A purchase agreement is an agreement between the IP owner and a manufacturer. As part of a purchase agreement, the manufacturer obtains the right from the owner to purchase the property for a specified period of time for studios, networks, distributors, financiers and other potential buyers or supporters. As a general rule, the owner does not receive payment from the manufacturer for the right to purchase the property. On the contrary, the owner benefits from a producer who uses his network, his track record and his sales experience in the field of pitching. Since such a small percentage of scripts is produced, the advantage for the purchaser is that the option part of the agreement allows them to temporarily control the rights for less money (the “option price”) than it would cost to purchase those rights (the “purchase price”). If the purchaser finds the financing/funds to get the script, the purchase sets half of the agreement the terms of purchase, and everyone comes home happy. The contract is intended to facilitate the negotiation process between an author or his representative and a company that employs that author. Businesses, writers and their representatives can use these forms to commemorate employment contracts before a “long form” agreement is presented. However, a purchase agreement may be more advantageous for an owner if the property gains heat and generates interest after being purchased. In the absence of a pre-negotiated purchase price related to the property, as in the case of an option contract, an owner is free, as part of a purchase agreement, to negotiate a purchase price directly with the buyer and take advantage of the upward trend, including possible bidding wars. But the opposite also applies. For example, a screenwriter could enter into a purchase agreement for a well-written screenplay with commercial potential, but a film with a similar premise will be released shortly after and become a cash register bomb.
Film and television trends are hesitant, the script can suddenly become dead in the water, without interested buyers re-breeding because of the risk of the same failure. The owner would be missing all the revenue he would otherwise have received if he had entered into an option contract. During the 2001 MBA negotiations, a great deal of time was spent reaching agreement on limiting “A Film by” and other possessive credits. Although there has been a serious dialogue on this issue, no agreement has been reached. It was agreed that this issue would be addressed industry-wide with other credit issues. Until this problem is resolved, writers and their representatives can contribute by expressing their belief that granting recognition of possession to the director denigrates the work, not only by writers, but also by all those who contribute creatively to the creation of a film. On television, the MBA limits the dissemination of speculative literary material, unless the author has agreed. A company cannot purchase literary material that it has not purchased without the author`s written consent in a document other than the option or sales contract. In order to enforce the provisions relating to television purchases, the MBA requires the company to pay the author, through the guild, 750 $US for each party that received the material in violation of these rules. (MBA, article 49) Purchase agreements can take many forms, including the following agreements: unlike option agreements, purchase agreements can be either exclusive to a single producer or not exclusively.