Motion Picture Herald (Jan-Mar 1932)

22 Better Theatres Section February 13, 1932 LIABILITY UNDER FILM SERVICE CONTRACTS analyses of recent high court decisions By LEO T. PARKER THEATRE OWNERS who enter into a valid contract to exhibit certain motion picture films, are bound to pay the rental price specified in contracts, although they sell their theatres, or for other reasons are unable to comply with the terms of the contract. This rule of the law is applicable even though the distributor does not ship or offer to deliver the films to the seller of the theatre. So held a higher court in the late case of MetroGoldwyn-Mayer Distributing Corporation V. Cocke (41 S. W. [2d] 645). The facts of this case are that a motion picture theatre owner and a film distributor entered into a contract by the terms of which it was agreed that the theatre owner would accept and pay a specified amount for the privilege of exhibiting motion picture films stipulated in the contract. The agreement provided that the distributor would give the exhibitor at least four weeks' notice, in writing, of the date when the various photoplays would be available. The contract also contained the following clause: "If the exhibitor sells or disposes of his interest in the theatre above specified, he may assign this contract to the purchaser of such interest with the written consent of the distributor and such assignment shall become effective upon the written acceptance thereof by assignee (theatre purchaser), such assignment, however, shall not relieve exhibitor of his liability hereunder." Without obtaining consent of the distributor the theatre owner sold his theatre to a man named Simpson. Under the terms of this contract the theatre seller assigned to Simpson the above mentioned film lease contract. The distributor filed suit against the seller of the theatre to recover the contract price for the films which were not exhibited by Simpson. The seller of the theatre contended that he was not liable because he had assigned the film lease contract to Simpson and, also, that the distributor had failed to give four weeks' notice in writing of the date upon which each photoplay would be available, and that he had failed to ship or offer to deliver the films. Although the lower court held the seller of the theatre not liable on the contract, the higher court reversed this decision, and said : "It is true that this sale was made without the consent of the apellant (distributor) having been obtained, and it is also true that Simpson (theatre purchaser) did not assume the obligations of appellee (theatre seller) to appellant, but, nevertheless, the appellee had not only transferred the theatre to Simpson but also had assigned the contract in controversy to him. This being true, the law would not require the doing of a vain and useless thing, such as provided in the contract, in giving such notice and making the tender provided for when the appellee (theatre seller) had by such sale placed it without his power to perform his contract." Another important rule of the law is that a theatre owner cannot avoid liability on valid clauses in a contract, although certain of the contract clauses may have previously been held by a higher court to be invalid. This point of the law was clearly discussed in the recent case of Fox Film Corporation v. Buchanan (136 So. 197). The facts of this case are that the owner of three theatres and the Fox Film Corporation entered into a contract by the terms of which the theatre owner obligated himself, among other things, to reproduce and exhibit in his theatres 35 Fox sound entertainment prints, 12 Fox Movietone and sound all-talking productions prints, and one Fox Movietone Follies print, at times agreed upon as set forth in the contract and at prices stipulated therein. The aggregate sum which the theatre owner agreed to pay the Fox Film Corporation for the pictures named in the contract amounted to $1,125. The theatre owner accepted one picture under the contract and paid the stipulated price therefor. He then sold his theatre. The purchaser of the same refused to accept and pay for the films contracted for by the seller. The Fox Film Corporation filed suit aeainst the seller of the theatre to recover damap'es and anticipated profits which would have been earned had the theatre seller retained possession of the theatre and completed the contract. The seller of the theatre defended the suit on the f'rounds that he was not obligated to fulfill the agreement because the eighteenth clause in the contract provided that in the event of disaereement the contractinn; parties will abide bv any decision or award of the Board of Arbitration, and that such decision or award shall be enforceable in anv court. The contract involved in this case was on a standard form adopted by practically all of the motion picture producers and distributors of America and used by them in their dealings with theatre owners for the reproduction and exhibition of pictures of any and all kinds. In this contract there are 22 separate provisions which are considered valid, except the eighteenth clause, which was held invalid by the Supreme Court of the United States for the reason that the provision therein violates the Sherman anti-trust law. It was contended by the seller of the theatre that since the eighteenth clause had been previously held invalid, he was not required to fulfill any part of the contract. Notwithstanding this argument, the higher court held the seller of the theatre liable for failure to fulfill the obligations assumed in the other 21 clauses in the contract, and said : "The uniform contract that has been adopted by the plaintiff and all other producers and distributors of motion pictures in the United States has been declared by the Supreme Court of the United States to be illegal in one of its provisions, the eighteenth, for the reason that this provision is violative of the Sherman Anti-Trust Law in that it is to that extent a contract in restraint of trade. ... It has been expressly held that, where agreements in restraint of trade were unlawful in part, they were enforceable as to the parts that were not unlawful, and this holding runs back to the earliest authorities. . . . The elimination of the arbitration provision of this contract does not leave the plaintiff (distributor) free to refuse to furnish the pictures called for, not could the defendant (theatre owner) refuse either to take or pay for the same. The essence of this contract is that the plaintiff agreed to furnish certain pictures and the defendantpromised to exhibit and pay for them. . . . Therefore, the parties are as free to resort to the courts for the enforcement of their rights thereunder as if the said illegal provision had never been incorporated therein." Law of Forgery IT IS WELL established law that a forged contract is invalid and its holder has no legal rights. Frequently, it is difficult to prove that a contract or other instrument actually is a forgery. Therefore, in order to sustain a conviction of forgery it is not necessary that the {Continued on page 51)