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How to Read a Book Contract – Who Decides What Contracts You Sign?

5 August 2011

Passive Guy returns to agency contracts. He promises he’s not piling on agents. This contract has been sitting on his desk for many weeks and captured his attention while he was looking for a paper clip.

Before we dive into the clause du jour, PG has to say this is a poorly-written contract. The contract arrived with the reputation of being one of the worst agency contracts in the business for an author. PG can see voluminous evidence supporting that characterization.

But it’s also a contract with a couple of holes PG could drive a truck through.

As he was reading it, PG wondered if the contract had been written by a lawyer. If it was, well, PG hopes it wasn’t.

Why? Should the contract be litigated, in PG’s invariably humble opinion, it will be gutted like a pig in a Jimmy Dean Sausage factory.

But that’s just what PG thinks. He could be wrong.

Looking at the language as a legal archaeologist, PG suspects it may have started out as a decent contract from an attorney, but was later modified by someone who was grasping for more control over authors. In the process of modifying the contract, the mystery rewriter screwed it up.

Details supporting PG’s archaeological speculations would be boring, so let’s look at a short little tidbit of a contract clause, a sort of mini sausage:

Acceptance of Contracts

Agency agrees to submit to you any offers it receives. No agreement shall bind you without your consent and signature, not to be unreasonably withheld.

The first sentence is fine albeit a little silly. Inherent in an agent’s obligations to an author is to submit any offers it receives. Why? Because the contracts bind the author in some way and it’s the author’s decision to accept or decline.

An agent who received an offer it didn’t forward to an author would be violating several basic tenets of agency. Revisit How to Read a Book Contract – Agents and the Law to see what those might be.

The second sentence before the comma is a simple statement of law. If you don’t sign a contract, you’re not bound by the contract. Never, ever, ever agree that your agent, your attorney, your friend from Pilates, your Mamma, your Daddy or your local Supreme Court Justice can sign any agreement on your behalf. Many of those stories you hear on TV or read in the paper describing another aging millionaire who got swindled out of her money by her yoga instructor arose from the yogi signing her name to something.

The part of the second sentence after the comma messes up this goofy description of fundamental agency principles. You need the unobjectionable part to understand the objectionable part.

No agreement shall bind you without your consent and signature, not to be unreasonably withheld.

This paragraph includes both objectionable and weird elements.

Let’s talk weird first, parsing the language carefully:

  1. The agency submits all offers to you, the good, the bad and the ugly
  2. None of these good, bad or ugly offers will bind you unless you sign them
  3. You will sign these agreements and you won’t unreasonably refuse to sign them

The weirdness comes in combining proposed agreements with third parties with what may or may not be unreasonable from the agency’s point of view. Some of the people who submit offers may think you’re unreasonable if you turn them down. Are they somehow the beneficiaries of this paragraph?

What PG thinks the agent was trying to say is, if the agent submits a contract and recommends the author sign the contract, the author agrees not to be unreasonable by refusing to sign the contract. But that’s not really what the contract says.

Legal provisions requiring the consent of someone and stating that person won’t unreasonably withhold consent are not unusual, but they typically apply to things like the assignment of a contract in connection with the sale of the company holding the contract. Such provisions bring business standards, making the decision in good faith, etc., into the consent process.

If someone says, “I’m withholding my consent because I hate your guts,” that would be unreasonable. What if someone says, “I’m withholding my consent because I don’t think the purchaser of your business is financially sound and able to carry out its obligations under my contract”? Sounds reasonable unless your contract was with Joe’s Bait Shop and Sushi Bar and Joe is selling out to IBM.

The reason that “not unreasonably be withheld” doesn’t fit in this context is the agent is obligated to obey the instructions of the principal. This is a substantially different relationship than that between two business entities.

If the agent doesn’t like the instructions of the principal, the agent’s remedy is to withdraw from the relationship, not fight about whether the author is reasonable or not. If the agent has concerns about the author’s reasonableness, the agent should not agree to act on the author’s behalf in the first place. This is a “let’s fight about contracts” provision if the author declines to follow the agent’s recommendation.

