The Agency Agreement

For many writers the first milestone to publication is the holy Finding of The Agent.   Agents have become the screeners and gatekeepers for major publishing houses, and receiving an offer of representation from an agent is certainly cause for celebration.  At that magical time, you will be presented with your agent’s “standard” agreement for signature.

 The first step in evaluating the agreement — if you haven’t already done so —  is to make sure the agent is reputable. The Association of Author’s Representatives (AAR) has a list of screening questions on its web site other good sources of information about individual agents are the annual Writer’s Digest Guide to Literary Agents,  Jeff Hermann’s Writer’s Guide to Book Editors, Publishers, and Literary Agents, and the Preditors and Editors web site.

Fee charging vs. non-fee charging agents.  Since the early ‘90’s, writers and writer’s organizations have debated the legitimacy of agents charging a fee (usually $250 -$750) to review a writer’s work.  In my opinion, reputable agents don’t charge a fee to represent authors, but I acknowledge there are exceptions.  Some experienced, successful agents now use fees to screen clients and/or as part of a legitimate, ancillary editing business.  If you have received an offer of representation from a fee-charging agent, however, be especially careful in your evaluation.

After you have established the reputation of the agent and his/her suitability, examine the proposed contact:

1.  Scope.  The typical agency agreement gives the agent the exclusive right to represent ALL of your work throughout the world, in all media, and in all formats.  Any existing works you create during the term of the agreement (in some cases, even work that predated the agreement) will be covered.  Instead, consider asking the agent to limit his or her representation to a specific work — you always can broaden the scope later, after you see how you work together.  You also might want to use a different agent for subsidiary rights — film, audio, foreign, electronic — especially if you are confident about a particular sub-market and/or the agent does not have an expertise in that market area.

2.  Exclusivity. 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.

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.  Duration.  The duration or “term” of the agreement is critical.  Terms range from 30 days to the duration of the work’s copyright.  Agents, on one hand, have a legitimate interest in not undertaking work without some certainty that the client will be around for a while; authors, on the other hand, have a legitimate interest in not being bound to an unproductive agent.  For authors, the best deal is a 30 day “at will” termination provision, i.e., either party may terminate upon 30 days’ notice.  A frequent compromise in this area is an initial non-terminable six-month period, followed thereafter by a 30, 60, or 90 day termination clause.  If you do sign a long-term agreement, be sure to get an “out” clause that allows you to terminate the agreement if the agent has not made a sale within a certain time limit (e.g., six months).  Keep in mind, however, that after termination the agent is entitled to continue receiving commissions for all publishing deals made by the agent during the term of the agreement.

BEWARE 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.  Commission.  Generally, this is not negotiable.  Most agents charge 15%, plus an additional five-10% for foreign rights (this is so the agent can compensate his sub-agent).  Thus, an author may pay as much as 25% commission for a foreign sale.  An exception might be if you have found a publisher yourself and simply want the agent to negotiate the deal — in that case, some agents might be willing to lower their commission.

4.  Disbursements.  Most agency agreements provide that the agent will receive all of the author’s royalties and advances directly from the publisher, deduct the commission, and disburse the remainder to the author. The agreement also should provide that all funds received by the agent on your behalf are deposited in a separate client’s trust account, not in the agent’s general account (where it can be attached by creditors) and that the author’s share will be paid within 10 business days.  If the agent does not deposit funds in a separate client trust account, then be sure the “agency clause” in your publishing contract gives you the right to cancel the clause in the event of the agent’s bankruptcy, death, or disability (see paragraph 9, below).   You’ll still owe the agent his commission, of course, but your share of the royalties won’t be held up in bankruptcy or probate court.

5.  Accounting.  The agent should be willing to provide at least an annual accounting to the author, along with the required IRS Form 1099.  If possible, also obtain an audit provision.

6.  Expenses.  Traditionally, agents have absorbed client expenses (copying, postage, courier, etc.) as part of their commission.  Recently, some agents have begun charging client expenses separately.  If your agent charges for all expenses, offer a compromise — ask the agent to charge only for unusual or “excessive” expenses, not to exceed a specific amount without the author’s written permission.  Further, these expenses should come out of your future royalties, not directly from your pocket.

7.  Powers.  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 the agent this power later, after you have established your relationship.

8.  Assignment.  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.

9.  Bankruptcy, Disability, and Death.  If your agent is a sole proprietor or in a partnership (not incorporated or an LLC), youmust know what happens in the event of his/her bankruptcy, death, or disability.   Specifically, what provisions exist for continuing operation of your account, for the processing of money due to you, and for the handling of your works?  Whether a sole proprietor, corporation, or LLC, I recommend the following clause be inserted in all agency agreements:   “In the event of the bankruptcy, insolvency, liquidation, death, or disability of the Agent, the Author may revoke all rights granted to the Agent hereunder.”   (Although the bankruptcy part of this provision may not be enforceable under the current provisions of the Bankruptcy Code, it is  somewhat unresolved whether it can be enforced when the debtor is the licensee of a registered copyright — typically, a publisher.)  This clause may allow you to direct publishers to pay royalties to you directly (see paragraph 4, above).   Again, you’ll still owe a commission for works placed by the Agent, but your royalties will not be tied up in court.

The final consideration is subjective.  If you find too many clauses slanted against the author, it might be a warning sign that the agency is not for you.  It’s often said that an agent-author relationship is like a marriage.  The agency agreement is like a prenuptial contract — you must understand and settle all issues before the breakup.

© Daniel Steven 2002, 2011