Breaches of contract

Late or missing payments are a common problem in the execution of contracts. For reasons of efficiency, if the agreed payment to an artist or creative is not made, it is advisable to first remind the contractual partner of the outstanding payment or issue a dunning letter. If the debtor does not respond to the reminder, he will be in default by virtue of the dunning letter.
Note: There are legal exceptions that render a reminder unnecessary, for example, when a service is tied to a particular date or if the debtor genuinely and definitively refuses to pay. However, the artist or creative must be able to prove this refusal to pay by the defaulting contracting party.

In the event of non-payment, legal action may also be taken directly; that is to say, legal dunning proceedings may be initiated or action for payment taken against the debtor. A dunning procedure may not only be conducted against a debtor domiciled in Germany, but may also be initiated internationally (information on the legal dunning proceedings, relevant countries, online dunning requests etc. can be found here - only available in German).

The dance company can initiate legal dunning proceedings and submit a corresponding request. If no particular court of jurisdiction has been agreed on, the dunning proceedings against the German organizer will be initiated in Germany.
Wedding District Court – Berlin-Brandenburg Central Debt Recovery Court (Amtsgericht Wedding -Zentrales Mahngericht Berlin-Brandenburg) is responsible for applicants based outside of Germany.

The pop band may initiate legal dunning proceedings. In this case, the organizer is headquartered abroad. A dunning procedure cannot be initiated in Germany if no German court is responsible for the international proceedings, i.e. if, for example, no particular court of jurisdiction in Germany has been agreed upon or if the place of performance is not in Germany. In this case, the collective must proceed via the Portuguese judicial system, which will necessitate local legal and linguistic assistance.

Further information can be found here (only available in German); helpful explanations are provided, for example, by the Stuttgart IHK (Chamber of Industry and Commerce). 

If an action is permitted, the defaulting party is legally obliged to bear the legal costs related to the proceedings. In practical terms, however, the defaulting contractual partner must be solvent; otherwise the artist will be granted a writ of execution, but will receive neither the monies owed nor the charges and procedural costs incurred as a result of the default. The procedural costs must then be borne by the artist, since these are usually pre-financed by him/her.

While the artist in this example has a right to demand that the buyer pay the purchase price, this will not help her if the buyer has no financial resources. It is uneconomical in most cases to further pursue a claim in the case of insolvency.
The ‘taking of the work’ is objectively considered a transfer of ownership of the work to the buyer. Since the buyer has in turn passed on the work, the artist can no longer demand that the new owner return the work, for example by arguing that the initial buyer did not pay for it.

At this point, it is important to recall the ‘goods for money’ principle, which, unfortunately, is not always feasible in practice. However, the contracting parties may contractually agree upon reservation of title until full payment of the purchase price. This would mean that the work does not become the property of the buyer upon handover, but only once the full purchase price has been paid. This only protects the artist to a certain extent, since a new prospective buyer may nevertheless purchase the work from the unauthorized original buyer in good faith. However, the initial buyer might be liable to prosecution if, for example, he acted deliberately, which would impede the resale of the work.

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Organizers in the field of performing arts frequently fail to comply with contractual terms and cancel performances at short notice, for example. In principle, the organizer, as a contracting party, is thus liable to pay damages.
Discussions often arise when it comes to calculating these damages: questions may be raised as to whether the artist is saving certain costs as a result of the cancellation, that is, if he/she does not have to travel to the event or may even be booked for an alternative event at short notice. In such a case, the contract concluded between the parties is also authoritative.
In order to prevent disputes, certain contractual penalties can be fixed in advance. These penalties are usually based on a graduated timeline: the shorter the notice given for the cancellation, the higher the contractual penalty.
Conversely, in the field of performing arts, artists should remember to contractually exclude a requirement to perform in the event of illness. This, in turn, negates the obligation of the organizer to remunerate the artist in the case of illness.

When negotiating contracts, it is often a question of the extent to which an artist is able to assert him/herself economically (or with regard to his or her own professional development) with regard to the contractual partner concerning such stipulations.

