How to Read a Book Contract – Agency Clause

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A reprise of an earlier post:

An agency clause may be inserted into a publishing contract between an author and a publisher. In essence, a typical agency clause provides that the agent may receive royalty payments on behalf of the author and has authority to act in the name of the author with respect to the contract.

Here’s an example:

All sums of money due to the Author under this Agreement shall be paid to the Author’s agent, Annie Agent, of 321 Applesauce Avenue, New York, NY 10023, U.S.A. (hereinafter called “the Agent”) and receipt by the Agent shall be a good and valid discharge of all such indebtedness and the Agent is hereby empowered by the Author to act on the Author’s behalf in all matters arising in any way out of this Agreement.   For services rendered and to be rendered the Author does hereby irrevocably assign and transfer to the Agent the sum of 15% (fifteen percent) as an agency coupled with an interest out of all monies due and coming due to and for the account of the Author under this Agreement.

To understand this beast, you need a teensy bit of legal background info. (I promise this won’t hurt too much.)

Since the agent doesn’t usually sign the publishing contract, the agent is a Third Party Beneficiary of the contract.

The classic Third Party Beneficiary example is a life insurance policy. Grandpa George buys a life insurance policy for $100,000 from Cornpone Mutual when he’s only Pa George. He names his three chillun, Bo, Lucille and Little George, as the beneficiaries. (Hint)

Grandpa George pays all the premiums on time, but gets careless around the hay baler one day and goes to meet his Maker. In pieces. The chillun tell Cornpone Mutual it’s time to pay up, but Cornpone says its policies do not cover hay baler accidents.

The parties to the life insurance policy are Grandpa George and Cornpone Mutual. The chillun never signed anything. Indeed, if they were under 18 at the time the policy was purchased, they were legally unable to enter into contracts.

The usual rule is that only parties to a contract can sue for enforcement or damages. This raises a problem. Grandpa George was a good man, so there are very few lawyers in the place where he has gone. There is also no email and Fedex guys who take packages there never return.

The children were named in the insurance policy, however. Although they didn’t sign, they are Third Party Beneficiaries so they can sue Cornpone Mutual in their own names.

Outside of a few clearly-defined fields, Third Party Beneficiaries are quite rare in the business world. When Passive Guy was practicing law, he would negotiate dozens of contracts with nary a Third Party Beneficiary in sight. The standard practice was to have everybody sign the contract if they had any rights under the contract.

However, in the wild and wacky world of publishing, agents are Third-Party Beneficiaries to a lot of publishing contracts. As will become clear during our discussion, Passive Guy thinks Agency Clauses only benefit the agent and can cause problems for both the author (obviously) and the publisher (don’t know if they’ve thought much about this).

So, in general terms, what does the presence of an agent as third-party beneficiary to a publishing contract mean? This is a weird area of the law, filled with lovely Latin phrases, serving primarily to fill out the semester in a Contracts Law class (which is one reason to have everybody sign the contract). PG will boil it down into fundamentals as they relate to an Agency Clause.

  1. If one or both of the parties to a contract violate the terms of the contract to the detriment of the Agent, the Agent can sue to enforce the contract.
  2. The Agent’s rights are subject to the terms of the contract.
  3. The Author and Publisher have obligations to the Agent to perform under the terms of the contract.

Isn’t this fun? Don’t you wish you could be a Third Party Beneficiary too?

Before we go further, let me make clear that Passive Guy is not anybody’s lawyer anymore. As much as he may love and admire you, PG is not your lawyer. Most publishing contracts will have a clause saying New York law applies to the interpretation of the contract. PG is not a New York lawyer either. Any legal discussions will be general in nature and New York or other state or federal laws may conflict with PG’s generalities. Hire your own lawyer if you want legal advice.

So, let’s start dissecting the Agency Clause so see where we have some wiggle room. Some agents just use an Agency Clause without a separate Agency Agreement between the Author and Agent. Our analysis will assume this is the case. If there’s a separate Agency Agreement, things can become much more complicated.

Passive Guy wants you to see this clause through PG’s magic contract vision glasses.

What does Passive Guy’s super-power vision see here?

1. Purple highlights – Unsurprisingly, the Agency Clause is about money only. Potential benefits or compensation other than money are not covered by this clause. Something that could be easily converted to money or is a money equivalent – a Visa gift card, for example – might be covered. PG is assuming “money” is not a defined term in the Publishing Contract. (For you persnickety types, super-power vision is not perfect. The purple “an” is a mistake.)

2. Blue highlights – Only money payable to the Author is covered. Money payable to other people or entities is not covered. The assignment clause, if any, in the Publishing Contract would make for interesting reading.

3. Yellow highlights – The Agent is authorized to act on Author’s behalf. In the oh-so-ever-humble opinion of PG, this gives rise to the classic obligations that an agent owes to a principal. These include always acting in the principal’s best interests, disclosing conflicts of interest, etc., etc.

Arising in any way out of the Agreement is broad.

