NOW CAN WE KILL THE LAWYERS?
ADMAP MAGAZINE

On this page about a year ago, I shamelessly quoted Burt Bacharach hopelessly out of context by asking, "Why is breaking up so very hard to do?" Of course, Burt was talking about love affairs, whereas I was concerned with the relationship between advertisers and their agencies.

The advertising recession has prompted many "couples" to look again at the terms of their relationship. They often discover that in the haste to consummate their relationship following a successful pitch, neither side felt the need to finalise a written contract. Now, as clients look to reduce their expenditure and agencies fret over the security of their revenue streams, they both repent at leisure, trying to tease out some certainty over various key questions. Who owns copyright in the advertising created? How much notice is the agency entitled to?

It does not have to be this way. This autumn, the Incorporated Society of British Advertisers, the Institute of Practitioners in Advertising, and the Chartered Institute of Purchase and Supply launched the second edition of their suggested terms for client/agency appointments. These replace the first set of suggested terms issued by the three trade associations in 1998 for appointments covering television, radio, cinema, press and poster advertising. The fact that the three bodies have returned to the negotiating table along with Lewis Silkin to produce updated terms is testament to the popularity of the original initiative with their respective members.

The three organisations represent opposing sides of the negotiating process so the suggested terms are a creature of compromise. Wherever possible, a single provision for a particular issue is adopted, which is intended to be a fair balance of the legitimate interests of both parties. In some instances, however, all three bodies simply could not recommend that their respective members adopt the same approach. The parties' interests over ownership of intellectual property rights, for example, are simply too divergent. Nevertheless, negotiation can now be confined to debating the principle to be adopted. Once that has been agreed, a suitable form of words is provided.

Some large advertisers with massive bargaining power may prefer a contract drafted entirely for their own benefit, that can be offered to agencies on a 'take it or leave' it basis. That more traditional strategy may be tempting, but it has disadvantages. An attempt to impose one-sided terms will often result in a tortuous process of negotiation. Legal fees will mount up and the abundant goodwill existing at the start of a new business relationship may be exhausted by protracted, detailed argument.

Anyone familiar with the original terms will notice some key changes. The most obvious is the introduction of three separate versions for full-service, creative-only and media-only appointments. This will save time and energy in removing superfluous provisions and re-formatting.

The contract now includes optional wording for a 'present assignment of present and future copyright' whereby the agency transfers ownership of copyright to the client at the start of its appointment. A reasonable compromise is for the agency to retain copyright until it had been paid, but some advertisers insist on an up-front assignment. This way, at least the wording is tailored to meet custom and practice in the industry.

A clause limiting the liability of the agency has been included to reflect what is typically found in contracts for services. It excludes liability for indirect or consequential loss, and limits liability for direct loss. The agency should negotiate a limit that reasonably reflects its remuneration and the amount of any professional indemnity insurance it is obliged to obtain.

Various other changes have been made to make the contract more user-friendly. The guidance notes and instructions to be deleted prior to signature are now in grey boxes. Defined terms are arranged alphabetically in schedule 1. Other provisions have been amended to reflect recent case law and new legislation.

A clearly drafted contract that strikes a fair balance between client and agency will provide clarity and certainty about their respective obligations, enhancing the relationship and even the quality of the work produced. When the relationship does eventually end, parting company may not result in time-consuming and expensive litigation to decide whether the client owns the copyright in the advertising or the agency is entitled to a notice period.

There may not even be any need to kill all the lawyers. They may just become extinct.

Brinsley Dresden is head of advertising law and partner in Lewis Silkin solicitors. Previously he was in-house lawyer to BT's advertising department and is a member of the European Advertising Lawyers Association.