Business Musings: The Agent Clause (Contracts/Dealbreakers)

canstockphoto4726013

So, you decided, even after last week’s post, that you need an agent. Maybe you were one of the people who found a way to dismiss the post because of my hyperbole in the beginning, figuring I don’t know what I’m talking about. Sure, sure, your agent would never do such things. Ever, ever, ever.

Riiiiiiiight.

Okay.

But do me a favor: read this blog post with an open mind.

Maybe you’ve decided to hang onto an agent because you believe that the agent will sell your foreign rights better than you can (as if this isn’t an international market already), or because you’ve always had an agent, or because you’ve always dreamed of having an agent. Fine. As I tell my students, you are responsible for your career.

Which means protecting yourself in all circumstances, even with the people you employ to help you with that career. And yes, in case you’ve forgotten it, you hired that agent. They work for you. (In theory. Generally, in practice, their interests align with the publishing company, but that’s another blog.)

So what this means is that you have or you will sign contracts with your publishers that reference your agent. And you will sign an agreement with your agent, creating a document that governs your relationship with them.

Writers rely on their agents to negotiate contracts, which means that agents will negotiate things into those book contracts that benefit the agent.

Writers who rely on their agents to negotiate book contracts generally are afraid to hire a lawyer to vet those contracts, and that opens the writer up to a whole ton of problems.

Because writers who rely on their agents to negotiate book contracts generally sign agreements with the agent or the agency which the agent is attached to without negotiating that agent agreement at all.

Sigh.

I dealt with this in the original Dealbreakers book. Of course, things have changed for the worse in the intervening five years. So I’m redoing the old post below, and next week, I’ll write a specific piece on agent agreements in particular. I’ll also write about the newest wrinkle in agent agreements, for those of you who “retain” your ebook rights while your agent negotiations your “book” rights.

Why am I putting those words in quotes? Because, the agent agreements that you folks have kindly sent me make those arrangements something other than black and white. They’re not even really shades of gray. They’re more…puke green.

Anyway.

This week, let’s deal with the clause that agents insert into your book contract with your publisher.

(This is the book contract that your agent negotiated for you. Yes, I’m telling you the agent inserted something into that contract that benefits the agent, but doesn’t benefit you.)

The Agent Clause

Agents have been abusing this clause for years now. Agents, not publishers, even though this clause is in a publishing contract between the writer and her publisher.

Once upon a time, publishers paid the writer directly and the writer paid the agent. Which is, frankly, how it should be. After all, the agent is someone you hired, not the publisher.

However, some brainy publisher got the idea that if Agent A has 20 clients with the publishing house, it’s easier to write one check to Agent A than it is to write 20 checks to the writers. Agents liked this because that meant they didn’t have to browbeat their writers to get the commission.

If the contract is between the publisher and the writer, the publisher cannot just pay the agent. That’s illegal. The author can’t just say, “Oh, pay my agent,” because that’s not legally binding.

If the author wanted to the publisher to pay the agent directly, it had to say so in the writer-publisher contract. So some lawyer came up with the way to do this. That was the origin of the agent clause, which was, in reality, a payment clause.

Back when this started, the clause looked like this:

The Author hereby authorizes the Author’s agent, Agent A, to collect and receive all sums of money payable to the Author pursuant to any of the provisions of this Agreement.

And that’s it. That’s all. Really simple, right?

The net effect was this:

Checks sent to Agent A (at such-and-so address) counted as payment to Writer Z, and thus fulfilled the contract. That’s all. If the writer signed the contract, then the clause became activated, and all payments went to Agent A.

The problem with this is, if you fire Agent A, you need an addendum to the contract, so that payment would go either directly to you or to Agent B, who is now your representative.

Well, that might screw Agent A out of money that you might owe him. So the agent started adding words like “irrevocable” to the agent clause which, of course, he negotiated with the book publisher.

Then things went crazy. Agents started adding all kinds of things to the agent clause which are in the agent’s interest, but no one else’s. The agent would add things like “the agent represents the author on this book, and all foreign sales of this book” and so on.

Then the agents all seemed to come up with “agency coupled with an interest.” The clause, which you find in most agent-negotiated publishing contracts, now says things like:

The Author hereby appoints Agent A irrevocably as the Agent in all matters pertaining to or arising from this Agreement…Such Agent is hereby fully empowered to act on behalf of the Author in all matters in any way arising out of this Agreement…All sums of money due to the Author under this Agreement shall be paid to and in the name of said Agent…The Author does also irrevocably assign and transfer to Agent A, as an agency coupled with an interest, and Agent A shall retain a sum equal to fifteen percent (15%) of all gross monies due and payable to the account of the Author under this Agreement.

