Clause & Effect

The agreement further provided that 'if the Picture gets made in association with Prelude, Prelude shall grant to Melchior a non-exclusive 'special advisor to [Prelude's] Mark Koch' or equivalent credit in the end titles of the Picture in a size, style, position and prominence to be determined by Prelude, in its sole and absolute discretion. Subject to Melchior's availability, Melchior shall be hired, and shall provide services to, Prelude for a period of a minimum of ten weeks during pre-production and/or production of the Picture at a salary of $1,500 per week.' The agreement also stated that it 'may be assigned or otherwise disposed of, or transferred by, [Prelude] and such assignee, disposee, or other transferee shall be bound by the terms of this agreement.'

Prelude did, in fact, sell the option rights to New Line Productions under an agreement that provided that Prelude 'assigned to [New Line as] Buyer all of Seller's right, title, and interest in and to the Property, including, but not limited to, ' Seller's right, title and interest pursuant to the release agreement dated June 15, 1994 between Seller and [Melchior] ', a copy of which is attached as Exhibit B hereto. Buyer ' expressly assumed all of Seller's obligations under the ' Release Agreement, subject to the retained obligations of Seller with respect to the ' Release Agreement, as set forth in the final sentence of paragraph 8 hereof.' According to paragraph 8, 'with respect to the ' Release Agreement, Seller retains the obligation to make all payments required to be made to Ib Melchior pursuant to such agreement ' provided that Buyer has the right (upon notice to Seller) to make any of the foregoing payments directly to Ib Melchior and to offset such payments against monies payable to Seller hereunder.'

New Line agreed to pay Prelude a participation fee either when the domestic box office proceeds for the film reached $75 million or at cash breakeven, whichever occurred first. The film reached neither point. New Line subsequently paid Melchior the $75,000 production bonus and $15,000 for production services, but Melchior never received a percentage of the gross receipts.

When Melchior sued, the Los Angeles Superior Court granted summary judgment New Line. Melchior argued in his breach of contract claim that Sec. 1589 required New Line to assume the payment obligations per the terms of Melchior's agreement with Prelude.

Reversing in part, the California Court of Appeal, Second Appellate District, noted, 'New Line made the Picture Lost in Space utilizing Melchior's rights and services. New Line thus accepted the benefits of Melchior's rights and services under the original Release Agreement.' Citing Fanning v. Yoland Productions, Inc., 150 Cal. App. 2d 444, 310 P.2d 85 (1957), a case that involved actor Ronald Coleman, the court of appeal added, 'Under the provisions of section 1589 of the Civil Code, the acceptance by [New Line] of such benefits, under the circumstances here, is 'equivalent to a consent to all the obligations arising from' the [agreement] between [Melchior] and [Prelude].

Also under the provisions of section 3521 of the Civil Code, since [New Line] accepted such benefits from the [Melchior/Prelude agreement], it must also bear the burdens of that contract. Notwithstanding the private arrangement between [New Line] and [Prelude] with respect to the nonliability of [New Line] for the [payments to Melchior], [New Line] is liable, under the circumstances here, for the [payments] stated in the [Melchior/ Prelude agreement].' Melchior v. New Line Productions Inc., B153239.

(The court of appeal decided, however, that Melchior's conversion and unjust enrichment claims were preempted by the Copyright Act.)

But New Line would have been liable even if its agreement with Prelude had specifically stated that New Line wouldn't be obligated to pay Melchior (which was the Fanning case). That's because, the court of appeal noted, Sec. 1589 would be triggered as long as New Line accepted the benefit of Melchior's services.

Parties who buy rights to produce films often sell those rights to third parties. Such assignments raise the issue of whether the third-party buyer must meet the contractual obligations that the original rights buyer owed the original rights seller.

California Civ. Code Sec. 1589 states: 'A voluntary acceptance of the benefit of a transaction is equivalent to a consent to all the obligations arising from it, so far as the facts are known, or ought to be known, to the person accepting.'