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If, for example, a work of art or a design object is damaged during an exhibition, the exhibitor is liable to reimburse the artist (Liability for damages (§ 823 BGB)).

In this example, the problem is proving when the damage occurred. If the artist can prove that the damages could only have arisen during the hanging process, the exhibition organizer is liable. If the damages could theoretically also have arisen during the transport of the works to Cologne (in this example, the packages were only demonstrably undamaged during the return), the artist may have difficulties proving liability. 
To make matters worse, the artist is based in Madrid and would have to sue the exhibitor in Cologne (provided that Cologne was agreed upon as the place of jurisdiction or if no explicit agreement was made regarding the place of jurisdiction). Hiring a local lawyer and securing any necessary translations etc. will quickly cause proceedings to become uneconomical for the artist, particularly in the case of rather small claims.
In general, the success of proceedings always depends on the case in question and usually cannot be predicted with absolute certainty.

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What happens if the client is insolvent and there are outstanding payments; for example, a fee has yet to be paid?
If a company declares bankruptcy, it must first be determined whether insolvency proceedings can be initiated. If this is not the case, one must assume that the fee is lost. If insolvency proceedings are indeed initiated, a debt-reduction schedule can be negotiated with the liquidator, which specifies what percentage of their open claims each creditor will receive. If no such plan is implemented and the company is sold, the sales proceeds will ideally be higher than the costs of the insolvency proceedings. If this is the case, the remainder can be distributed among the creditors based on a fixed percentage. In many cases, however, this is not economical.

In this context, it is important to note that if a company has filed for bankruptcy, it is considered insolvent and can no longer settle invoices. Even reminders or complaints will no longer be effective in such cases. If the company does pay individual creditors despite this, the liquidator can reclaim the money.

The German Insolvency Statute is available here.

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An action requires that the competent local court is contacted. Especially when it comes to local jurisdiction, jurisdictional issues may arise if the disputing parties are based in different countries. As a general rule, an action is brought before the competent court where the defendant is headquartered; in Germany, this would be a district or regional court. However, here, too, there are exceptions, so the place of jurisdiction should be contractually stipulated in advance.
The costs of judicial proceedings usually depend on the amount in dispute. It is also necessary to consider additional costs for experts, for example in the context of the process of collecting evidence, especially when it comes to the ascertainment of loss.
Any subsequent enforcement takes place in the location in which the judgment debtor is headquartered and is carried out by the competent national judicial authorities. This can also lead to enforcement in another EU country, for example.

Within the framework of European harmonization, there is no need to first have such writs recognized by the foreign court. The German title can thus be enforced directly in France.
Legal advice should always be sought with regard to the formal requirements for international enforcement proceedings, their execution etc.

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In the event of judicial proceedings, legal advice should be sought at the place of jurisdiction if possible. In Germany, disputes involving sums of up to (currently) 5,000 euros are usually conducted via the district courts, which do not require legal representation. In practice, however, it is rare for plaintiffs to represent themselves, especially if they do not speak German or are not familiar with the procedural practices.
As in all professional fields, there are specialists for specific issues. When searching for and hiring a lawyer, one can initially base one’s decision on the topic under dispute – problems with the premises (tenancy law), usage rights (copyright) etc.

The expected costs also play a role. Accordingly, the regulations concerning legal fees should first be discussed. Out of court, each party usually pays its own lawyer. The fees are only subject to a lower limit and are a matter of negotiation. An initial verbal consultation for clients should not cost more than 190 euros (in Germany). In the event of court proceedings, the losing party is liable for all costs associated with the proceedings, including the costs of the opposing lawyer based on the German Lawyers’ Compensation Act (Rechtsanwaltsvergütungsgesetz). If one party only partially prevails, however, the parties in dispute are liable for the respective proportionate costs.

Legal expenses insurance is one way of safeguarding against the costs associated with such proceedings. The devil is in the detail, however: when selecting an insurance policy, it is important to determine whether and to what extent the costs of litigation in the course of one’s profession are covered. Such cover is not a given with all insurers.

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