Authors blithely sign this stuff. I refused, and cut things like “fully empowered” and “agency coupled with an interest” from my contracts. I authorized payment only. A few of my former agents balked; I fired them.

Why? First of all, I’m not assigning anyone anything “irrevocably”—certainly not someone I can fire for cause. Especially if my money goes through their account first. I will not “fully empower” anyone to act for me.

(Some agents go so far as demanding legal power of attorney—which is something you should never give anyone. What that means is that they then have the right to be you in all legal matters. No. Do not give legal power of attorney to anyone without good cause—like you’re dying and need someone to handle your accounts [and even then, it might not be a good idea].)

Finally let’s discuss “agency coupled with an interest.” What that means is this: You are giving the agent ownership in your novel. Ownership. They now have a 15% ownership of your book.

In theory. Technically, a two-party contract cannot hold one party to third-party terms. In other words, if you and Publisher K have a contract, it cannot bind you to do things for Agent A, because Agent A did not sign the contract.

Still, what’s to stop Agent A from trying this? A lot of agents are doing it, and backing it up with a separate agent-writer contract, which I’ll touch on next week. Absent the agent-writer contract, these clauses should not hold up in court. (And so far, have not.)

As I’ve been doing this series, two examples backed up my non-lawyerly reading of these clauses. First, the Ralph Vicinanza Agency tried to sue its writers under this clause. Ralph, who ran the business for decades, died suddenly, leaving his agency to heirs who had no idea how the publishing industry worked. However, Vicinanza’s heirs wanted their money, and they threatened to sue authors who wouldn’t work with them.

A lot of negotiation happened, and a lot of behind-the-scenes maneuvering, which took nearly a year before everyone settled out of court. Writers lost entire books in time trying to hang onto their own income and reserve the right to hire an agent who actually knew what he was doing, instead of some relative of Ralph’s who had no idea what an agent was before Ralph died.

That’s but one example. The other, more important example, is an actual court case: Peter Lampack Agency v. Grimes et.al.

In 1996, Martha Grimes hired the Peter Lampack Agency (PLA) to represent her works. For those of you who don’t know, she’s a New York Times bestseller and a Grand Master in the mystery field.

In 2007, she fired PLA. At the time, she had a four-book contract with Penguin. That contract had an option on a book called The Black Cat. Grimes eventually sold The Black Cat to Penguin through another agent, and PLA sued, claiming—under the agency clause—that it had rights to any work deriving from that original contract.

Long story short, the case made it to New York court. The court decided that the agency clause only entitled PLA a 15% interest in the four-books named in the original contract, not in The Black Cat.

A victory, yes, but a minor one. Because Grimes fired PLA, and yet has to deal with them to this day on books still in print.

And maybe she still deals with them even if the books are out of print. I don’t know what her publishing contracts say, but given the fact that Lampack sued over the sale of a new book after the publishing contract mentioning him terminated, I would assume he had other icky tricks in his contractual agreements with Grimes.

You think it’s unusual that an agent would make a revenue grab on a book that he didn’t sell?

Not at all. It’s common.

For example, in 2014, Claire Cook detailed her break-up with her traditional publisher and her agent. She wrote the book Must Love Dogs, which became a movie with John Cusack and Diane Lane. Cook wanted to self-publish the sequel, and her agent, with a really big famous Big Name Agency, contacted her, demanding 15% of Cook’s self-publishing revenues.

Unlike many agent agreements nowadays, Cook didn’t seem to have any agent agreement in place that would have given the agent that 15% automatically. (Or else they wouldn’t have written to her.) Many agent agreements now have that clause—and we’ll deal with that next week. (These agreements are separate from the clauses we’re dealing with the publishing contract.)

No, the agent apparently had no right to that 15%. This revenue grab was Just Because. Most authors cave when their agents tell them to do something. That Cook didn’t is a tribute to her.

She was angered and confused. Her attorney tried to comfort her with the “bright side.” Her attorney said, “They never would have bothered if they hadn’t smelled money.”

Her attorney was right about that. The agents are doing this to make money for themselves and their agencies. If you think that agents are on the side of the writer, then I have a bridge to sell you.

So…

If you’re thinking of hiring an agent ever or if you have one now, I suggest you read Cook’s entire post.

