First aid when drawing up a commission contract with an international maker
Resumption of activities
As everyone knows, coronavirus and the measures taken to counter the pandemic have put international collaboration in the arts and culture sector on hold. And everyone will also realise that sooner or later, such activities will resume. DutchCulture has worked with its partners to draw up a guideline for committing to prospective collaborations, despite the continuing uncertainty. For example, what do you commit to on paper when it’s not yet certain whether the production can actually take place? This article explains how it can help to include an elaborated ‘force majeure’ clause in the commission contract.
A deal is a deal?
Deals are struck on the basis of trust, and with the expectation and the obligation that the agreements will be fulfilled. Consider for instance a dancer who receives a financial reward for participating in a dance performance. Many productions have been cancelled or postponed in the past year on account of the government’s pandemic measures. Cultural organisations were permitted to receive a very limited number of visitors or had to close up shop entirely. The European entry bans and/or quarantine obligations meant that individual makers were unable to attend rehearsals, or could not show up on time.
If parties are unable to fulfil the agreements, then the stipulations of the contract will need to be re-examined. Many agreements include a clause that regulates what happens in the event of a situation that occurs wholly beyond the control of either the client or the contractor. This is known as a force majeure clause. This clause generally clarifies whether a situation qualifies as force majeure, and then how the agreements should be modified or, in a worst-case scenario, be cancelled. Drawing up a carefully worded force majeure clause is extremely important to ensure that both the client and the contractor understand and accept what the situation is.
What is force majeure and what are unforeseen circumstances?
Force majeure can mean a temporary or permanent, partial or complete impediment to fulfilling made agreements. If an impediment is of a permanent nature, then the binding force of the agreement is usually permanently annulled. As an example: a singer whose vocal cords have been permanently damaged by coronavirus, making it impossible to ever sing again, will be released from the obligation to perform.
- Continue reading on force majeure
Force majeure is described in the Dutch Civil Code under article 6:75. This provision serves as a safety net for situations where parties did not include a force majeure clause in their agreement, after which a situation occurs that impedes the fulfilment of the agreements. However, the agreement itself remains the starting point, and then specifically how this agreement indicates which situations do and which do not qualify as ‘force majeure’.
Certainly, since our familiarity with COVID-19 and the subsequent government measures, it is unlikely that these general legal rules will offer much relief. It is now reasonable to assume that parties are aware of the risks so that if they make agreements without including a force majeure clause, they will have chosen deliberately to enter into such a contract.
Unforeseen circumstances (also referred to as hardship) can consist in a temporary or permanent, partial or complete impediment to fulfilling made agreements, as the result of an ‘unforeseen’ situation. This ‘unforeseen’ situation must have arisen after the contract took effect.
- Continue reading on hardship
What matters is that the parties did not take account of either the risk or the consequences of the arisen situation, either explicitly or implicitly, when drawing up and entering into the contract. With respect to the corona crisis as an unforeseen situation, this is generally assumed to apply for contracts made before March 2020, when it wasn’t yet clear that the government would impose a lockdown. The legal provision is set out in article 6:258 of the Civil Code. Ever since we did become familiar with COVID-19 and the resulting government measures, an appeal to unforeseen circumstances is unlikely to be accepted, unless the crisis took a clear and unforeseen turn for the worse.
Why is it important to include a force majeure clause in a commission contract?
A force majeure clause offers support if a situation occurs that hinders the fulfilment of agreements. By including ‘if…then’ scenarios in the force majeure clause, you create clarity concerning the consequences for the collaboration, if such a scenario actually arises. For example, in the case of a dancer who is unable to travel to the Netherlands due to the entry ban, it could mean agreeing to arrange a different date. What matters is that organisations regain the confidence to start making plans again, by creating clarity regarding situations in which the plans cannot be carried out or only in a modified form.
What do you include in a force majeure clause?
Which scenarios are relevant for a force majeure clause in a commission contract between an organisation and an international maker? Where international collaboration is concerned, it is important to take account of aspects that can restrict the mobility of individual makers or companies. Consider again the dancer coming from abroad, who may be affected by an entry ban or by a mandatory quarantine period. Government measures may also prevent a production from taking place on site; for instance due to the restriction on the number of visitors, or the obligation to present an anonymised negative test result or vaccination certificate. Below are two examples of force majeure provisions and elaborated scenarios, to assist you when drawing up a commission contract.
