RESTRAINT OF TRADE AS A SHIELD IN MUSICAL CONTRACTS

In Nordenfelt v Nordenfelt (1894), the English House of Lords held that although a general restraint is presumptively void, it may still be valid if the party seeking to enforce it shows that it is reasonable and consistent with the public interest. The case established the framework for deciding whether a restriction amounts to an unenforceable restraint of trade, now known as the “Nordenfelt test.” At first, this doctrine applied mainly to “solus” agreements, under which one party is required to obtain supplies from a single source. However, in Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd (1968), the House of Lords extended the doctrine’s reach to include musical agreements.

The doctrine of restraint of trade applies to musical contracts not primarily to protect weak or vulnerable parties from unfair transactions; that role is more properly addressed by the doctrine of undue influence. Although the line between the two doctrines can be blurred, both seek to protect artists who enter restrictive agreements from a position of disadvantage or weak bargaining power. In many restraint of trade cases involving the music industry, inequality in bargaining power is therefore a recurring concern.

Here, “inequality” means more than its ordinary dictionary sense. In his article “Inequality of Bargaining Power” published in the Oxford Journal of Legal Studies (1986, vol. 6, no. 1, p. 123), H. Beale describes it as involving “ignorance, vulnerability to persuasion, desperate need, lack of bargaining skill, or simple lack of influence in the marketplace.” When these factors are combined with undervaluation and the absence of proper advice, courts are more likely to scrutinize the process by which musical agreements are made rather than their specific objectives.

Over the past four decades, this body of law has developed through judicial activism by English courts to soften the harsh effects of standard-form contracts and to protect both the public interest and freedom of trade. It has produced a twofold test of reasonableness: one concerned with fairness between the parties and the other with the public interest. In applying this test, courts focus less on an artist’s creativity or integrity than on the parties’ relative bargaining power, which is central to assessing the fairness of the contractual process.

A common concern in cases involving the doctrine of restraint of trade is the restriction of an individual’s freedom to carry on a trade. In assessing such restrictions, courts usually consider two questions: whether the restraint goes beyond what is necessary to protect the legitimate interests of the party in whose favour it is imposed, such as a manager, publisher, or record company, and whether it can be justified as serving the interests of the restrained party, usually the artist. If the restraint is legally reasonable, the courts will uphold the contract. This principle runs through cases from Schroeder to George Michael in relation to both contractual terms and bargaining processes. Although the level of remuneration may differ, the core issues remain the same: exclusivity, duration, territory, ownership of the work, and the rights of termination and assignment.

Against this background, contracts for musicians in Nigeria are largely standard-form agreements. These contracts have been shaped over time by legal challenges, as well as technological and marketing developments. In essence, standard-form contracts reflect longstanding industry practice.

An exclusivity clause that prevents a musician from dealing with a rival label constitutes a partial restraint and may also raise concerns about freedom of association. Whether such a clause is enforceable depends on the facts of each case. At common law, restraints of trade are prima facie void, whether partial or general, but they may be upheld if they are reasonable between the parties and consistent with the public interest. The court’s main concern is whether the remuneration for the restraint is fair and commensurate. If it is, the agreement may be enforced. The crucial issue is not simply whether the artist is restricted from carrying on a trade, but whether both parties are mutually bound. The arrangement becomes unfair where one party, usually the artist, is exclusively bound while the other is not subject to a corresponding obligation.

For example, the P-Square musical group served as brand ambassadors for Globacom and was among the highest-paid brand ambassadors in Nigeria. Peter received a new 2015 Mercedes-Benz G-Wagon, while Paul received a new 2015 Range Rover Vogue. According to market prices, each vehicle cost more than N25 million. In addition, the Leadership newspaper of 29 August 2015 reported that the deal included a cash payment of N140 million.

If a covenant prohibiting dealings with rival brands was included in P-Square’s contract with Globacom, it could not be said to have prevented them from carrying on their trade. Although such a clause would amount to a partial restraint, the court’s concern, as the authorities suggest, would be whether the consideration for that restraint was fair and commensurate as between the parties and consistent with the public interest. Using P-Square as an example, the consideration appears fair and commensurate and does not offend public policy.

Public policy requires that every person remain free to work and should not, by contract, deprive either himself or the state of the benefit of his labour, skill, or talent. At the same time, it recognizes that a person who has acquired something of value through skill or other means should be free to sell it on the most advantageous terms. To make such a sale effective, the person may also need to restrain himself from competing with the purchaser.

The 1974 English House of Lords decision in Schroeder Music Publishing Co Ltd v Macaulay is particularly instructive in determining when an artist may truly be said to have been denied the right to carry on his trade. It was the first music contract case in which the doctrine was applied. Macaulay, a young and unknown songwriter, entered into a five-year exclusive services agreement with a publishing company. Under the agreement, he assigned to the publisher full worldwide copyright in every original song he composed during the term. The publisher paid an advance of 50 pounds against royalties and, once that amount had been recouped, would pay a further 50 pounds on the same basis. These advances were to continue throughout the initial five-year period and could be extended if the total royalties advanced reached or exceeded 50 pounds. The publisher could terminate the agreement on one month’s written notice, but the songwriter had no corresponding right. Moreover, the publisher was under no obligation to publish any of the songs, meaning the songwriter could earn nothing if the works remained unpublished.

The court therefore voided the agreement as unfair and contrary to public policy. It held that the restriction was neither fair nor reasonable because the publisher assumed no real obligation, while the songwriter was fully bound.

In light of Macaulay, it may be argued that standard-form contracts in the Nigerian music industry amount not to general restraint, but to partial restraint. The law is that such restraints are enforceable if they are fair and reasonable between the parties and consistent with public policy. However, each case must still be decided on its own facts and circumstances.