In a recent dispute, Prelude Pictures had optioned the rights from Ib Melchior to make a film based on the TV series 'Lost in Space.' Under the agreement, 'if the Picture gets made in association with Prelude, Prelude [grants to Melchior] ' the right to receive seventy-five thousand dollars ($75,000) as a production bonus payable out of the budget of the Picture ' and two percent (2%) of Prelude's gross receipts, if any, from the Picture (it being understood that such gross receipts are not the gross profits or receipts of the Picture or the distributor's gross but are Prelude's gross receipts from the Picture, including, without limitations, receipts from videocassettes, laserdiscs and other visual reproductions of the Picture.'

The agreement further provided that 'if the Picture gets made in association with Prelude, Prelude shall grant to Melchior a non-exclusive 'special advisor to [Prelude's] Mark Koch' or equivalent credit in the end titles of the Picture in a size, style, position and prominence to be determined by Prelude, in its sole and absolute discretion. Subject to Melchior's availability, Melchior shall be hired, and shall provide services to, Prelude for a period of a minimum of ten weeks during pre-production and/or production of the Picture at a salary of $1,500 per week.' The agreement also stated that it 'may be assigned or otherwise disposed of, or transferred by, [Prelude] and such assignee, disposee, or other transferee shall be bound by the terms of this agreement.'

Prelude did, in fact, sell the option rights to New Line Productions under an agreement that provided that Prelude 'assigned to [New Line as] Buyer all of Seller's right, title, and interest in and to the Property, including, but not limited to, ' Seller's right, title and interest pursuant to the release agreement dated June 15, 1994 between Seller and [Melchior] ', a copy of which is attached as Exhibit B hereto. Buyer ' expressly assumed all of Seller's obligations under the ' Release Agreement, subject to the retained obligations of Seller with respect to the ' Release Agreement, as set forth in the final sentence of paragraph 8 hereof.' According to paragraph 8, 'with respect to the ' Release Agreement, Seller retains the obligation to make all payments required to be made to Ib Melchior pursuant to such agreement ' provided that Buyer has the right (upon notice to Seller) to make any of the foregoing payments directly to Ib Melchior and to offset such payments against monies payable to Seller hereunder.'

New Line agreed to pay Prelude a participation fee either when the domestic box office proceeds for the film reached $75 million or at cash breakeven, whichever occurred first. The film reached neither point. New Line subsequently paid Melchior the $75,000 production bonus and $15,000 for production services, but Melchior never received a percentage of the gross receipts.

When Melchior sued, the Los Angeles Superior Court granted summary judgment New Line. Melchior argued in his breach of contract claim that Sec. 1589 required New Line to assume the payment obligations per the terms of Melchior's agreement with Prelude.

Reversing in part, the California Court of Appeal, Second Appellate District, noted, 'New Line made the Picture Lost in Space utilizing Melchior's rights and services. New Line thus accepted the benefits of Melchior's rights and services under the original Release Agreement.' Citing Fanning v. Yoland Productions, Inc., 150 Cal. App. 2d 444, 310 P.2d 85 (1957), a case that involved actor Ronald Coleman, the court of appeal added, 'Under the provisions of section 1589 of the Civil Code, the acceptance by [New Line] of such benefits, under the circumstances here, is 'equivalent to a consent to all the obligations arising from' the [agreement] between [Melchior] and [Prelude].

Also under the provisions of section 3521 of the Civil Code, since [New Line] accepted such benefits from the [Melchior/Prelude agreement], it must also bear the burdens of that contract. Notwithstanding the private arrangement between [New Line] and [Prelude] with respect to the nonliability of [New Line] for the [payments to Melchior], [New Line] is liable, under the circumstances here, for the [payments] stated in the [Melchior/ Prelude agreement].' Melchior v. New Line Productions Inc., B153239.

(The court of appeal decided, however, that Melchior's conversion and unjust enrichment claims were preempted by the Copyright Act.)

But New Line would have been liable even if its agreement with Prelude had specifically stated that New Line wouldn't be obligated to pay Melchior (which was the Fanning case). That's because, the court of appeal noted, Sec. 1589 would be triggered as long as New Line accepted the benefit of Melchior's services.