The mobility and production schemes described below illustrate the possible force majeure scenarios that may occur. The third and last scheme describes the consequences that client and contractor can connect to such scenarios. If a production cannot go ahead physically, do you want it to go ahead online, or do you want to postpone the physical event to a later date? It is up to both parties to determine which force majeure scenarios to stipulate in the force majeure clause, as well as the subsequent consequences.
- Example Clause (Dutch)
In acht nemend dat COVID-19 heerst en nog niet onder controle is, worden onvoorziene, dwingend opgelegde (overheids-)maatregelen die als doel hebben de verspreiding van COVID-19 te remmen en die de schuldenaar tijdelijk of definitief ervan weerhouden om te presteren aangemerkt als een overmachtssituatie.
- Wanneer deze overmachtssituatie optreedt, dient de schuldenaar dit binnen een termijn van … dit schriftelijk aan de schuldeiser mede te delen.
- Bij het optreden van de overmachtssituatie wordt het contract opgeschort tot een moment waar de situatie het toelaat voor beide partijen om hun verplichtingen weer na te komen. Beide partijen zullen zich tot het uiterste inspannen om binnen x termijn t.o.v. de originele datum/data een nieuwe datum/data te vinden om de verplichtingen alsnog na te komen.
- Wanneer het niet mogelijk is om, al dan niet binnen de vastgestelde termijn, de verplichtingen op een ander moment na te komen wordt de overeenkomst opgezegd. Prestaties die reeds geleverd zijn en niet direct verhinderd worden door de overmachtssituatie dienen hun tegenprestatie in proportionele zin te ontvangen. Voor de overige kosten zullen beide partijen hun eigen kosten voor hun eigen rekening nemen.
- Example Clause (English)
a. Force Majeure means any event or circumstance related to the COVID-19 (Coronavirus Disease 2019) outbreak, anywhere in the world, beyond the reasonable control of the Party affected that prevents or delays the performance by that Party of any of the obligations under this contract.
b. Performance by any Party hereunder shall be excused if and for so long as breach of such performance is or shall be caused by Force Majeure and following prompt notice thereof to the other Party.
c. If a Party fails to perform hereunder as a result of a Force Majeure, such Party shall be required to fulfil its duties hereunder within a reasonable time after the Force Majeure ceases to exist, unless it has become apparent that (timely) performance of the contract has become impossible with a view to (the commencement of) the scheduled project;
d. In the event of a Force Majeure the Organiser shall enter into good faith the possibilities to (i) meet the scheduled opening event of the Project on (date), or (ii) to postpone the Project, or (iii) to cancel the Project altogether and terminate the contract;
e. In case of termination of the contract by reason of Force Majeure, the Organizer shall reimburse to the Contractor the work realized until so far. Parties trust they will agree on a reasonable amount in case this event occurs. In case the Project is postponed, to treat the payment for the delayed Project as an advance.
f. Without prejudice to the above as a result of the termination of the contract by reason of Force Majeure, neither of the Parties shall incur liability towards the other Party for any damages whatsoever.
Mobility and Client's Force Majeure
- Does the scheduled activity fully depend on the physical presence of certain people? Or are online alternatives conceivable?
- Online alternatives are conceivable. Consider including in your contract an online ‘plan B’ to cover for the event that a physical convention of people or audience proves impossible. Try to specify in your contact exactly when the activity switches to plan B. Consider possible impediments such as an entry ban or mandatory quarantine periods.
- Fully depends on the physical presence of certain people.
- Does this include people who must perform cross-border travel? Does this include people from outside the EU? Or do you need to travel to a country outside the EU?
- Yes. Take account of entry restrictions for individuals traveling to the Netherlands from outside the EU and of the mandatory quarantine period. Bear in mind that, to lift entry restrictions, the EU considers the number of infections and vaccination rates in the country of origin. The European Commission has indicated that entry bans may possibly be relaxed (at a future date) for people who have been fully vaccinated with an EMA-approved vaccine (both shots if required).
- No. Take account of a limited availability of forms of transport such as flights, trains and coaches within the EU, a possible obligation to show a negative COVID-19 test result when boarding, and the obligation to enter into quarantine when arriving and often also after returning home. Remember that such a ‘double’ quarantine can hinder other professional opportunities. And please note: travel and health care insurances may not be valid when undertaking journeys to countries that the Dutch Ministry of Foreign Affairs has designated as colour code orange or red.
Production and Contractor's Force Majeure
- Are any people involved in the production without whose presence the production cannot take place, or only in a strongly modified form?
- No. Everyone is essentially replaceable.
