Question

Business Law:

You are a first year, inexperienced attorney representing a rock group. Recently the group has told you that it wants to get out of its present recording contract in order to take advantage of a much better offer. The group's contract is a "new kid" agreement common in the recording industry. The group complains, and you agree, that the terms of the contract heavily favor the recording company. For example, although the contract calls for the group to make eight records, the company can drop the group at any time. In contrast, however, under the contract, your client (the rock group) cannot terminate the agreement at will (i.e. whenever it wants to), but instead must stay with the recording company and make all eight recordings. However, these could take twelve years to produce.

The rock group entered into the contract, before you represented them, at a time when the members were all just out high school. In your opinion, had you been there to represent them, you probably could not have secured a much better deal. The above kinds of contractual terms are standard throughout the recording industry. In this regard, record companies say they have to rely upon "new kid" contracts to balance the financial risks of signing and producing many new artists, most of whom do not pan out.

A lawsuit requesting a court to release the group from its contract could go on for years. You know about another legal strategy, however, that could generate the same result much sooner -- declaring bankruptcy. Under federal bankruptcy law, the courts may free debtors from contracts the court views as burdensome.   You realize, although you have not yet shared this with the rock group, that it might be able to get out of the contract if the group members all rapidly accumulated large debts that might convince a judge they are financially bankrupt.

- Address the case above. Summarize the problem, lay out the legal issues, and address any ethical considerations. Analyze the situation using contracts and bankruptcy

Answer 1

The problem here is that a rock band needs to get out of their first contract before signing the better one because they are having tough time in getting anything recorded and The group complains, that the Terms of the contract heavily favor the recording company.they are being offered a BIG CONTRACT with a reputable label. The ethical issue here is building up huge debts, in order to file for bankruptcy and get out of the 1st contract

In order to file a bankruptcy there is no minimum amount of debt required so there is no requirement of large amount of debt. This is however the violation of bankruptcy code to incur debt with the intention to file for bankruptcy protection. One thing they can do is to file for bankruptcy protection, and list the record company as one of their creditors. This will prevent the record company from suing them for leaving.