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England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Confetti Records (a firm) & Ors v Warner Music UK Ltd (t/a East West Records)  EWHC 1274 (Ch) (23 May 2003)
Cite as:  EWHC 1274 (Ch)
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Strand, London, WC2A 2LL
B e f o r e :
| (1) Confetti Records (A Firm)
(2) Fundamental Records
(3) Andrew Alcee
|- and -
|Warner Music UK Ltd
(Trading as East West Records)
Mr. Robert Howe (instructed by Russells) for the Defendant
Hearing dates : 14th,15th,16th,19th,22nd May 2003
Crown Copyright ©
Mr Justice Lewison :
"Re: "CRISP BISCUIT" – SUBJECT TO CONTRACT
We are planning to release an album entitled "Crisp Biscuit" which will be mixed by The Heartless Crew. We would like to licence the following tracks on a non exclusive basis for the above album. Proposed deal terms are as follows:"
Re: "CRISP BISCUIT" –SUBJECT TO CONTRACT
Further to our telephone conversation on Monday 17th December I am pleased to enclose revised deal terms in relation to licensing the following tracks on a non-exclusive basis for the above album:
|TRACK:||"Burnin" by Anthill Mob|
|TERRITORY||UK & Ireland|
|ROYALTY:||19% of net published dealer price (less sales tax & withholding tax if applicable)|
|DEALER PRICE:||CD £10.25/MC £7.25|
|NO. OF TRACKS||40 (tbc)|
|RELEASE DATE:||March 2002 (tbc)|
|ACCOUNTING:||Half yearly (90 days)|
|CLUB/MAIL ORDER:||50% on the basis we are accounted to|
|LABEL COPY:||Please provide|
|CONTRACTING PARTY:||Please provide|
Please confirm that the tracks do not contain any uncleared samples.
I would be grateful if you would let me know as soon as possible if you are able to clear these tracks for inclusion.
Please send a copy of the tracks on CD or DAT and also on vinyl as soon as possible.
N.B. If you do not control rights in all the Territories requested please advise as soon as possible.
With best regards."
" "Burnin" – the Ant'ill Mob
Licensed to "Crisp Biscuit"
Granted for 3 years non-exclusive"
"Re: Licence request for "Crisp Biscuit" – The Heartless Crew
"Burnin" – The Ant'ill Mob
With reference to the above and our deal memo signed December 2001, if we have not received payment by Monday 4th February 2002, we will have to revoke our inclusion for the above album."
"As requested by yourselves 13/12/02 (sic) and as per your head of agreement, the above name track was/is available for licensing onto your album "Crisp Biscuit" mixed by the Heartless Crew – due to a massive push on the promotional front we subsequently informed you that after January 2002 the above named track could no longer be licensed as per head of agreement. From February 2002 a revised head of agreement will have to be negotiated.
As to date nobody from East West Records has replied, so subsequently we would like the track to be pulled from you (sic) planned album, or, as stated above we will negotiate a new contract."
"The only written confirmation we have from you is the signed head of agreement dated 19th December 2001 signed by yourself on behalf of Confetti Records, and on that basis we have gone ahead and used the track on the album."
"If I had to decide this matter I would have little hesitation in coming to the conclusion that the parties had every intention to create binding relations. I do not have to decide this matter. I recognise that there is some issue to be tried, I am not prepared to characterise it as a serious one, but I certainly can't say that there is anything in Mr Pascal's argument sufficient to justify further consideration."
Deal memos and long form contracts
"Please note that usage is always subject to final DJ selection. Once we have confirmation that the track was selected we will forward to you confirmation of the agreed terms."
"This memorandum shall be binding on the parties until replaced by long-form agreements negotiated in good faith but always subject to the above terms and conditions"
"These terms apply to and will be incorporated into our standard licensing Agreement. Both parties intend to enter into such a long form Agreement but until such time these terms shall be binding. Please confirm your acceptance of these terms by signing below where indicated and faxing it back to … together with the label copy and an invoice for the advance which will be paid on release of the album if the track is incorporated."
"I would be grateful if you would sign, date and return to me a copy of the letter agreement to confirm your agreement to these terms and conditions. Once I receive the same, I shall arrange for the countersignature by EMI Records Ltd and return to you of a fully executed copy."
"Not a binding offer until signed on behalf of EMI Records Ltd."
"Licensee shall not remix or otherwise alter the Track which shall be used as delivered."
Was there a contract?
"It appears to be well settled by the authorities that if the documents or letters relied on as constituting a contract contemplate the execution of a further contract between the parties, it is a question of construction whether the execution of the further contract is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. In the former case there is no enforceable contract either because the condition is unfulfilled or because the law does not recognize a contract to enter into a contract. In the latter case there is a binding contract and the reference to the more formal document may be ignored."