- Yes. Examine for each of the individuals concerned exactly what it will mean if they cannot participate because of a COVID-19 infection. Which participants can be replaced so that the production can take place, and which cannot be replaced so that the production would need to be postponed or cancelled? How will the infection of one individual affect other people involved (with whom they have had contact)? What are the guidelines regarding quarantine and COVID-19 testing?
- Are any protocols available to ensure people can work safely? And in the event that both parties have their own protocols, are these compatible?
- No. Draw up a temporary protocol to ensure safe working conditions. Remember that individuals’ consent to the procedures/protocols will depend on the infection rates current at that moment and on people’s personal sense of safety, and that these are permanently subject to change.
- Yes. Check with the individuals concerned whether they consent to working according to the protocol/the protocols. Remember that individuals’ consent to the procedures/protocols will depend on the infection rates current at that moment and on people’s personal sense of safety, and that these are permanently subject to change.
- Are any of the participants expected to present a negative COVID-19 test or (an anonymised) vaccination certificate?
- Yes. Stipulate how recent the COVID-19 test should be at the moment of participation and which party is responsible for any costs incurred. Also, if participants are personally responsible for getting tested, explicate whose responsibility it is to point this out to them. Also make clear that, if participants are unable to show a negative test result (at the required moment), they cannot participate in the production. As an alternative, the host could be asked to provide for rapid tests.
- Does the contract depend on venue capacity?
- Yes. See if you can include an anticipated venue capacity in the contract. Then also determine what happens if the maximum venue capacity must be reduced. For example, stipulate at what capacity level the production will be cancelled or can take place in a modified form.
Agreements cannot be fulfilled, for the time being: what now?
In the event that one or both parties cannot fulfil the agreements as a result of restrictive COVID-19 measures:
- Is it possible to deliver the performance in another manner?
- Yes. In what manner would this take place, then? For which complications regarding the mobility and production level would this work, and for which complications would it not work? Is a performance delivered in another manner entitled to the same remuneration? If not, what would be a suitable remuneration, then?
- Is it possible to postpone the performance to a future point in time?
- Yes. What is the maximum term with respect to the original date/dates within which the performance can be postponed? What happens if you cannot agree on a new date or dates? The lifting of government measures means in principle that a suspended production can once again go ahead. Consider including a cancellation clause in the contract.
Agreements cannot be fulfilled, definitively: cancellation
If it is not possible to deliver the performance in another manner or at a future date, then it is sometimes an option to cancel the contract. If both parties wish to cancel, then it will be necessary to determine how performances already delivered can be remunerated proportionally, without disproportionally burdening one of the parties. Some suggestions:
- Performances delivered are remunerated proportionally
Each of the parties will be responsible for all other costs incurred. For this option, it is important to have determined in advance which performances and what remunerations will be delivered, and at what moment. For instance, instead of agreeing to a single lump sum for the creation and performance of a show, you can break this down into costs for preparations, rehearsals, technical rehearsal, administration and planning, and indicate at which points in time these must be performed. Then, if it comes to cancellation, the performances already delivered can be remunerated proportionally, and the outstanding performances remain each party’s own responsibility.
- Performances are considered to have been delivered proportionally based on a timeline, for which a proportional remuneration is owed
For example: if an exhibition, production, day of filming or show is cancelled more than 6 months in advance, then 20% of the remuneration is owed; if cancelled 3 to 6 months in advance, the sum is 40%, at 1 to 3 months it is 60%, and if less than one month in advance, 80%. Do not forget then to stipulate whether costs already incurred, for example for preparations, travel and subsistence costs, and so on, are included in these calculations or whether these should be remunerated separately.
- As an alternative with a similar outcome: include a notice period in the contract. For example, both parties can cancel a contract at no charge up to 6 months before performance is due. If cancelled 3 to 6 months before, then 40% of the agreed remuneration is owed, 1 to 3 months before means that 80% is owed, and the contract cannot be cancelled with less than one month to go.
- You can choose to not make any specific agreements on how the remuneration will change as a result of changing circumstances, but to agree instead under what circumstances the remuneration can be renegotiated, and when not.
For example, remuneration will not be renegotiated if a participant drops out but can be adequately replaced, but will be renegotiated if the venue capacity is reduced or the show has to be cancelled because an irreplaceable person drops out.
Supplementary research and information have been collected and edited by Laurens Meijer and Michiel van der Padt of DutchCulture's Mobility Info Point. Please don’t hesitate to contact us in case of any questions.
Please remember that, although the information presented here has been compiled with the utmost care, any action you undertake based on this information is entirely at your own risk.