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Becky Holloway

Black Widow and Contract Risk Management

Contracts exist precisely for when things go wrong and it looks like things have gone very wrong in the case of Scarlett Johansson’s contractual relationship with Marvel Entertainment and its parent company Disney. Johansson just filed a lawsuit claiming breach of contract for her role in the movie Black Widow, which was released July 2021 following numerous delays due to COVID. While the facts of this case may present unique circumstances, this suit underscores why contract risk management matters so much and how we are all still feeling the effects of uncharted contract territory in the era of COVID.

In her suit Johansson claims that, when Disney chose to release Black Widow simultaneously in theaters and on Disney+ streaming service, they breached her contract. She further claims that “Disney intentionally induced Marvel’s breach of the agreement, without justification, in order to prevent Ms. Johansson from realizing the full benefit of her bargain with Marvel” since much of her salary was based on the film’s box-office performance. The issue centers around what constitutes an exclusive theatrical release and whether this has materially impacted Johansson’s potential earnings from the film. Johansson believes it has while Disney contends it has not. Time will tell how this suit is resolved, but, as a contract management software provider, we can’t help but notice some of the important contracting issues this case raises.

Get a Grip on Your Contract Risk Management

With contracts it’s all about risk mitigation and the ability to manage the terms of the agreement. Part of the reason negotiation can take so long is because each party is weighing the downside if anything falls apart. If understanding the amount of risk found in a single contract seems daunting, assessing risk across your entire contract portfolio can seem nearly impossible. No doubt when Johansson and Disney inked their Black Widow deal, neither party anticipated a global pandemic, nor could they have foreseen that almost overnight the world would go from watching new releases on the big screen to the comfort of their own living rooms. At the same time, all parties agreed to terms that memorialized their obligations apart from the unknown forces of the universe, and now courts get to decide what that all means. We know from research done by the World Commerce and Contracting Association (WCC) that 9% of revenue is lost annually due to poor contract management, including things like “disagreement over contract scope” or “claim and dispute settlement”. Which means that accurately quantifying contract risk is an important part of the profitability of your company.

THINK ABOUT THIS: Do you know how much risk is contained in your portfolio of contracts and how that risk could impact your company’s bottom line?

Know What’s Being Left on the Table

Johansson knew her contract well and kudos to her for that. Far too often parties lose sight of contractual obligations, which can easily put them out of compliance with their signed agreements. This happens far too often in organizations where hundreds or thousands of contracts exist with multiple obligations per agreement. Who in your organization is keeping watch over all these renewals, milestones, and due dates? In this particular case, we don’t know if Disney lost sight of this obligation, interpreted the language differently than Johansson, or deliberately chose to ignore it. Regardless, Johansson kept her eye on the money she could be earning through this deal and clearly has no interest in leaving that money on the table.

THINK ABOUT THIS: Do you have agreements with tiered pricing or price increase provisions that you’re forgetting about and are leaving money on the table?

GUARD YOUR Contract Relationships

In large organizations, it’s not uncommon for one entity to make decisions for another entity. Unfortunately, this could potentially violate a legal obligation if contract visibility is limited. Being able to see the relationships between entities and contracts can make a huge difference. While Johansson is incentivized based on box office performance of her film, Robert Iger (Chairman) and Bob Chapek (Chief Executive) are incentivized based on the performance of Disney+. Knowing how these contracts relate to one another and potentially impact one another actually makes a difference. In this case, competing interests found in different contracts could end up costing Disney a pretty penny.

THINK ABOUT THIS: What contracts do you have that relate to one another and are those relationships easy to monitor?

If any of these questions really got you thinking and you’d like to see what a modern CLM can do to help you get a handle on your contract risk management, reach out today for a demo.