Posted: July 29th, 2020
By: Jordan Peterson
At the outset of COVID-19, the entertainment industry came to a screeching halt. New York and California’s governments mandated that live theaters and production studios close and placed them late in their reopening plans—phase 4 in New York and stage 4 in California. Recently, entertainment unions have led efforts to safely open Broadway and recommence filming.
But while Broadway remains closed until January 2021, and Hollywood takes its first careful steps back into production, the question that producers, talent, and distributors are asking is, “Are my contracts still binding?” For many, the answer can be found in the often-overlooked force majeure boilerplate clause.
A force majeure clause (sometimes referred to as the “acts of God” clause) is a contingency paragraph that protects the interests of one or more parties in the event of uncontrollable and unforeseeable circumstances such as acts of God, invasion, natural disasters, or serious illness. These clauses appear in almost every sophisticated modern contract, but do they apply to COVID-19? Not every situation is clear, and not every force majeure clause covers the same events. Yet, force majeure clauses are being invoked to deal with intellectual property issues, pay-or-play deals, entertainment union contracts, and distribution deals.
Production studios deal extensively with entertainment unions and their standard union contracts. Members of the Directors Guild of America have a great deal of protection; their basic contracts stipulate that directors must be offered their jobs back despite force majeure hiatuses if the production resumes within six or twelve months. Additionally, members of the Screen Actors Guild use a variety of contracts. Depending on an actor’s role in a production, the invocation of force majeure clauses has caused production studios to suspend them without pay, continue to pay them despite the hiatus, or offer a small amount of emergency compensation. Furthermore, members of the Writers Guild of America do not have force majeure clauses in their basic agreements. Still, their contracts give writers the option to terminate their contracts and find other employment if they are suspended for five weeks.
Force majeure clauses in distribution deals could offer significant protection to production studios who want to delay a film’s release date or switch to streaming. COVID-19 has hurt traditional film distributors and production studios alike by ceasing production and shutting theaters’ doors. Recently, film distribution that bypasses the big screen could seem like a film’s best option for success. Disney’s Onward and Artemis Fowl releases substantially contributed to the success of Disney+. And streaming services like Netflix, Disney+, and Hulu have all seen increased subscribers as everyone stays at home.
However, new films moving to streaming services would continue to harm brick-and-mortar distributors who have already lost substantial revenue. The major distributors have all announced plans to reopen their locations this month, but with audiences required to wear face masks and a shortage of new releases, it remains to be seen whether local distributors will survive COVID-19. After all, they still have to pay rent and property taxes, and there is no force majeure clause in the Internal Revenue Code.
In any case, it will be interesting to note whether standard entertainment contracts a year from now have added language to include (or exclude) a pandemic from their force majeure clauses.
Jordan Michael Peterson is a rising second-year law student at Wake Forest University School of law. He holds a Bachelor of Arts in Theatre Arts Studies from Brigham Young University. Upon graduation, he intends to practice entertainment law.