Thursday, June 12, 2003

Court decision puts IMPLIED-IN-FACT CONTRACTS under scrutiny

June 12, 2003

In this newsletter:

One of the most frequent questions filmmakers ask is, "How do I structure financing for my film project?" At, you can now read an excerpt from Mark's upcoming book Risky Business, Financing and Distributing Independent Films, which addresses the question.

DISCOUNTED REGISTRATION AVAILABLE FOR Hollywood Finance and Distribution Market, JULY 19–20
On July 19 and 20, the Hollywood Film Festival will provide independent filmmakers with the opportunity to learn about finance and distribution opportunities. Those who register by June 15 will pay $145. After June 15, the registration fee is $295.
The two-day event will cover such topics as international co-productions, subsidies, and production incentives; distribution channels; how soon is too soon to promote or market a film; and the future of film financing.
In addition, filmmakers will have the chance to discuss their projects with agents, studio execs and distributors in 30-minute round tables.
The full schedule of events and details can be found at

Court decision puts IMPLIED-IN-FACT CONTRACTS under scrutiny
by Chrys Wu, Paralegal to Mark Litwak

Common scenario: A production company comes up with an idea and wants to pursue it with a large corporation. The production company gets in touch with a corporation rep to discuss the idea. Instead of hearing a pitch off the cuff, the corporation schedules a pitch meeting to hear the idea.

In some industries, when a pitch meeting is scheduled at the corporation's request, it's generally accepted that the invited production company will be compensated for the ideas it presents if its ideas or materials are used. When the corporation invites someone to pitch, the pitch meeting becomes, in effect, an implied contract, and an implied contract, according to case law, does not require an express oral or written representation of compensation.
Implied contracts always run the danger of being denied by one of the parties involved. Such was the case when animation company Gunther-Wahl Productions accused Mattel of stealing its ideas for a line of girls' toys after Mattel invited Gunther-Wahl to pitch. Claiming breach of implied-in-fact contract, Gunther-Wahl sought compensation.

At trial, the jury was given instructions that proved to be confusing, even though the instructions are similar to those given in implied contract cases since the 1956 landmark decision in Desny v. Wilder.

According to one of these instructions, the jury had to find that Gunther-Wahl "clearly conditioned their disclosure (of their ideas) on Mattel's agreement to pay Gunther-Wahl" if Mattel used any portion or the whole of its pitched concept.

The Appeals court found these instructions ran contrary to case law and basically forced the jury to rule against Gunther-Wahl. The Court therefore reversed the judgment against Gunther-Wahl, allowing the lower court to retry the case.

Gunther-Wahl Productions, Inc. v. Mattel, Inc., 128 Cal.Rptr.2d 50, 2002 Cal.App.LEXIS 5097 (Cal.App. 2002), review denied, 2003 Cal.LEXIS 1144 (Cal. 2003)