working with a competitor, the producer has grounds to sue for injunctive relief.

Preventing an actor from working on another project during the timeframe set forth in their original employment contract is known as a restraining order. New York courts often allow these types of agreements, provided they are reasonable in both time and scope.

If you want to cast minors in your film, you have to use a different type of agreement and the minor’s legal guardian must sign it. This agreement usually only spans one page and producer gets the lifelong exclusive rights to the minor’s image and likeness.

Most people are unaware that child actors can be in SAG. If this is the case, then the minors would be under not only the terms of their employment agreement, but also additional rights and protections set by SAG rules. An actor in this situation would need a more complex agreement than other cases.

It is essential to be mindful of the set regulations in the state where filming is taking place. For example, California necessitates a chaperone on set and has limits concerning how many hours minors are able to work within a given time period.

Using too many extras in a feature film can be complicated, but there are times when it is necessary. Producers usually have a standard extra agreement that states the pay and credit given to extras.

If the extras belong to SAG, their employment contracts must include terms that meet all requirements set forth in the SAG rules.

Although actors might not be getting paid for their role as an extra, producers should still have them sign a release agreement. This allows the producer to use the actor’s name and likeness in the film.

The agreements used when hiring cast members can be simple or complex, depending on the individual needs of the participants and any relevant union rules.

For a complete list of SAG rules and regulations, please visit their official website.

Location Agreements

Filmmakers lease locations for specified periods of time and at a certain price. The agreements that secure these leases are important because they outline the filmmaker’s rights and obligations.

The location agreement also allows for rescheduling or re-shoots in case of bad weather or other unforeseen circumstances.

The most important clause in a location agreement is the one that protects the owners of the premises from damage and tort liability arising out of filming. This will allow producers to use the film shot on location for other projects without worry.

Lastly, filmmakers usually have a disclaimer in their location agreement that all depiction of the location is imaginary and such filmography does not necessarily reflect what the actual location looks like.

Post Production

Postproduction is the period in movie production that occurs after shooting has wrapped and the film is being edited. This requires the assistance of editors and composers.

There are a few different types of agreements that are often needed during this time period, such as editor agreements and composer agreements.

Like actors, editors and composers may have an agreement with a guild or union that could affect the terms of their contract. However, the agreements will likely include the length of employment, pay rate and who owns the final product.

Producers usually hire editors on a “work-for-hire” basis

This is so that the producer can keep ownership of the edited product. Compensation is often times based on either how many edits the film needs or how many compositions are needed to be written by the composer.

A film will oftentimes use several editors, so it is crucial to write the agreement in a way that allows the producer to keep hiring more editors as necessary.

Any film’s success heavily correlates to two key components: the incorporation of music and sound effects, as well as clips from different films and TV programs. Using these tools helps create a more impactful presentation. If you’re looking for further guidance in this realm, be sure to read our music counsel Barry Heyman’s recent article discussing the types of agreements needed before using music in your own film or television show.

In Conclusion… Film Contracts and Legal Agreements to Protect Filmmakers in 2023

Making an independent film isn’t easy– it frequently necessitates haggling and striking deals throughout every stage of the filmmaking process, from pre-production to production to post-production.

The purpose of this article is to provide a broad overview of the different types of agreements used in independent film production.

This is not an exhaustive list of agreements necessary for the production of a feature film. Different films will have unique issues that require their own set of agreements.

There are times when it would be beneficial to hire an attorney who specializes in filmmaking and has substantial experience.