Structure of an Exclusive Management Agreement for a K-Pop Artist (Standard Form Contract)

Posted by Joseph Hwang Joseph Hwang 8/06/2024

Structure of an Exclusive Management Agreement for a K-Pop Artist (Standard Form Contract) - Part 15.

Joseph Hwang

* Attention: This article is based on the latest version of the "Standard Form of Exclusive Contract for Musicians (hereinafter referred to as "SFEC", Notice No. 2024-0021, Ministry of Culture, Sports and Tourism of the Republic of Korea, amended on June 3, 2024)."

** Contract parties: Artist (hereinafter referred to as "Artist"), and artist management company (hereinafter referred to as "Company")

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Article 15 ( Amendment of the Agreement)

The Agreement's content herein shall partially be available to amend in case of both parties' consent in writing, the amended provisions or clauses shall be affected from the agreed date between both parties unless otherwise specified in other options regarding the consent written in the agreed date.

Article 16 (Cancellation or Termination of the Agreement, etc.)

① The one party can demand the attributable party to rectify the violation against the Agreement herein within fourteen (14) days in case of occurring the attributable party's violation, notwithstanding the request, maintains being of the violation state or turning into the irrevocable circumstance, the counterparty shall be entitled to cancel or terminate this Agreement, then to be able to claim the indemnification against the attributable party, but only subject to being the reasonable grounds, the deadline of correction period fourteen (14) days is available to expend within the scope of fourteen (14) days since the notice date.

② The penalty money shall be paid by the Artist to the Company in addition to the damages in Paragraph ①, in the event of the termination of the Agreement caused by the Artist for the breach of the contract unilaterally in the middle of the contract period, despite the Company faithfully fulfilling its obligations under the Agreement herein, with an amount equal to the average monthly revenues for the two (2) preceding years as of the time of termination multiplied by the number of months remaining in the contract - in case of that remaining less than two (2) years of the Artist's period of service for pop culture art, the average monthly revenues for the period during which actual revenues were earned multiplied by the number of months remaining in the contract.

③ The rights and obligations of the parties that have already accrued as of the date of termination shall not be affected by the termination of this Agreement.

④ If the Artist becomes seriously ill or is injured and cannot continue to provide the popular culture art services, the Agreement may be terminated by agreement between the parties, then in such case, the Company shall not claim damages from the Artist.

⑤ If the Company, its officers (including registered directors), or its employees (regardless of employment type) are found guilty of sexual harassment or sexual violence against an artist by a final and conclusive judgment of the court, the Artist may terminate the contract and claim compensation for damages. However, in the case of a sexual offense committed by an employee of the Company, if the Company proves that it is not responsible for the offense, it shall not be grounds for termination of the contract and damages.

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The SFEC states that even after the contract is signed and while the contract is still in force, the parties can modify some terms of the contract under the parties' consent. However, the written agreement is the rule. The amendment shall be effective from the date of the agreement. The average K-pop idol group contract lasts for seven (7) years, which is not a short duration. Therefore, if the situation changes in the middle of the contract due to unreasonable circumstances, changes in the business environment, amendments, or establishment of new laws, the Company and the Artist may consider revising some parts of the contract by mutual approval.

Article 16 of the SFEC stipulates the termination and cancellation of the contract, which is one of the most important legal contents of the contract. There is a significant difference in the legal effects of canceling and terminating a contract. A legal act is effected by an expression of intent, which can be oral or written. However, if a particular contract recognizes only written communication as a valid legal act, or if the law stipulates otherwise, the method of communication must be followed to avoid disadvantages.

Cancellation of a contract means that the legal effect is extinguished retroactively from the first time back to the time of expression, and the effect is also extinguished in the future, on the contrary termination of a contract means that the legal effect is effective in the past, but the legal effect is extinguished in the future from the time of expression.

