Legal Issues In Agency Agreements

Many authors are unaware of legal issues in agency agreements that can be traps for the unwary unless their implications are fully understood.  They come under three broad headings, what I call the Exclusive Agency, the Forever Agency. and the Powerful Agency:

           1.  The “Exclusive” Agency.  Typically in an agency agreement, the author makes the agent his “sole and exclusive representative” or grants an “exclusive agency.”  This terminology often is misunderstood by agents and authors (and even some so-called publishing attorneys whose web sites I have visited!).  Why is this important?

Suppose this scenario:  You sign a two-year agreement with an agent.  He or she makes submissions to major publishers, but months pass and you’ve had no offers.  Further, your agent is slow to return your phone calls and generally seems to have lost all interest.  Meanwhile, you attend a writer’s conference and meet an editor from a small press.  Over the period of a few days, you pitch your novel several times to the editor.  After the conference ends, you maintain contact with the editor and submit a few chapters.  The editor is thrilled with your work and promptly makes an offer for a two book deal with a $10,000 advance for each book.  You sign the contract with the small press.  Do you owe your agent a commission?

In general (much to the surprise of your agent), the answer is NO.  Most courts (including those in New York and California, where many agents are based) make a clear distinction between an “exclusive agency” agreement and an “exclusive right to sell” agreement.  An exclusive agent, in the absence of a specific provision to the contrary (see below) is not entitled to a commission on sales of which he or she was not the procuring cause when such sales are made by the principal (you), rather than another agent.  Most agents, however, are wrongly under the impression that an “exclusive agency” is an exclusive right to sell (as in a real estate listing agreement) and thus are owed a commission in the scenario above.

In the minority of jurisdictions where courts don’t make any distinction between an exclusive agency and an exclusive right to sell, however, an agent with an exclusive agreement may be entitled to a commission on all sales, whether or not made by the agent, depending on the language of the agreement.  If your agreement is not governed by the laws of New York or California, you may have to check the applicable law of that state.

Specific provisions.  To add to the confusion, some “exclusive agency” agreements include provisions such as: “When the Author is approached directly by any party interested in the Work, the Author shall inform the Agency immediately and refer the party to the Agency.”  Arguably, this would convert an exclusive agency agreement into an exclusive right to sell.

A couple of caveats.  First, if you are happy with your agent’s efforts, you probably will want to turn the “outside” offer over to your agent in the interest of fairness and because you will benefit from your agent’s negotiation skills and advice.  Second, some agents will refuse to represent you unless they have an exclusive right to sell.  However, this right should only be granted if you are comfortable with losing your right to independently sell your work.

2. The Forever Agency.  Some literary agencies include in their author-agent agreements or in the book publishing contracts which they negotiate an “interminable agency” clause.  Rather than limit their right to representation during the term of your agreement, such clauses grant the agent an exclusive, irrevocable right to represent your work for the entire term of those works’ copyright.  This is inappropriate and can cause you and your heirs needless trouble.  The agency will be entitled to a commission on your work even after it goes out of print from the deal the agent negotiated and your new agent sells the work to another publisher.  After your death, your executor would have to keep track not only of which of your works are still under contract, but will also have to determine whether an agency has an interminable right to represent any of your out-of-print works. Your agency may merge, dissolve, or change names, providing more complications for your executor.

Similarly, a few agents use the phrase “agency coupled with an interest” in their contracts. This is a bit of legalese intended to make the agency relationship irrevocable (again!). Ordinarily, a principal may terminate his or her agent at will (or at the end of a contract term), and the agency terminates automatically on the death or disability of the principal. This clause, however, grants the agent the exclusive, irrevocable right to represent your works for the entire term of those works’ copyright. Even if you terminate the agency, and the rights to your book revert back to you from the publisher, you are obligated to pay the agency a commission forever for all future sales, even if the agency did nothing to cause that sale. It could even mean you would be paying two agency commissions, which could amount to thirty percent or more. This also would apply to your heirs.

3.  The Powerful Agency.  Third, some literary agency agreements give the agent power to sign contracts and checks on the author’s behalf.  This clause always should be deleted; if necessary, you can give your agent this power when and if there is a good reason to do so, such as your unavailability for a period of time..

Finally, your agent should not be permitted to “assign” (transfer) your agency agreement to another agency without your permission.  Likewise, you should not be transferred to another agent within the same agency without your permission.

©2011 Daniel N. Steven