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In my experience, there are a few terrible mistakes that some people make in their game development contracts that can lead to serious trouble down the road. I’ve written about a few that have to do with a website or mobile app’s Terms of Service before. Today I want to talk about a few deadly mistakes that crop up in licensing or independent contractor agreements.
Mistake #1: Failing to properly define the scope
The “scope” in a contract simply means how far-reaching the terms of that contract are. Suppose that you are developing a game that has had a successful Kickstarter, to be later published on Steam. You have an agreement with a designer that you’ve contracted to do the game’s UI. You draft an independent contractor agreement that sets up a payment structure, including an up-front fee and royalties that will be paid out of net profits.
Imagine, though, that the contract is silent on the scope of the agreement. Is the artist entitled to part of the profit from the Kickstarter sales that have already happened? What about sequels, expansion packs and DLC? A “remastered” version or a port to a console or handheld?
Depending on the understanding at the time the contract is written, the various parties could have different views on just how far the definition of net profits goes. If it were to go to court, various factors would be taken into account, including standard industry practice and the past dealings between the parties. However, the best way to avoid trouble is to plan for it in the first place. Therefore, it is vitally important to get this all in writing, preferably by a game lawyer who understands how the industry works and monetizes its products.
Mistake #2: Failing to get an escape route if things go wrong
The recent Yogscast Kickstarter failure brought up an interesting issue when news came out that one of the artists was paid $35,000 up front, but left after two weeks of work. The contract under which that artist was working presumably failed to allow the agreement to be terminated in order for the developer to get some of the money back. This, as you can imagine, is usually a BIG oversight.
Most contracts include a few clauses that can protect against this happening.
First, the payment terms will not give all the money up front. Rather, the money is paid in installments, whether weekly, monthly or quarterly. Other agreements make payments upon the completion of various milestones. That way, the money stays in the hands of the developer until more and more work is completed.
Second, the contract includes a provision for terminating the agreement. This is usually enacted when a few different events occur, such as failing to substantially complete the terms of the agreement or if one party or the other goes bankrupt. This allows a developer to stop payment due to non-performance and have the legal power to get money back (usually minus the reasonable value of work already performed).
It may be helpful to have the guidance of a game lawyer that can walk the developer or contractor through the various contract clauses to help ensure that they get the right protection in their agreement. Set up a free consultation today. Also, check out my FREE legal eBook for an overview of this and other game development issues.