The Standard Sections

Let's look at the sections usually included in development agreements.

Preamble or Recitals

This is where the identity of the publisher and the developer as well as the effective date of the agreement are set out.

Definitions

The first formal section of the contract is usually the "Definitions" section. This section identifies the specific way in which certain terms are used throughout the remaining text of the contract. These terms are then capitalized throughout the contract so that the readers can identify them as being specifically defined terms.

Term

The term of the agreement sets the length of time during which the development agreement is effective. It might also include other specific responsibilities concerning events that occur within that time period.

Territory

This section identifies the different countries or geographic areas covered by the sale and distribution obligations of the publisher under the agreement. It is not uncommon to have agreements with several companies in different territories to facilitate worldwide distribution of a game.

Ownership and Licenses

This important part of the agreement will establish ownership of the game content and of related intellectual properties. In addition to actual game content, this section will typically resolve ownership of any trademarks associated with the game, such as the game's name, logo, character names, fictional locations, or any other unique matters essential to the game.

The Obligations of the Parties

Usually, the developer's obligations are set out in one section and the publisher's obligation set out in another. However, these obligations might be included in a single section of the contract. Either way, this section of the contract sets out in detail the responsibilities of developer and publishers to each other. The developer's duties under the agreement generally include specific details regarding the dates and content of each milestone. The duties of the publisher concern advance payments, royalty payments, testing, promotion, and distribution and sale of the game; in some cases, the contract will even specify the promotion and advertising budget that the publisher will spend on the game's marketing.

Finally, provisions concerning any rights regarding sequels and ancillary products might also be set out in this section.

Notices and Credits

Everyone involved in the game wants to be recognized. This section sets out in detail exactly how the identity of the developer and publisher, as well as distributors or licensees, will be displayed in the game and on game advertisements and packaging.

Warranties

Warranties are the legal guarantees and assurances that each party sets out in the contract. These include the absolute rights that each party has in whatever they are contributing to the project. For example, the developer must warrant that it owns or has an appropriate license to use all of the content in the game that is being delivered to the publisher. Similarly, the publisher must warrant that it has all rights to any materials or content that it is providing for inclusion in the game or the game packaging.

Indemnification

Indemnification is the obligation of one party to a contract to cover the losses of another party incurred as a result of any acts or omission by the first party. For example, if the developer did not actually secure ownership of all of the intellectual property contained in a game, then the developer would be responsible for any loses incurred by the publisher as a result of that failure in ownership. Similarly, if the publisher did not own a trademark that was to be associated with the game and it resulted in a loss or a lawsuit the publisher would be required to defend a lawsuit and cover any losses incurred by the developer.

Confidentiality

Confidentially provisions assure that the confidential information conveyed between the parties, as well as the terms of the agreement itself, are keep confidential both throughout the term of the agreement and for a reasonable period thereafter.

Non-Solicitation

Many development contracts prohibit either party from soliciting employees from the other. This prevents a publisher from "poaching" talented employees from the developer either during the course of development or after the completion of the game. Such provisions can be very important for developers wanting to maintain development team integrity.

Termination

This important section identifies and details the situations in which one party can terminate the contract, and the procedures to follow to do so. Termination clauses typically include failure of either party to meet their specific obligations under the agreement, matters beyond their control (acts of God and war), and even financial matters such as the bankruptcy of one or the other parties. Many of these provisions contain a time limit within which the breaching party can cure the breach without the contact being terminated.

General Provisions

General provisions, often referred to by lawyers as the "boiler plate," are the general terms of the contract regarding everything from the assignment rights, notice of the parties to each other, effect of the headings, execution of the contract in counterparts, remedies, and provisions regarding arbitration, attorney fees, and to what state's or country's law applies to the enforcement of the obligations under the agreement.

Contract Addenda and Attachments

In addition to the main portion of the contract, for ease of drafting, attachments to the contracts set out the specific terms unique to the deal. Some examples of matters often detailed in these addendum are as follows:

• Specifications: Setting forth the game title and general specifications.

• Milestones and payments: Identifying in reasonable detail the time (either a date or number of weeks from execution) for each milestone delivery and payment, what deliverables are included in each milestone, and how much money will be paid upon delivery and acceptance of each milestone.

• Additional deliverables: Things such as screen shots, promotional demos, downloadable demos, and other promotional materials.

• Additional agreements: Any secondary contracts regarding conveyance of intellectual properties rights, and specific confidentially agreements to be signed by all of the members of the team.

• Localization: What specific languages the game will be delivered in and who is responsible for the localization.

• Personnel: Identifying by name and address all essential team members involved in the development.

• A signature page: The names and titles of the people who are entitled to sign the contract, along with the date of the contract's execution.

Contract Form and Tone

All contracts are different, but most contain the various sections listed in the preceding section. The details will vary from publisher to publisher. Some developer contracts have a lot of technical legal language. Others are worded in "plain language." Each type has its advantages and disadvantages. Formally written contracts are, at least in principle, more exacting, and therefore they better delineate the duties and responsibilities of the parties. However, they are often difficult for anyone other than lawyers to understand. On the other hand, reader-friendly "plain language" contracts might be easier to understand for a non-lawyer, but harder for a court to enforce due to loose construction. Ultimately, it is the publisher who starts the contract negotiation, so it will be the publisher who decides the basic tone and format of the agreement.