With the rise of the entertainment economy, we often see a celebrity breaking a contract with a brokerage company online, and a celebrity switching from one live streaming platform to another is sentenced to a high penalty for breach of contract. So, what kind of contract is the artist agency contract that frequently appears in people's sight?

 

In fact, artist agency contracts belong to unnamed contracts, so their nature is often controversial. Before 2013, artist agency contracts were usually recognized as commission contracts, in which the artist, as the principal, had the right to terminate the contract at any time without any reason, known as the "arbitrary termination right". At this point, the artist is in an advantageous position in the contract. Since the "Lin Renewal Termination Case" in 2013, the brokerage contract has been recognized as a "comprehensive contract" with various properties such as commission, mediation, and labor, so artists no longer have the right to terminate it arbitrarily.

 

For artists and internet celebrities who already have a certain position, although the "artist" in the artist agency contract has lost their dominant position, they still have the right to speak. The real disputes caused by the artist agency contract are mostly just the guardians of internet celebrity anchors, trainees, and some child stars who have just started to flow.

 

Taking Cai Xukun and Shanghai Yihai Film and Television Cultural Communication Co., Ltd. (hereinafter referred to as "Yihai Company") as an example, in November 2015, Cai Xukun, who was under the age of 18, signed an eight year brokerage contract with Yihai Company as a trainee, and the brokerage contract contained a large number of domineering clauses. In early 2017, Cai Xukun proposed to terminate the contract with the company; In February 2018, Cai Xukun officially sued Yihai Company; On April 25, 2018, the first instance verdict was reached, and it was determined that the contract was terminated in accordance with the law. Cai Xukun won the lawsuit, and the other party appealed; In January 2019, the second instance was held; On February 14, 2019, the ruling allowed the appellant Yihai Company to withdraw the appeal, and the first instance judgment took effect; Afterwards, Yihai Company filed multiple lawsuits under the name of "unfair competition". As of June 1, 2021, the first instance civil ruling on the unfair competition dispute between Yihai Company and Xinyi Cai Xukun Film and Television Culture Studio was made public, and the ruling result was that the plaintiff Yihai Company was allowed to withdraw the lawsuit. At this point, the contract dispute between Cai Xukun and the former brokerage company has been ongoing for nearly 4 years.

 

Cai Xukun successfully terminated his contract without paying any penalty, but not all artists have such good luck, such as SNH48 Huang Tingting, Wang Ziyi who failed to terminate their contract, and even more so, Jiang Jinfu who not only failed to terminate but also had to pay a commission of two million.

 

The root cause of the above disputes is the original artist agency contract signed. So what aspects do artists need to pay attention to when signing or reviewing an artist agency contract?

 

1、 Contract term

The term of an artist agency contract is generally as short as three to five years, and the longest can reach ten or even twenty years. This is because in the business model of China's cultural and entertainment industry, in most cases, brokerage companies have a greater profit margin in the later stages of artist development, so the contract term is generally not too short, mostly eight years.

 

There are no restrictions on the term of the contract in Chinese law. But in countries with relatively developed entertainment industries, there are restrictions on the maximum term for brokerage firms. According to California law, the contract between an artist and a brokerage company cannot exceed seven years. If the contract exceeds seven years, the contract can be terminated early if certain conditions are met.

 

2、 Renewal terms

In a brokerage contract, it is important to note whether there are automatic or priority renewal clauses. Some artist agency contracts may stipulate that after the contract expires, under the same conditions, the agency company has the priority to renew the artist's contract or must renew or automatically renew the contract if the income within the agency period reaches a certain level. For example, in the priority renewal dispute between Hu Bing and his Guangzhou brokerage company, the priority renewal right was deemed valid by the arbitration tribunal. Therefore, it is important to carefully pay attention to the specific agreed conditions for the renewal terms.

 

3、 Penalty for breach of contract

In the artist agency contract, in addition to the high penalty clause for terminating the contract, there is also a separately designed penalty clause for breach of contract during the contract performance period. However, it is worth noting that in judicial practice, courts usually do not support a high proportion of high liquidated damages arising from termination. Article 585 of the current Civil Code of the People's Republic of China (hereinafter referred to as the "Civil Code") stipulates: "The parties may agree that when one party breaches the contract, they shall pay a certain amount of liquidated damages to the other party based on the circumstances of the breach, and may also agree on the calculation method of compensation for losses incurred due to the breach.

