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Court of Appeal Tackles Film Industry Option Agreement Dispute

fEven the most carefully drafted contracts can give rise to issues of interpretation, but such disputes are always resolvable with the right legal advice. Exactly that happened in one case concerning a film industry option agreement.

Film producers had acquired an option to purchase a licence to develop, produce and exploit a script with a view to turning it into a feature film with a well-known director at the helm. They paid 25,000 Euros for the option to the company that owned the rights in the script. The option was expressed to last for six months, although that could be extended in specified circumstances.

In the midst of pre-production, however, the producers fell out with the intended director and litigation between them ensued in France. The company refused to extend the option and, following expiry of the six-month period, licensed another producer to make the film, which had subsequently been completed and was ready for release.

The company launched proceedings, seeking a declaration that the option had expired at the end of the six-month term. However, its claim was dismissed by a judge, who found that the option had been extended by the existence of the litigation in France and would continue until that litigation was completed.

The option agreement provided that the six-month term would be extended in the event that the script became the subject of a claim, proceeding or litigation. The judge found that that clause had been triggered by the French litigation in that the right to produce the film without the director’s participation was not what the producers had contracted for.

In dismissing the company’s challenge to that ruling, the Court of Appeal found that the French litigation had rendered it impossible for the company to grant the rights it had promised. The judge’s conclusion that the option remained extant accorded with commercial common sense and was consistent with the wording of the agreement.

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