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Miramax claims Warner Bros. has breached the UCC

Miramax LLC is currently involved in a law suit against New Line Cinema Corporation and Warner Brothers Entertainment Inc. over Peter Jackson’s newest foray into Tolkien’s Middle-earth. Miramax initially acquired the film rights to Tolkien’s work back in the ’90s. They relinquished the rights to New Line Cinema through a signed agreement. Miramax is claiming that they were owed royalties on the subsequent Hobbit movies based on the agreement signed back in 1998.

The agreement states that Miramax would be entitled to 5 percent of the gross from each initial motion picture based on each book. According to Miramax, Jackson’s recent Hobbit trilogy is one story told in three films, meaning that they are owed 5 percent of the gross from the subsequent Hobbit movies. Miramax claims that Warner Brothers is breaking an obligation of good faith that is implied in the Uniform Commercial Code.

§ 1-304 of the UCC maintains that parties involved in a contract must not injure each other’s entitlement to gain from the contract. This is to prevent underhanded business deals in commercial transactions. The UCC prevents one party from engaging in shady practices to avoid giving the other party its fair share.

In the case of the Hobbit films, Miramax must prove that they have been denied their fair share in order to use the UCC in their defense. If they are successful, they may earn the additional 5 percent of gross receipts from the last two installments in the Hobbit trilogy. But this provision applies to all business deals and cannot be ignored. The UCC attempts to maintain and encourage fair dealings in all business transactions. It is the language of business, and you must understand it to succeed.

Source: Mondaq, “The Hobbit: an unexpected lawsuit – breach of contract,” Sarah Hoffman, Jan. 17, 2014

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