CONTRACT LAW PRINCIPLES AND EXCEPTIONS IN MUSIC RECORDING AGREEMENTS BETWEEN ARTISTS AND RECORD LABELS IN NIGERIA

INTRODUCTION

The Nigerian music industry has experienced exponential growth, with artistes and record labels now conscious of protecting their intellectual property rights over their respective musical works by entering into contractual agreements in relation such works. These agreements are typically governed by contract law principles, which ensure the enforceability of rights and obligations between the parties. However, certain exceptions and legal precedents influence how these agreements are interpreted and enforced. Creative minds are the souls of their industry and where there is no guidance, it is very easy for them to be exploited through unfavorable and oppressive contracts. While the general rule is that contracts are binding where there is offer, acceptance, consideration, and intention to create legal relations, the recording industry presents unique challenges and exceptions. Factors such as undue influence, unconscionable terms, copyright ownership disputes, and industry-specific practices often complicate the straightforward application of traditional contract law principles. This article examines the fundamental contract law rules governing artiste-label agreements in Nigeria and highlights the notable exceptions and industry peculiarities that shape how such contracts are created, interpreted, and enforced.

LEGAL FRAMEWORK GOVERNING MUSIC RECORDING AGREEMENTS

   1.    Copyright Act:

The Copyright Act plays a crucial role in recording agreements by defining copyright ownership, particularly for musical works, sound recordings and audiovisual works, and granting exclusive rights to control their use, reproduction, and distribution. It also dictates how copyright vests in these works, typically with the person who made the arrangements for the recording.[i] Notably, the Copyright Act, 2022 defines the author of an audiovisual work as the person by whom the arrangements for the making of the audiovisual work were made, unless the parties to the making of the audiovisual work, provide otherwise by contract between themselves, and defines the author of a sound recording as the person by whom the arrangements for the making of the sound recording were made. Notably, the Act did not define who is clothed with the authorship of a musical work, but it is reasonably believed that any person by whom a musical work is composed and performed, is deemed as the author, particularly as Copyright eligibility in any work requires no formality[ii].

In this article, we also refer to audiovisual works and sound recordings because musical works are often infused with sound recordings popularly known as “sound beat” to give the composition its unique melody as no musical work can be much appealing without the sound recording. On the other hand, when musical work is performed and recorded in a visual form it will qualify as audiovisual work. The aggregate of these distinction and peculiarities make it imperative to consider the three categories to together.

2.    Trademark Act:  

The Trademarks Act plays a crucial role in music recording agreements involving trademarks related contents, particularly in the context of licensing, assignment, and other transfers of trademark ownership in a musical work. The registration of an eligible trademark ensures that such mark is legally recognized, protected, and enforceable by the owner upon infringement. This is because copyright ownership in a musical work does not confer automatic ownership of the associated trademark where it is registered in the name of a Proprietor other than the owner of musical work.  What is a Music Recording Agreement?

A recording agreement is a legally binding contract between a recording artist and a record label that outlines the terms and conditions of the music recording, publishing and the distribution. Just like every other contract, it details the rights, obligations and entitlements of the parties such as compensation arrangement, royalties’ distribution ratio, copyright ownership, licensing rights, tenure, renewals and such other clauses as the parties may wish to include in the agreement.

KEY CONTRACT LAW PRINCIPLES IN RECORDING AGREEMENTS

The same elements of a valid contract guiding commercial transactions also apply to music recording agreements. These elements include –

1. Offer and Acceptance

A valid contract must begin with an offer by one party (e.g., the record label offering a music recording deal) and acceptance by the other (e.g., the artist agreeing to the terms of the contract). In other to be binding, an offer must be clear and unequivocal, and acceptance must be unconditional. The supreme court in N.R.M.A & F.C v Johnson[iii], held that an offer must be clearly accepted in order to crystallize into a contract. In other words, where there is no acceptance of the offer made, a valid and enforceable contract cannot be said to exist.

