The paper "Business Law: the Definition of the Second Party" is a brilliant example of a case study on law. Ellington’s grandson and heir whose is Paul Ellington sued EMI for a breach of contract. In the suit, Paul Ellington claimed that EMI had engaged in double-dipping by retaining 50 percent of revenue through its foreign subsidiaries before splitting the remaining 50 percent with the Ellington family. The agreement designated Duke Ellington and other family members named in it as the first parties and the second party included music publishers primarily Mills Music, Inc. (EMI). His argument was that this arrangement allowed EMI to inflate its foreign revenue share to 75 percent and reduce the Ellington’s family share, which was in violation of the contractual agreement to pay the family 50 percent provided in the contract as 50 percent “of the net revenue actually received by the Second Party from ... the foreign publication”. Contract law is important for the formation and enforcement of agreements between different parties. In the appeal, Paul Ellington asked the Court of Appeals to interpret the terms of royalty provision in 1961 the United States copyright renewal Agreement between Edward Kenney “Duke” Ellington and Mills Music, Inc. (EMI). The court ruled that the disputed terms of the contract were clear and unambiguous and as such, no breach had been caused (Ellington v EMI Music, Inc., 2014).
The Supreme Court of the United States of America ruled dismissed the amended complaint in entirety and ruled that the royalty payment provision provided in the contract was clear and unambiguous. Paul Ellington appealed at the decision at the New York Court of Appeals, which affirmed the Supreme Court’s decision stating that the Supreme Court correctly determined the case.
Was the definition of Second Party in the copyright renewal agreement 1961 unclear and ambiguous? In other words, does the definition of Second Party include only the parties named therein or does it also include other affiliates of (EMI) that were in existence at the time the agreement was executed?
In this case, the rule that applies regards the fact that when the terms of a contract are clear and unambiguous, the intent of the parties must be within the four corners of the contract as in Greenfield v Philles Records and Assoc. V Giancotieri. Another rule is that the words and phrases used in the contract by the parties should consider contract interpretation and be in terms that express the plain meaning as in Brooke Group v JCH Syndicate.
Another rule applicable in this case provided in Breed v insurance, an agreement is considered as unambiguous if the language that is used in it provides a definite and precise meaning and strives not to cause “misconception in the purport of the [agreement] itself, and concerning which there is no reasonable basis for a difference of opinion” (Ellington v EMI Music, Inc., 2014). A contract is unclear and ambiguous when it does not disclose its purpose and parties intent when reading as a whole or when its language is susceptible of more than one interpretation as in State of New York v Home Indem. Co.
According to the first argument on the term “net revenue actually received”, the agreement read that the Second Party would pay the “First Parties a sum equal to fifty 50% of the net revenue actually received by the Second Party…from the foreign publication” (Ellington v EMI Music, Inc., 2014). In its ruling, the New York Court of Appeals affirmed the Supreme Court’s decision that the provisions of the contract were not unclear or ambiguous. The court ruled that the language was not ambiguous because a plain reading of the provision indicated that the plaintiff is entitled to 50 percent of the net revenue received from foreign sub-publishers when paying the First Parties. In declining to give a ruling on the royalty provision, the court stated that the provision did not make any distinction between affiliated and unaffiliated foreign sub-publishers. Therefore, the court could not rule because it did not appear to be the intent of the parties involved (Ellington v EMI Music, Inc., 2014).
With respect to the argument of ‘any other affiliate’, the court ruled that the phrase included the affiliates in existence when the contract was formed. The court stated, “The Releases reference to affiliates [is] stated in the present tense. Nothing…indicates the inclusion of future rather than present members” (Ellington v EMI Music, Inc., 2014). Here, the parties did not intend to bind future affiliates. Therefore, this means that the foreign sub-publishers were not affiliates at the time the contract was executed. The court also observed that the use of present tense in the contract showed that it would bind the affiliates that were in existence when the agreement was formed and not any other.
The court concluded that the terms “net revenue actually received” and “any other affiliate” as provided for in the contract in the definition of the Second Party were not unclear or ambiguous (Ellington v EMI Music, Inc., 2014).