In this video, you will get answers to these questions:
- What is one term every artist should know?
- What is recoupment?
- Why is recoupment so vital for an artist?
- What is a general rule when signing a business contract?
What is one term every artist should know? Recoupment. I’m Aaron Hall, a business attorney in Minneapolis, Minnesota. Let’s talk about recoupment. What is it? Why is it so vital for an artist? Let me give you an example because that really brings recoupment to life. Imagine that you are a guitar player and you’ve written some great songs and you’ve started to do some live shows and all of a sudden you get picked up by a record label and that record label is going to spend a lot of money promoting you, helping you tour, helping you sell records, et cetera. As part of your record label deal, the word recoupment showed up in the contract. Basically it said that the record label is entitled to recoup from your portion, its costs associated with you. So a year goes by, a couple of years go by, you have millions of dollars coming in.
You know that you’re selling out concerts and stadiums, you’re selling merchandise, everything’s going great, but you’re wondering, where’s that money? What happened to this? Usually there is a recoupment provision in the deal with the record label in your contract. It says anything spent to promote you is deducted or recouped from your portion so that means the record label gets their cut and then all these expenses come out of your cut. That is why it is so vital when you are signing any sort of contract, especially signing away the rights to your work, your intellectual property, your labor, your future, that you have an attorney experienced in these issues analyze the contract, looking out for you, looking out for your behalf in your interests and talking about are you comfortable with what you are signing away? There are some big name artists who have had litigation over these issues and lost because they said they didn’t realize what they were signing at the time they signed it.
As a general rule, when you’re entering a contract with another business, you can’t argue, ” I didn’t understand it or I didn’t read it.” Those are failed arguments. There’s no value in arguing, “Oh, I didn’t know what I signed or I didn’t understand or I didn’t read it.” In general, for business agreements, courts will not give any credibility to those sorts of arguments. You are assumed to have read it and to have understood it and consulted with an attorney, to the extent you didn’t. In some extraordinary circumstances, you can overcome this, but in the setting where you are a musical artist and you’re doing a deal with a record label, that would be very difficult. So what is recoupment? It is simply the right for one party to recoup costs out of the portion owed to another party.
So for example, the record label recouping from the artist out of pocket expenses or recouping from the artists portion of the proceeds. I’m Aaron Hall, a business attorney in Minneapolis, Minnesota. I do these educational videos to help people understand legal topics and avoid legal problems. If you’re interested in more of these videos, you’re welcome to subscribe to this channel, just click the subscribe button. In the description below is a link to aaronhall.com for additional information on this and other topics. Please see the disclaimer below. There’s a disclaimer which talks about, “Look, this isn’t a replacement for getting legal advice. I’m simply doing these general educational videos to help you spot issues to discuss with your attorney.” Again, I’m Aaron Hall, thanks for joining me here today.