2. Consideration

Consideration refers to the benefit exchanged between the parties. For a music recording agreement, this may include monetary advances, royalties split, promotional support in exchange for the artist’s commitment to produce music and the artist’s undertaking to release a certain number of albums in return for the record label’s investment. In Olawuyi v. Adeyemi[iv], the Nigerian courts reaffirmed that a contract without valid consideration is void, even as it is settled that consideration must not be adequate before a contract can be binding.

3. Intention to Create Legal Relations

Contracts between artists and labels must reflect clear and deliberate intention of the parties to enter into a legally binding agreement. An agreement lacking this intent is unenforceable.

4. Capacity to Contract

The parties must have the legal capacity to contract. Minors (below 18) will not be able to enter into binding contracts unless through a guardian or under specific exceptions recognized by law. For example, Under Section 2 of the Sale of Goods Act 1893, a minor is liable to pay a reasonable price for necessaries. “Necessaries“ refer to goods and services suitable to the minor’s condition in life and actual requirements at the time of sale or delivery. This includes food, clothing, shelter, education, medical care, and essential services. Also, contracts of employment that are beneficial to the minor are generally valid and enforceable. However, these contracts must not be exploitative or harmful. While a contract entered into during minority is generally voidable, a minor can ratify the contract after reaching 18, thereby making it fully binding.[v]

In E.T.E.C (Nig) ltd v Nevico ltd[vi], the court held that only legal persons, natural or artificial, have the capacity to enter into a contract. the implication of this is that teenagers and/or minors are ineligible to enter into music recording agreements except in the manner required by law. Where a record label desires to sign a teenager, the contract will be negotiated and signed on behalf of such teenager by the Guardian or a person standing in loco parentis to the teenager.

VITIATING ELEMENTS OF A MUSIC RECORDING AGREEMENT

1. Mistake

A mistake in contract law occurs where one or both parties operate under a fundamental misapprehension regarding a fact essential to the agreement. Mistakes may be common (where both the artist and the label are misinformed about the same fact—such as the artist’s prior contractual obligations to another label), mutual (where both parties misunderstand each other’s intentions), or unilateral (where one party is mistaken and the other is aware but fails to correct it). Where a mistake goes to the root of the contract and negates consent—particularly in cases of common or unilateral mistake—it may render the contract void ab initio. The courts, however, apply a high threshold before setting aside a contract on the ground of mistake, emphasizing the need for certainty and finality in commercial transactions.

2. Undue influence

Undue influence arises where one party, by virtue of a special relationship or position of trust, exercises improper influence over another party in a manner that compromises the latter’s free will. It may be actual, where evidence of undue pressure is adduced, or presumed, based on recognized fiduciary relationships such as between a talent manager and a newly signed artist. In such cases, if it can be shown that the artist did not act independently or lacked proper legal counsel, the recording agreement may be deemed voidable at the artist’s instance. Courts may set the agreement aside or refuse to enforce exploitative clauses to preserve the principle that contracts must be entered into freely and voluntarily.[vii]

3. Misrepresentation:

Misrepresentation arises when a party to a contract makes a false statement of fact that induces another party to enter into the agreement. Depending on the nature and intent of the false statement, misrepresentation may be fraudulent (where the label knowingly or recklessly misstates its promotional capacity, distribution reach, or industry affiliations), negligent (where misleading assurances are made without adequate verification, such as inflating expected royalties or audience reach), or innocent (where the falsehood was believed to be true based on available information). While such misrepresentation does not render the agreement void ab initio, it renders it voidable at the instance of the misled artist. The artist may seek to rescind the contract or claim damages, especially in cases involving fraudulent or negligent misrepresentation, which are more likely to result in financial or reputational harm. Courts will consider not only the falsity of the statement but also its materiality and whether it substantially influenced the artist’s decision to contract.[viii]

4.    Illegality

A contract may be vitiated where its object, purpose, or mode of performance is illegal or contrary to public policy.[ix] Illegality may arise either from a statutory prohibition (e.g., contracts involving criminal acts or fraud) or from a breach of common law principles (e.g., contracts in restraint of trade without justification). An illegal contract is generally void and unenforceable, and courts will not assist a party in recovering benefits under such agreements, pursuant to the equitable maxim ex turpi causa non oritur actio—no action arises from a dishonourable cause- thus preserving the integrity of legal and public policy standards in the music and entertainment industry.