Here’s the real bright side. It’s now two years almost exactly since Cook wrote that post, and she has published not one, not two, not three, but four sequels to Must Love Dogs and hit The New York Times list with her self-published book, Life’s A Beach.

You can survive this stuff, with the right attitude.

In fact, you can not only survive, but do much much better.

The above examples, especially Vicinanza, occurred in agencies with either handshakes with the clients to cement the relationship or old-fashioned agent agreements between the client and the agent. Those old-fashioned agreements were very loosely drawn. However, because of a series of lawsuits against agents (many of which did not end up in the press), agent agreements have become draconian.

Nowadays, agents do not rely solely on that clause in the publishing contract. Most major agencies now require their writers to sign an agreement with the agency stating that the writer will follow all the terms of an agency clause in publishing contracts.

We’ll deal with the agent agreements next week.

But let’s come up with a solution to the agency clause in a publishing contract right now.

Delete it.

Even if you have an agent, let your attorney negotiate all of your contracts. Pay the agent out of your own pocket. If the agent wants 15% of the book sale, fine. Pay the agent after you receive the advance. Your money should never go to someone else first.

Most agents will balk at this. That reaction alone should give you pause. Why isn’t the agent trusting you to pay them—which is a standard business arrangement? Why does the agent expect you to trust them, and get all the monies first, which in most businesses is not standard?

Think about it: the agent is getting the money and the paperwork explaining what that money is. Paperwork that can easily be changed or fudged.

Yeah, yeah, I know. Your agent would never do that.

Okay. But maybe someone in that giant agency where your agent works will do that. You have no idea. I know of more cases of embezzlement involving agents than I do of any other active business I’ve studied. I personally know more than a dozen people who have had their agents embezzle from them.

I’ve caught two different reputable agents (or their agencies) embezzling from me.

If you really want to hire an agent who balks at cutting the agent clause from the contract, then do this: have your attorney revise the clause so that the publisher splits payments. What does that mean? It means the publisher will issue two checks when it comes time to issue payment. The first check (the larger check) will go directly to the writer. The second check (the smaller check—15% or less) will go directly to the agent.

That way neither of you can “forget” to pay the other.

But if you take anything out of this blog post, please take this: let your attorney negotiate all of your contracts. Do not let an agent touch your money or your contracts.

Of course, if you have an attorney negotiate your contracts, and you’re dealing with the publisher yourself, why do you have an agent in the first place? Maybe it’s time to get rid of this vestige of mid-20th century publishing and branch out on your own.

Just sayin’

I think I only have three more posts before this very long series ends. I won’t be able to cover everything with contracts and copyright and deal breakers. I can’t even get close. It seems that there’s a new wrinkle every single day.

I’m hoping, though, that these posts give you a mental framework in how you should handle contracts, not just in your writing, but in your life. If you have to sign something or agree to something legal (like a TOS), make sure you understand what you’re signing (agreeing to). Make sure you can live with the consequences.

I’m living with the consequences of some bad contracts I signed, so sometimes this is a do-as-I-say-not-as-I-do kinda thing. Benefit from my experience.

That’s why I write these blogs, so that you won’t have to make the same mistakes.

With that in mind, if you found anything of value in this post, please leave a tip on the way out.

Thanks!

Click paypal.me/kristinekathrynrusch to go to PayPal.

“Business Musings: The Agent Clause,” copyright © 2016 by Kristine Kathryn Rusch. Image at the top of the blog copyright © 2016 by Canstock Photo/pressmaster.




23 responses to “Business Musings: The Agent Clause (Contracts/Dealbreakers)”

  1. Kathe says:

    Wow, thanks for all the info. What an eye opener!

  2. June Kempf says:

    I published my memoir,’Yo God! Jay’s Story’ with a small publisher without an agent. The book was not financially successful due to low publicity budget; but it was my first attempt , Now with a second book ready for publication, I am considering this option because when I read guidelines of most major publishers, they insist on literary agency representation. How can anyone break that barrier? BTW, a Barnes and Noble rep advised against hiring an agent .Also, where can I find a literary attorney I can trust?