For services rendered and to be rendered is interesting in light of the Ralph Vicinanza agency matter discussed previously. This implies an ongoing stream of services and is specifically worded as consideration for the ongoing 15% agency fee. If no more services will be rendered, there’s an argument no more agency fee should be paid.

4. Green highlights – PG never likes irrevocable agreements where one party is providing services to the other. The services may start out just fine, but if they go bad, you want to be able to stop paying for them.

If this is the only written description of the Agent’s agreement with the Author, then no term – time period – for the agency exists. It’s not one year or five years or a hundred years. Generally speaking, an agency agreement that doesn’t have a term is revocable at will by the principal.

Agency coupled with an interest is an agency in which the agent has an interest in the property regarding which he or she is acting on the principal’s behalf. PG has another post on this ominous-sounding term coming out tomorrow, but, for our discussion today, essentially, it means the same thing as irrevocable. It’s a belt-and-suspenders approach to try to keep the Author from revoking the agency agreement. Absent a separate document actually describing the interest of the agent, it probably doesn’t add much.

5. Red highlights – Payments to the Author under other agreements, even other agreements with this particular Publisher, are not covered by the Agency clause.

So, putting all this together, what do we have?

Following are a few (but not nearly all) possibilities:

1. The Agent is empowered to act on the Author’s behalf respecting this Agreement, but nothing prohibits the Author or someone else – an attorney or agent – from also acting on behalf of the Author. The Agent doesn’t have an exclusive right.

2. All the Agent’s rights are tied to this specific Publishing Contract. New or separate agreements are not included. If the original agreement includes options for additional books in a series, PG thinks there is a good argument that if the Author insists on a separate agreement for subsequent books, the Agency Clause in the first agreement would not necessarily give the Agent a commission on subsequent books. (Again, we’re not dealing with situations in which there is a separate Agency Agreement.)

3. Since everybody is bound by the Publishing Contract, if that Contract has an out-of-print clause, the Publisher can declare the book out of print and enter into a separate agreement with the Author for something like an enhanced and revised version of the original book. There will likely be many other clauses in the Publishing Contract that allow the Publisher to effectively terminate the commercial life of a particular book.

4. If the Author receives an ebook amendment or rider to the original contract, and the Author no longer desires to use the Agent’s services, the Author might want to insist on a separate Publishing Contract for the ebook. Under the terms of the Agency Clause, the ebook contract might not be commissionable.

5. PG is sure the attorney who first came up with the for services rendered and to be rendered language thought he/she had done a cool thing in providing for future consideration from the agent for future commissions. However, if future services by the Agent are not satisfactory to the Author and the Author terminates the relationship for that reason, this contract language strengthens Author’s argument that the Agent’s commissions should end.

6. If the Author gives the Agent specific instructions, preferably in writing, about what the Author wants the Agent to do or not to do respecting the Publishing Contract, PG believes the Agent cannot act contrary to the Author’s instructions unless the Author asks the Agent to do something illegal or totally ridiculous.

7. If there is a fight between the Agent and the Author based on the Agency Clause, PG thinks it quite likely the Publisher would be dragged into ensuing litigation, particularly if the fight was about a separate contract between the Author and the Publisher for which no commissions were payable. PG wonders why a Publisher would open itself up to this possibility when the Agency Clause provides no discernable (at least to PG) benefit to the Publisher.

Passive Guy will close this very lengthy post by admitting puzzlement and worry.

When PG heard these Agency Clauses described before he saw one, he expected to find a serious lock-down legal provision. Instead, there appear to be lots of holes in the one used to illustrate this post. Others PG has received for his Contract Collection (Thank You!) are almost identical.

The reason PG worries is whenever it appears too easy to get out of what’s supposed to be a tight contract, PG fears he has missed something big or obvious.

Since we have a large number of informed publishing veterans visiting The Passive Voice, let me know if I’m really off-base in my analysis.

 

17 thoughts on “How to Read a Book Contract – Agency Clause”

  1. P.G.

    I get all this about contracts, but aren’t agents in an almost invincible position when time comes to sign?

    What they gonna do when you say?

    “I’m not signing that piece of horse-puckey. My matelot P.G. and the rest of his infernal mates are going to look over it.”

    Agent’s going to tell you to take a short trip off a long pier, inni?

    Sounds like a game for a poker player rather than a writer.

    Every single thing I’ve read about agents contracts here, well, I’d just never sign one at all.

    brendan

    • An author can be in a fix, but the agent really wants the deal as well because without one, there’s no commission.

    • Once a book gets to the contract stage the publisher is not going to withdraw their offer because you ask for some changes to the agency clause. It seems to me the agent is in the weekest position.

  2. Me and my agent had nailed down a contract with a major publisher (who did not have agency language in their contract) then on one of the revisions this popped in…from my agent. It would muddy the waters in all kinds of ways.

    – What if in the future we (me and the agent) have a falling out?

    – What if the agent does give me my money?

    – What if the agent dies? Does this go to other agents in the firm that never worked on my behalf or lifted a finger?

