In our explorations of representations and warranties that are typical to contracts in the fashion business, we now come to one of the classics: the warranty that, by signing the contract, the party is not violating any other contracts it has signed. A typical such warranty would look like this:
Fashion Company represents and warrants that, by entering in to this agreement, it shall not violate the terms and conditions of any other agreement, arrangement or understanding to which Fashion Company or any of its affiliates is a party.
What is that about? Remember Mel Brooks’ The Producers (in any of its forms as movie, Broadway musical or movie of the Broadway musical)? The hero (loosely speaking) was Max Bialystock, a down-on-his luck Broadway producer who, with his accountant partner, tried to make a killing by selling far more than one hundred percent equity investment interests in his musical Springtime for Hitler. All he had to do to make the scheme work was to be sure that the show failed—which would not prove as easy as it first appeared.
If someone contractually sells interests in anything to different people so that they collectively have rights to more than all of what could have been sold, the seller has certainly made agreements that violate the terms and conditions of each of the sale agreements, resulting in a breach of this important warranty each time—if the seller was foolish enough to compound his problems by making such a warranty. Another all-to-common example: any Ponzi scheme or similar scam.
Surely, one of the most important places in the fashion business for such a clause is in a license agreement. The licensee needs to be very sure that the grant that it has received is valid and does not conflict with any grant made by the licensor to any other licensee; and the licensor needs to be equally certain that it is not granting conflicting rights to different persons. For example, if you are about to sign as the exclusive licensee for a brand in the “sportswear” category, would you feel that a license to another party for “activewear” violates your exclusivity? The answer, on those possible facts alone, is a resounding “maybe.” If you define sportswear broadly enough, even redundantly enough, to include, “all casual, active and athletic wear,” any license granted by the licensor to a third party for activewear would violate the warranty made to you for sportswear—and you would therefore have the basis of a claim and, if necessary, a lawsuit.
Here again, doing your diligence on your counterparty—and defining your terms—will go a long way toward making your contract into the protective blanket that you and your attorneys intended it to be.
Credit: Alan Behr
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