Based on some questions from clients, PG thought it might be a good idea to republish this earlier post he wrote and published here several years ago.
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.
- 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.
- The Agent’s rights are subject to the terms of the contract.
- 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.
If you have a publishing contract you would like to share with PG, he would appreciate you’re forwarding a copy to him. You can feel free to blackout/whiteout/cover up the names of any individuals or publishers involved in the contract prior to sending the copy of the contract.