The Business Rusch: The Agent Clause (Deal Breakers 2012)
For the past several weeks, this blog has focused on deal breakers in modern publishing contracts. Novelists Inc. asked me to update my article on deal breakers for their conference binder from last year, and wow, oh, wow have things changed in these short twelve months.
I used that article as a jumping off point for these blogs. I turned the article in last week, keeping it as short as I could. The article was still twice the length that it had been a year ago. Only a few things remained the same. The rest changed.
And I added some deal breaker clauses, including this one. Weirdly enough, it’s your agent clause in your publishing contract.
Yes, I’m still talking about the contract you make with your publisher. But in that twenty-plus page document, there is a clause about your agent. That’s the clause I’m referring to.
Why has this clause become a deal breaker? Lawsuits, my friend.
And the deal breaker, in this instance, is not between you and your publisher, it’s between you and your agent.
Please remember, I am not a lawyer and I do not have legal training. I just have years of experience with publishing contracts. What follows (and what you will find in the previous blogs on this topic if you search them out) is my opinion only. In no way does it constitute legal advice.
First, a little history.
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 someone the publisher hired.
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.
Paying the agent directly is not legal without the writer’s permission. So some lawyer came up with the way to make paying the agent directly legal. That was the origin of the agent clause, which was, in reality, a payment clause. 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.
This is why agent clauses exist in publishing contracts. Not to bind you to your agent, but to allow your agent to be the recipient of your money. It is a simple, legal device that you could do in any contract. You could send the money directly to your mother in your mother’s name if you wish, so long as this method of payment is stipulated in the contract.
Also, there’s a phrase in that clause which says that both parties to the contract (the publisher and writer) will consider payment made in this way to fulfill the terms of the contract.
Again, that’s all. If you want your money to go to your agent first, that’s all your agent clause in your publishing contract should say. If, indeed, you believe that sending all your money to a third party is a good idea in the first place. We’ll get to that below.
Here’s the problem with the agent clause as I just described it. 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.
And that’s another problem with the agent clause, from the point of view of an agent. You can easily screw Agent A out of money that you probably owe him.
I’m sure lots of writers did just that, especially if they fired Agent A for cause. If the writer and Agent A now hate each other, then neither are very motivated to pay the other. The writer in particular no longer wants to give Agent A a percentage of a work, even if Agent A did all his work expecting long-term commission on that work.
So what did Agent A (and his friends) do to prevent such things from happening? Well, he started adding words like “irrevocable” to the agent clause which, of course, he negotiated.
Then things went crazy. Agents started adding all kinds of things to the agent clause which are in the agent’s interest, and 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.”
Now, the agent v 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 “full 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.
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 in a moment. Without that agent-writer contract, these clauses should not hold up in court. (But see the comments section on last week’s post about the ways that things that “should not hold up in court” often do hold up after all, depending on the jurisdiction the court is in.)
In the past year, two examples held 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, they 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 relatives who had no idea what an agent was before their family member died.
That’s but one example. The other, more important one, 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 still has to deal with them to this day on books still in print. Also, this victory—so far—only applies in the State of New York. It hasn’t been tested elsewhere.
Finally, after this ruling, most major agencies required 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. Signing the agent-author agreement and the agent clause in a contract could possibly close the legal loophole used in the Grimes case. I say “could possibly” because, to my knowledge, no one so far has tested this in court.
Those agent-author agreements are pernicious. I dealt with the agreements in depth last year in this blog post. I suggest you read it now, particularly if you’ve signed an agency agreement.
Let me give you just one example, however. It’s an important one. Through the agent-author agreement and with the agent clause, some major agencies actually take 15% ownership in everything a writer writes, even if that writer never sells the product through the agency at all. This is becoming more and more common.
But let’s assume your agent is a fairly nice person who works for a large agency. Let’s assume that the agency insists on an agent-author agreement, and let’s assume that the agent-author agreement looks fairly benign.
By fairly benign, I mean that the agent-author agreement details the relationship—what you will do, what the agent will do, and even lets you cancel the agreement for any reason with thirty days notice. However, the agreement has one clause in it, one little tiny clause that says something like this:
The Writer agrees that she will abide by the agent clause negotiated by Agent in all of her publishing contracts.
Sounds fine, right? It’s not. Because…let’s assume the agent clause in your publishing contract has this standard little phrase at the end: The provisions of this paragraph shall survive the termination of this Agreement.
This means you’re screwed. You have twice signed legal documents (and maybe more than twice) that says you will continue to pay your agent money on this particular agreement in perpetuity. The first time you signed, it was in the agent-author agreement (stating you will abide by the agent clause), and the second time was when you signed the publishing contract itself.
This is nasty, nasty stuff, folks, and lots of writers have signed it. Hundreds, maybe thousands, of writers have done so.
Don’t you do it.
In fact, if your agent asks you to do so, run from that agent, leave that agency, and don’t look back.
Why? Even if your agent is a really nice person, here’s what these clauses tell you. They tell you that your agent does not work for you. Your agent is interested in his own business and his own profits at the expense of yours.
Here’s what you should remember from this deal breaker’s section: Never sign an agreement with your agent without letting your intellectual property attorney look over the agreement first and negotiate it for you.
Better yet, let your attorney negotiate all of your contracts and avoid the agent clause altogether. In fact, pay your agent out of your own pocket. Your money should never go to someone else first.
If you have an agent, pay them yourself. If they don’t trust you to do so, then why should you trust them? If they get pissy, have an agency clause that you (or your attorney) write, that splits payments—15% directly to the agent and 85% to you.
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.
And remember this: If you end up hating your agent, if you want to fire your agent, you’ll need to hire an attorney to do so. Why not hire an attorney up front and save yourself both the time and the hassle.
Publishing is changing. It’s time you change as well.
You all have been great during this long section on deal breakers, particularly in the comments sections. Attorneys have weighed in on the various topics and so have other writers citing their own experiences. Please look at all of that.
Thank you too for maintaining the donations during this period. Usually donations go down when I do straight business posts, and the decline this time wasn’t as severe as usual. As I’ve mentioned before, this blog has to remain self-sustaining for me to continue writing it. I make much more at my fiction writing than I do at my nonfiction writing, so I’m kinda sorta doing this for the love (and my own edification).
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“The Business Rusch: “The Agent Clause,” copyright © 2012 by Kristine Kathryn Rusch.