"Famous Last Words"

Standard Contracts (September 2008)

Dear Jim:

We're working with a publisher who wants to sign a dev contract that contains standard terms and conditions. The publisher says this will speed up future contracts because all the terms will be settled once and for all. When they call us for more work, all we have to do is agree on the payment schedule, milestones, and a few other terms. It seems like a good idea. Anything here we may be missing?

East Coast Developer

Dear East Coast:  

Contract negotiation can be a long, difficult, and expensive process. So it is hard to find fault with anything that promises to make it faster, easier, and cheaper!

But here are a couple observations to keep in mind if you choose to go down that road.

Despite the appeal, one size does not necessarily fit all. The deal you negotiate now may not really work for the game you are asked to develop next time, or the time after that. Circumstances change, priorities change. Your own goals as a company may change. But once you've locked into terms, there may be pressure exerted from the other side not to alter them. After all, anything you ask for is likely to improve the deal for you.

Even though you have negotiated standard terms, it is important to reread the full agreement (including the standard terms) in the context of the current deal on the table. Some things may require reconsideration.

For example, the complexity of a new project may merit greater time to correct rejected milestones, or to fix bugs that are uncovered during play testing.

Your standard terms may contain limitations on the types of competing products you could develop (these are known as “exclusivity” or “non-compete” clauses). Unless the language is artfully negotiated, each time you sign a new deal that incorporates the standard exclusivity or non-compete terms, your ability to take other work considered non-competing could further narrow. The worst case scenario is that you could be foreclosed from taking any work outside of the narrowest sliver not covered by the standard terms non-compete spread across several games created under your standard terms!

Similarly, if the standard terms were to permit cross-collateralization of advances and royalty streams, there could be a risk of all your deals under the standard terms could be cross-collateralized against each other. This would make the possibility of seeing royalties even more remote!

Of course, these and other less than favorable contingencies may be avoided through artful negotiation. And any proposal to enter into this sort of standard terms deal will certainly place a premium on forward thinking.

In my experience, use of standard terms works best where the parties intend to work together on a series of shorter development time projects that use similar technology and for which there may be some overlapping of assets.

But in any case, even where your deals incorporate negotiated standard terms, be sure to include your lawyer in the deal and the contract.

He or she can help review the deal in the larger context of whether there is anything in the standard terms that may not be a good fit.