Licensing Agreement #7 – Audits
09-22-09
For the next few weeks I will be breaking down a general Licensing Agreement clause-by-clause and giving brief explanations on what it all means. For the beginning of this series of posts, start at the first one dated Sept 14, 2009 (scroll down).
This is the next clause in a Licensing contract:
5. AUDIT
5.1 The Licensee shall keep, maintain, and preserve (in the Licensee’s principal place of business) for at least two (2) years following the termination or expiration of the Term of this Agreement or any renewal(s) hereof, complete and accurate records of accounts including, without limitation, invoices, banking, financial and other records pertaining to the various items required to be submitted by Licensee. Such records and accounts shall be available for inspection and audit at any time during Licensee’s business hours and upon fourteen (14) days notice by Licensor or its nominees. The expense of audits initiated by the Licensor shall be at their expense.
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Clause 5 is self explanatory. Keeping proper records is a good idea, even if you don’t license an entertainment property. This Agreement forces the Licensee to keep accurate records of all accounts, including invoices of sales to stores/clients, banking statements, financial records and other records pertaining to the various items required to be submitted by the Licensee in the Royalty Statements (see previous post).
These records and accounts shall be available for inspection and audit at any time during Licensee’s business hours and must be kept at the Licensee’s principal office until two years after the expiry or termination of the Agreement. The Licensor can only commence an audit after fourteen (14) days notice from the Licensor or its nominees. Add written notice for clarification in future contracts.
The expense of audits started by the Licensor shall be at their expense. This line is very important and ensures that the Licensor will not only pay for audits they commence but will not do audits without justification as they can be quite costly.
Next – Licensing Agreement #8 Samples & Quality
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As most of you know, I am not a lawyer or an accountant and I recommend everyone seek their own legal counsel and accounting and tax advice in all contractual matters. I provide consulting which is detailed on the ‘services’ page of this website.
Hope this contract breakdown helps you understand the intricacies of a Licensing Agreement. Should you have any questions contact me at info@Playdigm.com – please put ‘Licensing’ in the subject line of your email.
Sandford Tuey