All recording contracts will define the “term” of the agreement. This explicitly sets out the length of time that the recording agreement between a company and an artist is valid. This will usually consist of the initial term as well as further option periods, commenced by both parties in varying, negotiable ways. For example, the term of an agreement may be an initial two-year period, with three additional one-year agreements (totaling a five year period).

Even though these contracts will use units of years and months to stipulate the length of “periods” of time, it will invariably be connected to the artist’s delivery of product (masters, singles, etc.). Therefore, without delivery of product, the contractually stated amounts of time may come and pass, yet the period, or entire term itself, may be still be suspended. If this is to occur, many standard recording contracts could technically be extended forever.

In New York State and others, courts will generally grant relief to an artist wishing to terminate an agreement, after an extended period of time, even if they are in breach of contract. With no specific amount of time stated in the law, they must weigh the term of the agreement against the general public policy regarding harsh or unreasonable lengths of time. In Vanguard Recording Society v. Kweskin, a New York Federal Court refused to enjoin an artist from recording with another company where enforcement of a suspension clause for an indefinite period would make the contract “harsh and unreasonable”. Thus, the artist may have failed to perform his contractual duties or deliver the stated product, yet in regards to public policy, the unreasonable length of suspension rendered the contract void.

However, California State Labor Code has a “7 Year Rule” (as referred to in the music industry) stating that personal service contracts which last more than seven years cannot be specifically enforced. Many record companies may define the contract’s term as, say, a two-year initial period plus three one-year option periods to protect themselves against California’s seven-year rule. However, failures of artists to deliver products and failures of record companies to release and exploit products can lead to four or five-year terms carrying on past the seven-year limit. Artists wishing to terminate agreements have actually used these types of scenarios to their advantage in the past. This has protected countless artists and angered similar numbers of record executives since its inception in the earlier part of the 20th century. In another example, MCA Records v. Olivia Newton-John, a California Court of Appeals stated that an artist could not be prevented from performing from another record company for a period longer than the one in which her commitments to MCA could have been fully performed. MCA unsuccessfully argued that they should be allowed to extend the agreement past seven years by reason of contractual language that permitted suspension until delivery was completed.

While not all states have set a specific limit on the length of personal service contracts, when dealing with artists on a national level, this seven-year rule must be considered, for at some point in a growing artists’ career, their contracts and finances will pass through California (or more specifically, Los Angeles).