The grounds for termination and cancellation of the contract are defined in the SFEC. The basic rule is that if one of the parties violates the contract, the other party is entitled to cancel or terminate the contract, and the cancellation or termination is effective upon the expression of the contracting party's intention. Since the contract is with a person, not an impersonal object, it would be crucial to define the grounds for cancellation or termination of the contract, or conversely, it would be hard to ensure the stability of legal practice if it were too easy, as the conclusion, this Agreement defines only a few important grounds for cancellation or termination. One of the most important is the penalty clause. SFEC's penalty clause is designed to apply only to the Artist, not the Company. This is an effect of the South Korean government's accommodation of the Company's position and demands. This reflects the circumstance that Companies take risks and invest money in artists even before they have earned any revenues and then an Artist becomes famous after their debut, they are likely to be approached by other competing companies, thus increasing their risk exposure. In support of this, "tampering" has become a big issue in the K-pop industry lately. "Tampering" is when the Artists betray their contracted company and secretly contact and negotiate with another company in the equal line of competing positions to substitute their contract without the company's prior consent. Companies want to stop Artists from cheating at the source.

Conversely, Artists have been victimized by being exposed to sexual offenses by Company employees. These sexual offenses are also major grounds for termination or cancellation. However, sexual crimes against Artists can make the relationship between the Company and the Artist difficult after the incident, and the Company's inadequate response has the side effect of creating secondary damage, making it difficult for Artists with character to maintain their contracts.

The South Korean government has also considered the unfavorable reality for artists and has enacted the Popular Culture and Arts Industry Development Act to regulate the industry. Article 27 of the Act stipulates the following disqualifications for running a company or engaging in the business of signing exclusive contracts with artists: those who have committed sexual crimes and received certain punishments are not allowed to work in this industry, and Article 29 (4) of the Act stipulates that those who work in this industry must receive education to prevent sexual crimes. If the company violates these regulations, the government will revoke its business license, which puts the company at a great disadvantage.

*** POPULAR CULTURE AND ARTS INDUSTRY DEVELOPMENT ACT ***

Article 27 (Grounds for Disqualification)

Any of the following persons may not operate or engage in the popular culture planning business: <Amended on Nov. 26, 2019>

1. Any person who is a minor, who is under adult guardianship, or under limited guardianship;

2. A person who was declared bankrupt, but has not yet been reinstated;

3. A person for whom three years have not passed since his/her punishment was fully executed or a decision to waive his/her sentence became final after he/she had been sentenced to a fine or higher for violation of this Act, Articles 287 through 292 and 294 of the Criminal Act, Article 5-2 of the Act on the Aggravated Punishment, etc. of Specific Crimes, the Act on the Punishment of Acts of Arrangement of Commercial Sex Acts, Etc. the Act on the Regulation of Amusement Businesses Affecting Public Morals and the Act on the Protection of Children and Youths against Sexual Abuse or for committing child abuse-related crimes under subparagraph 7-2 of Article 3 of the Child Welfare Act;

4. A person for whom three years have not passed since registration was revoked under Article 33 (1);

5. A juristic person that allows an officer, to whom any of subparagraphs 1 through 4 applies, maintain his/her position even after becoming aware of fact.

Article 29 (Education of Popular Culture Planners)

(4) A popular culture planner shall take necessary measures to ensure that affiliated popular culture artists take courses in sex education or ones intended to prevent sexual violence, commercial sex act, and sexual harassment offered by specialized institutions prescribed by Presidential Decree to promote sound values of sex and to prevent sexual violence, commercial sex act, sexual harassment. <Newly Inserted on Jun. 9, 2020>

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* Standard contract analysis continues in the series.

** References and quotations:

https://www.mcst.go.kr/kor/s_data/ordinance/instruction/instructionView.jsp?pSeq=2413

Series Articles

Overview

https://www.musicbusiness.co.kr/2024/05/structure-of-exclusive-management.html

Part 1.

https://www.musicbusiness.co.kr/2024/05/structure-of-exclusive-management_26.html

Part 2.

https://www.musicbusiness.co.kr/2024/06/structure-of-exclusive-management.html

Part 3.