  3. I’m an agent. Unfortunately, there are unscrupulous agents out there, and this post is a great overview of what to watch for when working with an agent (or looking for one). Reputable agents would not ask for power of attorney; and would never object to an author also working with an attorney. Reputable agents do more than review contracts and collect payments for their authors–if that’s all your getting from your agent, it’s time to find a new one. Your agent should be reviewing proposals and manuscripts, providing feedback, advocating for authors when the publisher isn’t behaving, reviewing royalty statements and addressing anything that doesn’t look right in those statements. Agency agreements should specify how long an agency has to remit payment, and you should be receiving a copy of the publisher’s royalty statement from your agent. Your agent should be willing to spend time with you going through the statement, answering any questions you might have. Just as you would when looking for a financial advisor, attorney, or family physician, make sure you do your homework when choosing an agent.

    • T.A. says:

      Hi Cynthia,

      What is here that the write cannot easily do for herself? I’ve listed the duties you see that entitles an agent to 15%, and commented. I remain confused.

      “Your agent should be reviewing proposals and manuscripts, providing feedback”

      What kind of feedback? I have been publishing since 1991, and I have worked with most of the major publishers. What will an agent tell me that I can’t figure out for myself? Even a beginner, in the age of the Internet, can probably answer most questions she might have with a little bit of research.

      “advocating for authors when the publisher isn’t behaving”

      What do you mean by not “behaving?” Being rude? violating the terms of a contract? Do you know any professionals who hire agents and pay them 15% to advocate when people are being rude? If the publisher is violating the contract, that’s a legal matter requiring a lawyer.

      “reviewing royalty statements and addressing anything that doesn’t look right in those statements”

      Writers are not smart enough to figure out royalty statements for themselves? Or ask questions of the publishers until they do?

      “Agency agreements should specify how long an agency has to remit payment, and you should be receiving a copy of the publisher’s royalty statement from your agent.”

      And what does the writer do if the agent disappears and stops payment? The smart author has the publisher write two separate checks.

      “Your agent should be willing to spend time with you going through the statement, answering any questions you might have. ”

      Is this statement different from the royalty statement? If so, why is an agent introducing a new statement? If not, we already addressed the fact that writers are smart people and can figure out a royalty statement as easily as an agent can.

      Just as you would when looking for a financial advisor, attorney, or family physician, make sure you do your homework when choosing an agent.

      None of this answers why we need agents.

      Note: I have worked with 8 agents over the years. My traditional publishing career took off when I fired my last agent and dealt directly with publishers.

  4. Sedamens says:

    I have done an internship at a midsized (german) agency and they purposely delayed payment from their bestseller client, because the agent wanted to go on a three week expensive vacation first and needed the money (not joking.) I had the bestseller writer on the phone many times asking for his money and the agent wanted me to lie and say the money did not come from the publisher yet. Instead I said to the writer, that I don´t know and put sticky notes on the agents desk to call her bestselling client back (and lie to him herself.)
    This went on like this for three months – then my internship was over. When I left, the writer did still not have his money, as far as I know.
    Before this I thought, working for an agent could be my dreamjob.
    Now I sometimes catch myself thinking, that this was an exception and only this specific german midsize agent.
    Then I read Kris Blog and get sober. Thank you, Kris!

  5. Maureen says:

    Hi Kristine,
    I’ve been following your series and linking to the posts for some time on my blog. I am a children’s writer in another country. We have a very small publishing scene here and we know that we have to get traction overseas to earn any money at all. However to do this we need to have an agent. Ebooks for junior fiction aren’t really getting any traction so we are still in the print based high production cost era. I wondered if you have seen any big fish hooks in contracts for children’s writers and agents for children’s writers or would you say the hooks apply across the board?
    Thanks for your time,

    • I haven’t seen a lot of children’s book contracts, Maureen, so I’m not sure if there are some clauses that are different there. Other children’s writers want to weigh in?

      Mostly, though, everything in these blogs occurs in everything from nonfiction to fiction. So these are just kind of “Writer Beware.”

      • gordonrhorne says:

        My information is out of date, but…

        It used to be the children’s market was not as dependent on agents as the general market. But there were as many bad apple agents among those who served the children’s market as the general market.

        I saw one agent agreement that granted the agent 15% of anything the author wrote ever. Standard practice applies; read any contract carefully, and assume the worst interpretation possible.

    • I would question the assumption that you need an agent to get traction overseas. The sad truth is that international rights agents usually just sit in their office, and only draft the contract. And that after a local publisher comes looking for the rights. They don’t actually go out and shop your book around.

      I’ve had 12 or so foreign rights contracts, and only one came from a proactive agent. All of the others came from the publishers directly, or from me contacting local publishers in my genre and selling them on the book. If a publisher likes a book, they’ll come find you. Agents are useless. The only useful thing they know are the current prices for advances that authors can get, and you can learn this if you start asking around to other authors or publishers you are friendly with.

