Demystifying Contracts #5: Agency – When Things Go Bad

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    In my last article: Demystifying Contracts #4: Agency – Terminating Contracts I was exploring the tip of an iceberg…in that case it was what happens when you no longer are getting along with your agent and would like to find another one. But this is just one of the possible problems that may occur and when evaluating the contract. There are others, and in fact it is best to look at a contract considering all the various worst case scenarios. So let’s look at some of them.

    Bankruptcy

    Many authors are surprised that the standard practice in the publishing industry is that the publisher pays the agent, who takes out their 15% or 20% then they send the remaining 85% or 80% to the author. It does seem odd to me that the person getting the small piece of the pie gets the money first, but it is the way that almost all publisher-agent-author agreement work. My agent actually was fine with me getting the money first then paying her, but I suspect most would not.

    The big problem with them getting the money, is while it comes to them, it really is yours. You can’t count, nor do you want your money tied up by a bankruptcy court who is going to decide who gets what part of incoming money. So what can you do?

    • Have the publisher split payments—sending the agent their 15% and you the 85%
    • Have the publisher pay you first, then you pay the agent
    • Have the agent setup separate trust accounts for each client and have the publisher deposit to those rather than the agent’s general account.
    • Have a clause in the publishing contract allowing you to remove the agent ad redirect the money from the publisher to yourself.

    Death

    Both yours and your agents. Call me funny but I look at the author/agent relationship as one whereby the agent is being paid for an ongoing relationship helping to build my career. If I wanted someone to just deal with a contract and then be gone, I’d be using an intellectual property attorney. So if I’m dead, I want my money going to my heirs not to someone who is collecting a check for work they may have performed years previously. So the agency agreement I have with one of my agents (I don’t have any agency agreement with the other two) states that they won’t receive any cut if I’m dead for contracts that were signed long ago (I chose 10 years). I could have made it less, 2-3 years is probably a more reasonable term, (as most money is earned by then) but what I didn’t want to have happen is for an agent to do a bunch of work on my behalf, have me drop dead after six months, then be cut off from a revenue stream that they played a big part in arranging.

    As for death of the agent. It really depends on what type of agency you are dealing with. In the case of a large agency, you’ll be reassigned to someone else…and no doubt someone you aren’t familiar with. You’ll have to meet with this person and determine whether you feel comfortable with them. If not, then you should be able to terminate the contract and find an agent that you like (see the prior post). But what about money for contracts already signed? I’ve never had a contract with this type of agency, but I suspect they look at those as “assets of the corporation” so yeah you can go elsewhere, but they will be keeping their cut. Just make sure that their cut is related to contracts that they actually worked on and signed, and not ANY contract associated for the work no matter who does the negotiating.

    For a small, or sole-proprietor agency, the agent probably IS the agency and vice versa. But just as when you die, your works pass on to your heirs, the agency will probably pass on to the heir of the agent…people who probably know nothing about the publishing industry, (so aren’t qualified to represent you) and had no part to play in getting the contract in the first place. Should they get 15%-20% of all the contracts going forward? I don’t think so, but if you don’t write the contract in a way that spells this out, you might find yourself tied up in court trying to stop it from happening. If you want to know more google Ralph Vicinanza or check out this post on The Passive Voice. Here is a summary what of PG (passive guy) recommends:

    If the services of a particular individual are a key value to you, include a provision in the contract that gives you the right to terminate the contract:

      • if that person dies,
      • becomes disabled and unable to perform his/her normal work, or
      • leaves the agency for any reason

    As far as what happens to the agency percentage on book contracts the agent negotiated while alive or working at the original agency, PG would push for a provision that says those end when your agent goes.

    Want to make a bet about what my contract says?

    You no longer get along with your agent

    Few authors are with the same agents they started out with. There are many reasons for this, sometimes they lose interest or get “bigger fish” that demand more of their time. Or it may just be a number of disappointments or disagreements that built up over time. You should read the contract with an eye toward what happens when you leave them and go to someone else…or leave them and go out on your own. It was mentioned in the last post, but bears repeating…that an agency agreement should be for a specific work and only produce income to the agent for contracts that they actually close. I’ve seen more than a half dozen contracts that are worded in such a way that they get their cut regardless of who gets the contract. Here is an example of two clauses in an actual agency agreement. I’ll not name the agency, but they are not the only one writing contracts of this type:

     The term “Gross Proceeds” shall mean all monies, properties and considerations of  every kind paid to you or credited to your royalty account, including, but not limited to,  earnings, fees, royalties, bonuses or profit participations that may be received as a result of  any contract or other arrangement exploiting any of the Rights in the Literary Work. Gross Proceeds shall also include any sums received by any person or entity in your behalf or by any entity that you own and/or control.

     

    This agreement covers any and all contracts and other arrangements directly or indirectly related to the disposition of any Rights to the Literary Work, whether such contracts or other arrangements are negotiated by you, us, or any third party and all  modifications and extensions of such contracts or arrangements or additions thereto and replacements thereof.

    (Emphasis mine). Notice it says nothing about contracts they negotiate and as it specifies entities you own and/or control, then any income from self-publication also is something they get their cut from. I expect language of this type is going to be more prevalent and contentious as self-publishing becomes more utilized by authors.

    Summary

    The most important thing to do when looking at a contract is consider what happens in any number of “what if” scenarios. If the contract doesn’t clearly state what will occur, then it’s worth adding a provision. No, you won’t be able to cover all situations, but it is worth making a good faith effort and to take care of the big things. After all death is inevitable, as is the chances of you remaining wedded to the same agent over the course of an entire career.

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