5. Duress

Duress refers to a situation where a party is induced to enter into a contract by means of threat, coercion, or unlawful pressure, thereby undermining their free will. Duress may be physical, involving threats of violence, or economic, involving undue commercial pressure that leaves the victim with no practical alternative but to comply.[x] In the musical industry, it could be where the record label or management company leverages the artist’s vulnerable financial situation or industry inexperience to pressure them into accepting exploitative terms—often under the threat of blacklisting, contract termination, or withdrawal of support. A contract entered into under duress is voidable at the instance of the coerced party. The doctrine serves to protect the principle that genuine consent must be freely given and not obtained through intimidation or unlawful leverage.

6.    Fraud

Fraud occurs when one party knowingly makes a false representation of material fact with the intention that the other party rely on it, and the misled party, in fact, relies on it to their detriment. This may involve a record label falsely promising promotional opportunities, misrepresenting royalty structures, or concealing the transfer of ownership rights to the masters. Fraud may also arise from dishonest royalty accounting or manipulation of contract terms after execution.[xi] If proven, such fraud render the contract voidable at the instance of the defrauded party, who may seek rescission, damages, or equitable relief. Given the serious implications, artists are advised to scrutinize recording deals and seek independent legal counsel before signing.

OTHER PRINCIPLES OF CONTRACT THAT APPLY TO MUSIC RECORDING CONTRACTS

While contract law generally requires formal agreements, certain exceptions exist within the Nigerian music industry:

1. Quantum Meruit (Reasonable Compensation)

If an artist or record label performs obligations under a contract that lacks key formalities, they may still be entitled to compensation. The law is settled that where a plaintiff can prove the rendering of services under an unenforceable contract, the contract is admissible as evidence of the value of the services rendered and he may recover on a “quantum meruit” basis. Put differently, where work is done or services are rendered by the plaintiff at the request of the defendant and of which the defendant has had benefit, the plaintiff can recover the value of the work done or the services rendered on a “quantum meruit” [xii]. By virtue of this principle, a signed artist will be awarded remuneration for services rendered even where there was none agreed upon or fixed in the contract.

2. Unconscionable or Unfair Terms

Although the courts have no power to interfere or rewrite a contract on behalf of parties, contracts containing oppressive terms may be set aside by the courts. There are certain voidable elements of a contract and where there is a no consensus ad idem, the court may choose not to enforce such contract. The principle of a contract of adhesion was stipulated by Honorable Justice Eso in Sonnar Limited v Nordwind[xiii], in determining such contracts which should be considered unfair. The contracts of adhesion are usually contracts where the parties are not equal. These contracts are concentrated in relatively few hands and the terms are usually not negotiated between the parties thereto, thus suggesting undue influence on the weaker party. The party with the bargaining power dictates the terms while the weaker party is presented with a simple decision to either take it or leave it. He does of course. Nothing happens until dispute arises.

3. Industry Custom and Practice

Courts may recognize industry customs in contract enforcement. The industry-specific customs can be used to interpret contracts where terms are ambiguous or where not specifically agreed upon by the parties.

SOME ESSENTIAL CLAUSES OF A MUSIC RECORDING AGREEMENT

1.    Royalties:

Royalties are the payments generated from the commercial usage of a song by third party outlets and vendors. When music recordings are played, performed, covered or streamed, the owner of copyright in the song receives payments. Usually, the royalties are distributed in accordance with any existing agreed sharing ratio after all reasonable deductions based on expenses incurred for the production, publishing and promotion of the songs on digital platforms such as Apple music, Spotify and so on. However, it is pertinent for both parties to agree on what forms part of the deductions in order to guarantee that artists are well remunerated for their intellectual property and the record label in turn recoups its investment.

