Abstract
Hollywood film studios, talent and other deal participants regularly commit to, and undertake production of, high-stakes film projects on the basis of unsigned “deal memos”, informal communications or draft agreements whose legal enforceability is uncertain. These “soft contracts” constitute a hybrid instrument that addresses a challenging transactional environment where neither formal contract nor reputation effects adequately protect parties against the holdup risk and project risk inherent to a film project. Parties negotiate the degree of contractual formality, which correlates with legal enforceability, as a proxy for allocating these risks at a transaction-cost savings relative to a fully formalized and specified instrument. Uncertainly enforceable contracts embed an implicit termination option that provides some protection against project risk while maintaining a threat of legal liability that provides some protection against holdup risk. Historical evidence suggests that soft contracts substitute for the vertically integrated structures that allocated these risks in the “studio system” era.
Disciplines
Commercial Law | Contracts | Entertainment and Sports Law | Intellectual Property | Law | Law and Economics | Law and Society | Organizations
Date of this Version
3-5-2014
Recommended Citation
Jonathan Barnett, "Hollywood Deals: Soft Contracts for Hard Markets" (March 2014). University of Southern California Law and Economics Working Paper Series. Working Paper 151.
http://law.bepress.com/usclwps-lewps/151
Included in
Commercial Law Commons, Contracts Commons, Entertainment and Sports Law Commons, Intellectual Property Commons, Law and Economics Commons, Law and Society Commons, Organizations Commons
Comments
Forthcoming in Duke Law Journal (2014).