 

If the agreed liquidated damages are lower than the losses caused, the people's court or arbitration institution may increase them at the request of the parties; If the agreed penalty for breach of contract is excessively higher than the losses caused, the people's court or arbitration institution may reduce it appropriately at the request of the parties

 

The penalty system in China is mainly based on compensation, supplemented by punishment. So even if the brokerage contract stipulates a high penalty for breach of contract, its basis is still actual losses, such as the initial investment of the brokerage company. There may be some considerations for expected benefits, but not much.

 

The penalty clause designed separately for breach of contract during the performance of the contract is roughly the same as the penalty for termination of the contract, and is mainly based on the actual losses of the brokerage company.

 

4、 Termination clause

For artists, it is particularly important to pay attention to whether there is a unilateral termination right in the brokerage contract, that is, the contract clearly stipulates the obligations of the previous brokerage company and designs corresponding termination clauses. Once the brokerage company encounters this situation, the other party has the right to directly terminate the contract according to the contract.

 

In addition, according to Article 563 of the Civil Code:

 

In any of the following circumstances, the parties may terminate the contract:

（1） Due to force majeure, the purpose of the contract cannot be achieved;

（2） Prior to the expiration of the performance period, one party clearly indicates or indicates through their own actions that they will not perform the main obligation;

（3） Either party delays in fulfilling its main obligation and fails to fulfill it within a reasonable period after being urged to do so;

（4） Either party delays in fulfilling its obligations or commits other breach of contract, resulting in the inability to achieve the purpose of the contract;

（5） Other situations stipulated by law.

 

For an indefinite contract with continuous performance of debts as its content, the parties may terminate the contract at any time, but shall notify the other party before a reasonable period These situations belong to fundamental breach of contract, and the opposing party therefore has the legal right to terminate the contract.

 

Since the "Lin Xin Termination Case" in 2013, judicial decisions have no longer fully supported artists, and artists no longer have the right to arbitrary termination. Therefore, in terms of contract termination, artists must pay more attention. If they cannot determine whether the company is fundamentally in breach, it is best to keep evidence of the company's breach and prepare chips for termination and negotiation.

 

5、 Other matters

In addition to the more important clauses mentioned above, attention should also be paid to the following clauses:

 

1. Brokerage scope. Confirm whether the scope of brokerage is full contract, partial contract, or agency contract. If the contract stipulates full agreement, all entertainment affairs must be handled by the company.

 

2. Divided into proportions. In general, there is a decreasing distribution model for brokerage companies, but there are also situations where the proportion of relatively strong artists is opposite.

 

3. Cost deduction factors. The cost is mainly divided into brokerage service costs and artist living costs. In order to avoid disputes, it is possible to clearly list which items need to be deducted in advance and which should be borne by the brokerage company when distributing profits, based on the obligations of the brokerage company.

 

4. Tax burden. How to bear the taxes and fees arising from the brokerage contract, whether the agreed payment amount includes taxes, and whether the brokerage company is responsible for withholding and paying taxes and fees are particularly noteworthy. From the Fan Bingbing incident in 2018 to the Zheng Shuang incident this year, all of these issues were caused by improper handling of taxes and fees. Therefore, when signing the brokerage contract, special attention should be paid to whether the responsibilities and agreements of taxes and fees are compliant.

 

5. Special terms. There may be specific clauses in the contract for specific counterparties. For example, when the opposite party of the contract is a minor, special clauses for minors can be stipulated. During the period of under 18 years old, the agency needs to ensure the artist's right to study and study, the artist can refuse work that requires close contact with the opposite sex or physical exposure, the company needs to fulfill necessary safety precautions for the activities and training arrangements arranged by the artist, and so on.

 

In most disputes over artist brokerage contracts, the judicial appeal of artists is often termination, and brokerage companies often want to obtain liquidated damages the most. When signing contracts, artists are often in a relatively disadvantaged position and are prone to accidentally signing unequal treaties. In today's booming entertainment economy, signing artist agency contracts requires a more cautious attitude. If various matters are clearly defined in an artist agency contract from the beginning and both parties follow the agreement, it will avoid many unnecessary disputes.