    – Because the clause empowers the Author to act on the Author’s behalf in all matters arising in any way out of this Agreement. — Could they change things and screw me royally?

    My personal opinion…Don’t “muddy” up the agreement by making it a there-way arrangemnet. Make the publishing contract between the author and the publisher and have a seperate contract betwen the author and the agent. And make sure that both knows what will happen if they later decide to “part ways.”

  3. The agency clause in a couple of my contracts has turned out ot be the babe of my existence. I wound up in a hideously inconvenient and vulnerable situation due to the sort of “no, let’s make it PERSONAL” nonsense that so often supercedes contracts and business sense in publishing.

    After I fired the agent who was agent-of-record for my contracts with one house, the agency (wherein I’d previously never had an administrative problems, despite have a lot of BUSINESS problems) -imediately- starting screwing up my fiscal paperwork. Royalty statements didn’t get sent to me, and I’d ask and ask and ask for them, and it would take weeks or months to wrest them from the agency.

    This being a nuisance factor with an agency where I had severed my association, I naturally requested split payments to resolve it. This is a standard practice (not universally implemented, but very common) after you leave an agency, so that YOUR 85% $$ of the earnings stops being sent to the agent (see the agency clause PG has posted). Getting your payments split means that the publisher sends 85% to you and 15% to the agent. A common sense measure whereby someone whom you FIRED (or who dumped you) is no longer CONTROLLING YOUR MONEY. Makes perfect sense, right?

    Well, the s.o.p. is that you file a letter with the publisher which both you and the agent have signed, authorizing them to split the payments, and it’s treated as an amendment to the agency clause of the contract.

    But… my *#@%$!&*#*!!^$#@ agent refused to consent to split payments. Wouldn’t sign the form. I asked and asked, and sent form after form, and the agent kept refusing. As my fiscal paperwork CONTINUED getting “lost” or misplaced or not arriving, etc., and the agent continued refusing to consent to split payments, I eventually filed complaints against the agent with RWA, NINC, SFWA, and the AAR. I also consulted 4 different lawyers who represent authors in such matters, and I wound up paying a lawyer to deal with this agent in my place after a a while, in (thwarted) hope that the agent stop screwing around.

    This has on and on and and ON and on… and it has been YEARS since I fired this agent.

    The agent is, as PG noted, NOT a signatory to the contract. But the agent as leverage as a Third Part Beneficiary, making the publisher (it would seem) uneasy about amending the agreement without the agent’s explicit consent.

    In fact, publishers DO split payments even on occasions when the agent withholds consent (and I know of instances where publishers have split payments from -this- agent at the requests of former clients)… but it’s strictly arbirtrary. Does the publisher have a stronger relationship with the writer, or with the agent? Is the publisher angry with the agent? Is the publisher afraid of the agent (some agents are notoriously vindictive)? And so on. Very arbitrary.

    Suffice it to say, this has been a nightmare–and I STRONGLY advise anyone who signs a contract with an agencya greement, as well as anyone who signs an agency agreement, to ensure that such agreements ALWAYS say that upon termination of the author-agent relationship, all payments will automatically be split, the agent herein consents to that eventuality, etc. Learn from my hair-tearing example of just how wrong this can go.

      • Indeed.

        Which is precisely why it is well worth noting I am speaking, in fact, of a prominent, reputable agent whom many writers will tell you to hire IF you’d be lucky enough to be taken on, and whom I have seen decsribed by aspiring writers–including in discussions like this–as “one of the good ones” to whom cautionary tales like this OBVIOUSLY don’t apply.

  4. First, love this blog.
    Second, I’m a lowly one-time published writer. I had an agent way back in 1997. She sold my book to Bantam. It did okay for a PB, and went into 3 printings. I had a 2-book deal. Long story shorter, I ended my contract with Bantam for various reasons and paid back my very small advance. I also “fired” my agent in writing. Fast forward to 2011. Random House sent me a letter saying my book was to become an ebook. The letter CAME THROUGH MY AGENT. I signed, not knowing any better. And now, after all these years, my former agent is taking her 15% out of my meager ebook earnings. Maybe this story belongs in a different post, but I keep wondering how I get Random House to stop sending her my royalties. If I EVER get my second book published, it’ll be independently!! Thanks, Passive Guy. You’re my favorite online reading.

    • Annette, the remedy to your situation is to have your agent consent to split payments–your 85% will come to you, her 15% will go to her.

      There is no remedy, alas, for the agent getting 15%, all these years later, of a still-in-effect contract wherein she was the agent of record.

      But you CAn prevent -your- share of the earnigns from going to the agent. IF, that is, the agent consents to split payments. It’sa standard procedure and emminently sensible… but some agents refuse to consent to it. Such as MY ex-agent. (See above.)

      And, to be clear, there is only ONE reason an agent would refuse to consent (which is why I am so anxious about my swituation): To ensure they control the earnings [viz the contract(s) in question] of an ex-client.

      Any other reason offered is specious. An agent refusing to consent to split payments is specifically trying to control of the ex-client’s money.

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