We barely get to see the napkin contract around which much of the drama in  Welcome to the Chippendales revolves. However, we are led to understand a few key things about it.  Chippendales founder Steve Banerjee met Nick De Noia in a restaurant. The two talked shop. At the end of their meeting, Nick wrote on a cocktail napkin that Steve granted Nick the “Chippendales touring rights in perpetuity.” Nick also wrote that he would pay Steve 50% of the tour’s net profits in return for the rights. Steve and Nick then signed the napkin.

No one ever said the word “license,” but in the end, the words on the napkin amounted to a license agreement – that is, a contract giving Nick permission to use Steve’s property (the Chippendales name), to a limited extent (on a touring company), in exchange for a fee (a percentage of the tour’s profits). All the elements necessary for an enforceable contract were on that napkin. Steve agreed to give Nick something, and Nick agreed to give something in return. And the two indicated their “mutual assent” to that agreement by signing the napkin. 

[By the way, the fact that Nick believed he needed Steve’s permission to use the name would be evidence tending to show that Nick was an employee, not a partner, in the Chippendales business – the issue I explored earlier.]

Most license agreements do not fit on cocktail napkins. Just take a look at the voluminous license agreement that Microsoft says you agreed to by “clicking through” before using its software. In Steve’s and Nick’s case, the barebones agreement wound up working to Nick’s advantage when Steve later balked at their deal. However, even from Nick’s perspective, a more robust agreement would have been better. By that, I mean an agreement that clearly addresses foreseeable questions head-on.     

For example, if (as we’ve already imagined) Steve later claimed in a lawsuit that he should not be held to the agreement because English was not his first language and he therefore did not appreciate the meaning of the term “in perpetuity,” Nick would have to grapple with that defense. In litigation, even weak defenses must be dealt with.

Now consider how much easier it would be for Nick in that litigation if his license agreement with Steve included language along these lines:

Voluntary Assent. By signing this License Agreement, Steve and Nick affirm that they each have been given a reasonable amount of time to consider this agreement and to review it with an attorney. Steve and Nick also affirm that they fully understand the meaning and intent of this agreement, and freely and voluntarily assent to all of the terms and conditions of this agreement.

I know lawyers get a bad rap for making simple things seem complicated, but in the context of this story, I hope it is easy to see why a more robust agreement—provided it is also clear, and its terms are consistent—may help keep legal costs down in the long run. That would have been true for Nick and Steve (who apparently really did wind up in litigation over the napkin contract), and would have been true for many of my clients who later find themselves embroiled in a dispute over the meaning of a contract.