"It has been undoubted ever since the decision of Sir George Jessel in Winn v. Bull ((1877) 7 Ch D 29) that the words "subject to the preparation and approval of a formal contract" in a document prevented the document from being held to be a final agreement of which specific performance could be enforced, and it has been the practice of estate agents to insert these words to prevent parties being imposed upon. In many cases it is important to avoid the disastrous results of entering into open contracts, and I think it would be most mischievous to throw any doubt on the effect and meaning of such expressions. I do not overlook what was said by Lord Sterndale in Rossdale v. Denny ( 1 Ch 57 at 66) in this Court: "I am far from saying that there may not be an unconditional offer and acceptance of a binding contract although the letters may contain the words 'subject to a formal contract', but certainly those words do point in the direction of the offer or acceptance being conditional. I do not think it can be put higher than that; I think he is well founded in saying that the general trend of the decisions has been, where those words occurred, to hold that the offer or acceptance was conditional." But it seems to me that too much importance has been attributed to those expressions of Lord Sterndale, and I think what he meant to say was that the words in question indicate in themselves no binding bargain, and are merely conditional, but that there might be other circumstances which would induce the Court not to give them that meaning in a particular case."
"To my mind the words "subject to contract" or "subject to formal contract" have by this time acquired a definite ascertained legal meaning—not quite so definite a meaning perhaps as such expressions as f.o.b. or c.i.f. in mercantile transactions, but approaching that degree of definiteness. The phrase is a perfectly familiar one in the mouths of estate agents and other persons accustomed to deal with land; and I can quite understand a solicitor saying to a client about to negotiate for the sale of his land: "Be sure that to protect yourself you introduce into any preliminary contract you may think of making the words 'subject to contract'." I do not say that the phrase makes the contract containing it necessarily and whatever the context a conditional contract. But they are words appropriate for introducing a condition, and it would require a very strong and exceptional case for the clear prima facie meaning to be displaced."
"Even if the deal memo has been signed and agreed all this means is that the parties have agreed to the basic terms to be included in the final long form contract. In my opinion the deal memo does not constitute a legally binding contract. If a deal memo was a binding agreement then there would be no requirement for the final contract."
"As explained in detail above, a long-form agreement will usually be signed subsequent to the deal memo/heads of agreement being signed. The initial offer is sometimes marked "subject to contract". The reference to "subject to contract" in this particular context has a dual meaning. It is in effect a shorthand method of saying that in due course the standard long-form agreement will be put in place (which it accepted is the standard practice). Equally it means that once the fax offer is signed by the third party then a legally binding agreement has been reached that contains all of the negotiated commercial terms and that is the basis on which all parties accept the track will be included on an album."
"I think it is a specific thing relating exclusively towards licensing in for compilations. It is more of a shorthand thing, as I said, to do with the fact that there have to be 40 long form contracts physically issued and sent back and signed and logged and whatever, and the time issue is always crucial in relation to the release of a compilation."
"Q. You told my Lord you are not a lawyer and so you have not the faintest idea of whether or not and indeed these terms are binding?
Q. What I suggest to you is that what you are saying here is that in your experience in the industry when people enter into deal terms generally that goes on to the track being used with the label getting their money and everybody going away happy?
Q. Whether or not it is legally binding. If you [ask] somebody "Can I use your track?" and they say "Yes" it is most unusual for them to change their mind?
Q. But if they did change their mind, you could actually change the recording by pulling off the track?
"The company cannot touch someone else's material unless they have clearance."
"The purpose of the suspensory condition "subject to contract" in the context of negotiations is to avoid the other side seeking prematurely to conclude a contract by the acceptance of an offer so as to give rise to unintended legal consequences. In cases requiring a unilateral act the only question is whether that act has occurred."
"In some cases, the right to revoke may be exercised even if the licensee has incurred expense, such as publication costs, but where the licensee has incurred trouble and expense in reliance [on] the licence, it is possible that the licensor may be estopped from revoking the licence either at all or else on reasonable notice."
Does an estoppel arise?
"In the present case the government acted in the hope that a voluntary agreement in principle expressly made 'subject to contract' and therefore not binding would eventually be followed by the achievement of legal relationships in the form of grants and transfers of property. It is possible but unlikely that in circumstances at present unforeseeable a party to negotiations set out in a document expressed to be 'subject to contract' would be able to satisfy the court that the parties had subsequently agreed to convert the document into a contract or that some form of estoppel had arisen to prevent both parties from refusing to proceed with the transactions envisaged by the document."
"This confirmed exactly my understanding of the position: when the deal terms were signed and returned, we had reached an agreement and Confetti had granted a licence to us to use the track on the proposed album for three years."
"Q. You would say that by signing it [the deal memo] Confetti led you to believe that there was a contract in place?
A. Yes, by having negotiated the terms which they wished to change or negotiate and then by signing it and sending us parts for manufacture of an album I would believe." (Emphasis added)
Is the contract sufficiently certain?
(a) what proportion of the 19 per cent royalty would be paid to the Claimants;
(b) when the advance royalty was to be paid;
(c) how many tracks were to be included on the album;
(d) when the release date was to be and
(e) whether the track was to be used mixed or unmixed.
Revocation of the licence
"it amounts to distortion or mutilation of the work or is otherwise prejudicial to the honour or reputation of the author".
"to any distortion, mutilation or other modification of, or other derogatory action in relation to, the said work, which would be prejudicial to his honour or reputation."