That said, this clause is also an example of a stupid contract provision. Think about it. If an author doesn’t want to enter into a publishing contract and remembers this clause, he could think for ten minutes and come up with a reasonable basis for rejecting the offer. PG certainly could do so on behalf of the author.

Hell, PG could generate dozens of reasonable excuses not to sign a publishing contract:

  1. I think I can make more money self-publishing. Here are five examples of authors who make more money self-publishing than they ever did with a traditional publisher. I want to be like them.
  2. Many experts in publishing believe big publishers are headed toward the cliff and I don’t want to go along for the ride.
  3. The publisher is going to ask for rights for the life of my copyrights and I believe a contract extending for more than 100 years is a terrible idea.
  4. At least one attorney believes all major publishers are illegally colluding to fix the royalties for ebooks at 25% of net. I don’t want to be involved with a publisher whom I believe is violating antitrust laws. I worry that fighting an antitrust investigation means the publisher will be less effective in marketing my books and my marketing budget will be going to pay lawyers.
  5. I think Amazon will become the dominant force in publishing as well as bookselling and this contract isn’t with one of Amazon’s publishing imprints.

But this is just PG’s opinion. He could be wrong. Happens all the time.

Agents, Contracts, PG's Thoughts (such as they are)

9 Comments to “How to Read a Book Contract – Who Decides What Contracts You Sign?”

  1. Your five answers? Yeah, one through five. Loved them!

  2. And this is why I tell people to read your blog.

    (I snickered at the “unreasonably withheld” part.)

  3. Truth is, most publishing contracts are full of holes. And many agents in my experience don’t understand half of what’s in them. It’s “Sign this so I can get my 15 percent.”

    I fully expect in the next couple of years we will see some nasty legal battles from authors trying to break agency contracts or agents trying to scoop self-pub money they claim should be theirs. Probably between parties who today profess to “unquestioningly love and trust” each other.

    • Scott – I agree about the holes in publishing and agency contracts. As a class, they’re the sloppiest of the various types of contracts I’ve seen.

      I also agree there will probably be some lawsuits in the future. It will be interesting to see the effect of author blogs on the reputation of the agency during such fights, however.

      • I think the chances of this are slim, based on simple practicality. Most authors aren’t making enough money to afford to sue an agent – especially when he has to do it in the agents home state. Authors that are making enough money to fund litigation are either smart enough to avoid a bad contract or hire a lawyer to negotiate for them. There is always the independently wealthy novelist out there who might sue for the principle, but as my father taught me right after I passed the bar, “beware of a client who is suing on principle and paying by the hour.”

        (N.B. If an agent failed to forward a movie deal author because he mistakenly thought the offeror was “rinky dink” -see below- I’d take the damn case on a contingency!)

  4. A major agency that shall remain nameless was stacking up ebook contract amendments sent out by publishers, not even notifying their clients the amendments had been sent because, as one of the agents explained to me, “we don’t think the amendments are in the best interest of our clients.” I sorta thought it should have been up to the clients to decide that. At the very least, I thought the agency was under an obligation to make the offer known to their clients.

    A friend of mine who writes suspense/thrillers had a film production company sniffing around, wanting to turn one of her books into a movie. Her agent never mentioned it because she thought it was a rinky-dink outfit — one she’d never heard of, therefore not worth their time. Turns out the production company was owned by George Clooney. I can’t recall how my friend found out about this, but I do know she left that agent when she discovered it.

    • Patricia – It’s pretty fundamental that an agent always conveys any offers, opportunities, etc., the agent receives to the principal.

      It’s a specific provision in every set of legal ethics rules I’ve read that every offer received by an attorney must be conveyed to the client – sore neck suit, plea bargain in a criminal matter, etc., etc. An attorney who fails to do this, regardless of the merits of an offer, can be sanctioned.

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