2.    Duration

A music recording agreement is expected to operate for a defined duration. However, parties may choose to renew the agreement after or prior to its expiration on the same terms or revised terms. During the validity of the tenure, parties will be strictly bound by the terms as anything to the contrary will amount to a breach of contract. It is adjudged that signing a long-term contract is not advisable for a promising artist due to the dynamic nature of the entertainment industry unless there is such protective clause that makes it possible for a periodic review on such improved considerations as may be agreed upon by the parties.

3.    Exclusivity

Usually, music recording agreements confer on the record label exclusive rights to the works of the artist to the exclusion of all other persons during the duration of the contract. This means that the artist is not allowed to work on a music project for any other record label or an artist associated to another record label during the subsistence of the contract. However, there could be conditions under which the artist can collaborate with artists of other record labels, and this will depend largely on the negotiating power of the artist to ensure that the music recording agreement is adequately dotted to allow such flexibility.

Other essential clauses may include provisions for;

·       Promotion/merchandise: This clause outlines the record label’s responsibility to promote the artist’s work through various channels—radio, television, digital platforms, social media, public appearances, and tours. It may also define the scope of merchandise rights, such as the right to produce and sell branded items (e.g., T-shirts, posters, etc.) using the artist’s name or image. Key issues to be discussed beneath this clause include revenue sharing, control over branding, and approval rights of the artist over promotional materials or merchandise.

·       Territorial jurisdiction: This defines the geographic area in which the agreement applies. It is especially important where distribution rights, streaming, or promotional efforts span multiple countries. A label may secure exclusive rights to distribute or exploit recordings in Nigeria, across Africa, or globally. It helps to clarify jurisdiction for legal disputes, i.e., which country’s laws govern the contract and where lawsuits can be filed.

·       Advance fees: This sets out the upfront payment made by the record label to the artist upon signing the agreement. The advance is recoupable, meaning the label will recover the amount from future royalties before the artist receives further payments. Important considerations here include how much is advanced, the payment schedule, and whether the amount is linked to the number of albums or singles to be delivered.

·       Recording rights: This clause outlines the ownership and usage rights in the music recorded under the contract and in most cases, the record label owns the master recordings, although more modern or independent deals may allow the artist to retain ownership. It should specify whether the artist grants an exclusive license, assignment, or joint ownership, and the duration for that.

·       Recording cost: This provision details who bears the cost of recording the music, including studio time, production, mixing, mastering, and related expenses. Usually, the label covers these costs, but they are recouped from the artist’s royalties, much like the advance. Clear accounting and spending limits are crucial to avoid exploitative deductions from future earnings and any possible disputes that may arise.

·       Release commitments: This clause obligates the label to release the artist’s work within a defined timeframe. Without this clause, the label could delay or shelve the music indefinitely, stalling the artist’s career. It may also include a minimum release commitment (e.g., at least one album per year) and penalties or exit rights if the commitment is not met.

CONCLUSION

Recording agreements between artists and labels in Nigeria are primarily governed by established contract law principles and the courts will enforce them as they are no matter how unfair they may appear unless the unwilling party alleges and is able to establish any of the vitiating elements of a contract to make such agreement unenforceable by the court. It is also noteworthy that the proper court with jurisdiction over copyright claims arising from a music recording agreement is the Federal High Court.

Meanwhile, there are unsettled concerns over the proper court with jurisdiction over actions involving breach of the terms of a music recording agreement as it is considered to be a simple contract. this conversation and the answer will form part of our conversations in the subsequent publication on this subject. So, enjoin you to stay glued for our next publication on this topical issue of record label and artist relationship.