A product-placement dispute over the popular TV show MasterChef sheds some light on how not to complete your negotiations.
A cookware manufacturer (Anotech International) planned to pay television company Reveille over $1m for a licence of the MasterChef US brand and promotion of its cookware in the US show. It seems that the project turned out to be a disaster with no sales ever made. Anotech wanted to avoid paying - but was a contract was ever formed?
The parties started negotiating a Deal Memorandum in 2011, with a series of calls and emails. Then, late in the negotiations a problem came up. Cookware products from MasterChef judge Gordon Ramsay started appearing in QVC's online marketing under the strapline ‘The Master Chef'. Anotech wanted this sorting out before committing to the deal, and a handwritten amendment to the version signed by Anotech said ‘Branding Conflict with Gordon Ramsay to be concluded'. Reveille got in touch with QVC to ask for the removal of ‘Master Chef' from the website. The correspondence continued but the Deal Memo was never actually signed by Reveille.
Reveille and Anotech pressed on with the project. Anotech showed its products at a Chicago homeware show, a draft long-form agreement was exchanged and filming started. Reveille sent invoices and an Anotech executive accepted that the amounts were due. Anotech used the MasterChef brand in its promotional materials and activities.
The draft Deal Memo expressly required signatures from both parties for it to become binding. But the parties had acted as if the contract had been signed. Was that enough? Yes, the judge said. In legal language, Reveille had accepted the offer made in the deal Memo by its conduct, and Anotech had recognised that the deal had become binding.
What about the handwritten clause requiring the brand conflict to be sorted out? The judge felt that this had been satisfied by removing the reference to ‘Master Chef' on Gordon Ramsay's QVC marketing. Anotech's argument that Reveille were obliged to do more failed.
So Anotech was obliged to pay up, at least those instalments falling due in the opening stages of the project.
Lessons to be learned? Easy to say and sometimes hard to achieve, but try to make sure the contract is signed before starting the project.
And a warning, even if the contract was never signed, and says signatures are required for it to take effect, it may still become binding through the conduct of the parties.