  6. Kristi N. says:

    Uh, maybe someone with more legal experience can correct me if I’m wrong, but isn’t it a tad illegal for someone negotiating on your behalf to insert language into a contract that directly benefits himself? I would imagine if a lawyer would do so, there would be some rather swift and dire professional consequences.

    • ThePolyBlog says:

      There’s nothing illegal about it at all. It’s just words. If you sign it, that’s your choice, and courts presume you got a benefit out of it being there since you signed it.

    • T.A. says:

      Yes this is illegal. (1) “Agent” is a legal term for someone empowered to act on behalf of another person. (2) A conflict of interest occurs when a person acting as an agent benefits from the transaction. If a lawyer did this, the lawyer would be disbarred.

      ThePolyBlog— if you ask a friend or neighbor to negotiate a contract for you, and your friend or neighbor inserts a clause benefiting himself, yeah, probably nothing would happen to that person. Why? Because the person isn’t posing as an agent.

      This sort of thing is governed by state law, and states are different. Texas will have very different laws from, say, California. But in general, person calling himself or herself an “agent” has a legal duty to act in the interest of the client.

      If a writer finds herself with a nasty agency clause, I feel confident that a smart lawyer could come up with several causes of action (grounds for a lawsuit) against the agent. I can think of a few off the top of my head. In other words, the agency clause may be illegal, and therefore unenforceable.

      • T.A. says:

        clarification (I wrote quickly!) I should have said a lawyer would probably be disciplined. Different states handle ethical breaches differently.

        Another way agents violate the law is through unauthorized practice of law. Most (if not all) states prohibit non-lawyers from practicing law.

        Agents get away with this because they’ve never really been challenged.

        Kris, do you know if anyone has ever filed a lawsuit against an agent trying to get out of a bad agency agreement or agency clause? Personally, I found that when I demanded to be released from agency agreements or agency clauses, agents just caved and gave in. (I did this more than once before I swore off agents altogether.)

        Maureen, I’m a children’s book author and I’ve had some dealings with very shady literary agents.

        • Yes, Teri, I do know of some lawsuits, but I’m not supposed to. Those writers signed non-disclosures as part of the settlements, and shouldn’t have said a word to me. In fact, some of them didn’t say a word, just nodded or shook their heads at questions asked of them. 🙂

          • Teri A. says:

            That’s the problem, right? Agents keep settling these matters out of court, requiring nondisclosures, so we never get a court judgement on the merits. I’m so glad you’re doing these blog posts, Kris. As long as writers know it is not only possible but (relatively) easy to get out of bad agency agreements and agency clauses, they’ll look for ways to do it. I never had to go as far as threaten a law suit. Two writers came to me for help getting out of particularly nasty agreements , and I just started writing letters to the agents explaining how and why their behavior was illegal and they were willing to rescind all agreements.

  7. 1 L Loyd says:

    You remind me of the trouble Patricia Cornwell had with her business manager. She went years without knowing what they were doing with her money. I remember her saying she just wanted someone to take care of her while she wrote and lived her life. The world doesn’t work that way.

  8. antares says:

    Kris, The power of attorney you warned against is a general power of attorney. I agree. Never give anyone that power.

    The other kind is a special power of attorney which is limited in scope and often limited in duration. I have used them. Even sold a house with a special power of attorney. Negotiated the sale of a house for another party under a special power of attorney that specifically denied me the right to close the deal; that is, I could take the deal all the way to signing but I could not sign.

    Anyway, special powers of attorney are, if not common, at least not uncommon. Parents may not be aware, but often child care agreements give the caregivers special power of attorney to make emergency medical decisions for their children.

    • Let’s not get too detailed, Antares. If I do, then people will take it as a blanket yes and ignore the caveats. 🙂 But yes, you’re right. I’m just trying to get people to think here. 🙂

      Most agents want a general power of attorney. Sigh.

      • Reanne says:

        Agents want a general power of attorney? Are they insane? No, I guess they just know that your average person doesn’t read contracts and doesn’t know how much power a power of attorney grants someone.

  9. Ferran says:

    Hmmm…. Suppose that you DO get an agent.

    In the contracts I’ve seen (not many, really), the publisher is supposed to pay the writer (through the agent, if you will) after so many months (“minus reserves”).

    WHEN is the agent supposed to forward the money?

    Take care

Leave a Reply