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peterfc

Can I get a critique on a Profit Sharing Agreement?

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So I recently started a Hobbyist Project on Game dev, to turn a project I've already created into a video game. I've recently hired a programmer I think looks promising and we are getting to work on the project. I don't expect profits and my main goal is to complete the project, but just in case I figured I should start a contract between us.

 

I know it's a good idea to just get a lawyer, but for a project that I have no *expectations* of making money, I'd like to keep the costs down. Someone suggest I just make a contract in plain english, so I did, I'm wondering if anyone here can critique it or offer advice. One possible complication is that I am in Canada and my programmer is in Saudi Arabia.

 

The basic thing I'm trying to get across is:

 

1) I still own the rights, including whatever he makes

2) We both get paid if the game makes money

3) It lasts for 5 years.

 

Anyways, here it is:

 

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This Profit Sharing Agreement is entered into as of (Date) by (My Name) located at (Address) and (Second Party), both of whom agree to be bound by this Agreement.

 

Whereas, (My name) has developed Wars of Keridor (“the game”) and holds ownership of all current intellectual property rights in this product, in addition to those developed by (Second Party) for the creation of the game.

 

(Second party) may not use works created for the game unless for a function that does not compete or hinder the sales of the game, or use its likeness in anyway.

 

The contract will be binding if the game is sold with coding created by efforts by (Second party). If the game is sold with no work created by (second party) the contract will be void. The contract does not apply to any derivative works, including but not limited to expansions or sequels where (second party) does not contribute additional work.

 

(My name) and (second party) will share profits realized from the sale of the game as follows:

 

% of net income will be kept by (My name)

% of net income will be kept by (Second party)

 

(Second party) will be paid any profits realized at these times:

 

At the end of each month following the release and sale of the game, if the game makes $250 Canadian or more within that time period.

 

Otherwise, at the end of each 3 months following the release and sale of the game, if the game makes $250 Canadian or more within that time period.

 

Otherwise, at the end of each year following the release and sale of the game.

 

This profit sharing contract will become null and void at the end of 5 years of the release and sale of the game.

 

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Edited by monalaw
putting original OP back because seriously WTF

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Just some thoughts before the real lawyers get here...

Who decides what net income is?

Who defines what "sold with no work created by" means - and who checks it?

The whole "....in addition to those developed" clause is very vague. It doesn't help that terms like "for the creation of the game" are basically meaningless. Just like "coding created by efforts by". You're dancing around the substance rather than encoding it.

If you have to do this yourself, I'd advise less faux-legalese and a more precise plain English approach. e.g. References to code should be clear and unambiguous, such as "Code submitted to the project repository becomes property of (My name)" (although how reasonable that is, considering you're paying nothing until it ships, is something else. And some jurisdictions will say that's unenforcable until you've made some sort of payment or other consideration anyway.)

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I can see that you don't know much about copyright law, which isn't surprising considering you're trying to get people to work for you with this naïve model. But only a lawyer is legally allowed to give legal advice, and I am not a lawyer. What I will say is that what you're trying to do is called a "copyright assignment".

And the other thing I will say, if you go ahead with this, whoever was foolish enough to get in on it will figure out how bad it is for them and drop out sooner or later. Probably sooner.

If you really want to develop a game, you have three options:

  1. Do it yourself.
  2. Pay someone a proper wage.
  3. A combination of both (1) and (2).

What you are currently planning on doing simply won't work. It never has worked, and it's probably attempted by newbies hundreds of times a year.

Edited by JulieMaru-chan

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37 minutes ago, peterfc said:

I am in Canada and my programmer is in Saudi Arabia.

Then any agreement you make will be unenforceable. You cannot afford it.  Everything is based on good will, and often that breaks down when money happens.

Profit sharing is usually a bad thing for accounting and the few companies that used to do it have stopped due to complications. Are you prepared for the issues of sending and reporting taxable money to Saudi Arabia?

As to your agreement...

46 minutes ago, peterfc said:

I know it's a good idea to just get a lawyer

Yes. The agreement is pretty bad.

46 minutes ago, peterfc said:

1) I still own the rights, including whatever he makes

The agreement doesn't say that anywhere I can find.

I can see it says you currently hold all rights to the game, but there is nothing that assigns or transfers the rights of whatever they create over to you; it isn't yours and you would have no right to use the assets. 

48 minutes ago, peterfc said:

2) We both get paid if the game makes money

I don't see that in your agreement at all, or at least in the way you expect it.  Instead I find an EXTREMELY DANGEROUS mix of the words "profit" and "income", along with the vague term "if the game makes $250..."

Gross revenue, net revenue, net income, and profits are all rather different.  Games often require a large net revenue to produce a tiny profit. Your agreement says that if you make a small profit you must give up most of your net revenue. 

50 minutes ago, peterfc said:

3) It lasts for 5 years.

This one is actually rather complicated, and your agreement doesn't handle it well. Does it survive if either of you go out of business? Does it survive if you or he enter bankruptcy? Does it survive if either of you are bought out? Can either of you terminate the agreement, cancel it, or buy the other person out?

I know about four standard exit forms (voluntary/involuntary and you/them) and none of those four are addressed.

 

Get a lawyer and do it right, or don't bother at all.

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