Book Contracts
In the past, many writers would simply sign a publisher’s form contract as written, rather than bargain for more favorable terms. Over time, the trend has changed from one of acquiescence to one in which at least some negotiation is commonplace. In order to protect their interests, writers may demand that certain contract clauses be deleted or included, and contract negotiations often involve a lively give and take in which the demands of both writers and publishers are at least partially met. This chapter considers the clauses typically included in book contracts and the demands likely to be made by the respective parties as to how these clauses should be written. The next chapter considers the clauses typically included in a magazine contract.
Book publishing contracts tend to be more detailed and lengthier than magazine publishing contracts, since books require a larger investment by the publisher and more issues are involved. Every writer who writes commercially should be generally familiar with the contracting aspects associated with books, since these issues frequently spill over into other kinds of publishing.
ADVANCES
An advance against royalties may be the first money received by a writer and is, in effect, typically a partial payment of anticipated royalties before they are earned. Publishers generally determine the amount of the advance based on the number of copies of the book they think will sell and the royalties that will be due the writer. Frequently, the advance is based on the anticipated royalties to be earned in the first year after the book is released. The advance may be delivered to the writer as a lump sum after signing the publishing contract or may be paid in installments triggered by various events. Thus, a portion of the advance could be paid when the parties sign the contract, another portion when the writer delivers the manuscript, and the rest upon publication.
Advances may or may not be refundable to the publisher. If an advance is refundable, the writer will have to return that portion that exceeds the royalties due to the writer from actual sales. For example, if the writer received a $7,000 advance, but sales of the book warranted only $3,000 in royalties, the writer would have to return the $4,000 that was not earned. When the advance is refundable, it is important that both parties agree to a specific period within which the royalties are to be matched against the advance.
A nonrefundable advance (sometimes called a guarantee) need not be returned by the writer, even if it is never earned out, to use the industry jargon. Most advances are nonrefundable.
Some authors feel that the advance clause is the most important clause in the contract because it provides immediate cash. In the long run, such a view can be shortsighted, since ultimately the income derived from the work will depend on other issues, such as royalty rates, subsidiary rights, and out-of-print provisions. On the other hand, many publishers never recoup their advance through sales, so there may be something to be said for large advances. Some small publishers may not be in a position to provide a writer with a large advance or any advance at all. They may attract authors by offering concessions in other areas of the contract—for example, a larger royalty rate or more subsidiary rights.
Many unpublished writers are not offered advances. Many publishers today are paying advances only to established, bestselling writers. Thus, there is no stigma in not receiving an advance when beginning a writing career.
Signing Fees
Advances should be distinguished from signing fees, which may only be available to well-established writers who have proven sales records. Signing fees, unlike advances, are never refundable and are unrelated to royalties. They do not have to be earned out by sales. A signing fee is merely a payment made to a writer for purposes of attracting that writer and consummating the publishing contract.
ROYALTIES
Royalties begin to accrue once the book starts to sell. If an advance has been given, royalties will be applied against the advance and no money will be paid to the writer until the royalties exceed the amount of the advance, referred to as an earn-out. Royalties are customarily paid semiannually and are typically accompanied by a royalty statement. The royalty statement is an itemized account showing the number of copies printed, bound, sold, or given away by the publisher; the author’s royalty rate; and, generally, the reserves for returns.
The first aspect to look at when reviewing a royalty clause is whether the royalties are based on the list price (also known as the suggested retail price) or the net receipts (which may often be the wholesale price). Books are typically sold at a discount of slightly less than 50 percent of the publisher’s list price and are sometimes discounted even more. Therefore, at any given royalty rate, payment on a net-receipts basis will be about half of what the payment would be on a list-price basis. In general, payment on a list-price basis is preferred because it simplifies tracking royalty payments.
The conventional royalty rates for hardcover trade books begin at 10 percent of list price for the first 5,000 copies, 12.5 percent for the next 5,000 copies, and 15 percent thereafter. The rates for trade softcover books range from 6 percent to 8 percent. Mass market paperbacks are typically 8 percent of the list price for the first 100,000 copies and 10 percent thereafter. Royalty rates outside the trade category are generally less. For example, textbook rates typically range from 6 percent to 15 percent of net receipts and professional books typically range from 10 percent to 15 percent of net receipts. Rates also tend to be lower for books written for children and young adults.
Publishers will typically include a clause in the contract stating that no royalties will be paid on copies distributed for review or advertising, on copies furnished gratuitously to the writer or as samples, or for copies destroyed while in inventory or during shipment. Moreover, the publisher will normally stipulate that no royalties will be paid on books returned from bookstores. Thus, if the royalty rate is 10 percent of the list price, 8,000 copies are shipped to retailers and 2,000 copies are returned, the writer would be entitled to royalties on only 6,000 copies, rather than on the full 8,000.
The publisher is likely to require that the royalty rate be reduced for copies sold at a substantial discount (also known as a deep discount). Traditionally, this clause was intended to reflect the lower return from special sales outside of regular trade channels or the sales of remainder copies. Remaindering refers to the sale by the publisher of the publisher’s inventory of a title after the initial distribution has been completed and there is no intention by the publisher to continue selling the title. Thus, a royalty rate of 10 percent might be reduced to 5 percent for copies sold to bulk purchasers at special discounts or to wholesalers for specialized markets at larger-than-normal discounts. Similarly, the royalty rate might be reduced for all export, remainder, and premium sales.
At times, the royalty rate reduction may be determined by a particular formula. For example, the publisher might specify that the stated royalty will be reduced by one-fourth of the difference between a 50 percent discount and whatever discount is granted. A discount of 60 percent would, in this case, reduce the author’s royalty rate by 2.5 percent. Of course, the writer may demand that some limitations be placed on this type of clause to ensure that, in every case, at least some royalties will be forthcoming. The writer might demand that the royalty rate never be reduced by more than half.
Deep-discount clauses are subject to abuse, since many publishers will sell a large portion of their inventory in the normal course of business at discounts greater than the one set forth in the contract. Since industry custom seems to be heading in the direction of increased deep discounting, writers should try to modify reduced-royalty clauses by clarifying that they do not apply to the ordinary sales of books to the trade. If that fails, writers should try to minimize the effect of the clause by changing the discount rate or having reductions in royalties apply on an escalating scale.
Reserves
Reserves are another significant issue for authors. Most publishers offer booksellers the right to return unsold inventory for a refund. The customary practice is for the contract to withhold a certain percentage of royalties to cover the anticipated returns. Although the practice is commercially reasonable, it is readily subject to abuse should the publisher withhold amounts that significantly exceed the actual expected returns or withhold the reserve for an excessive time. Since the percentage of returns varies considerably depending on the book, most book contracts entitle the publisher to establish a reasonable reserve. Providing the publisher with some flexibility to establish the size of the reserve is reasonable, although it is a good idea to put some limits on the publisher’s discretion. For example, the publisher should be able to better estimate the anticipated returns of a book over time, and therefore should be willing to agree to limit the reserve to 20 percent or less after four standard six-month accounting cycles (unless the book is remaindered or the actual returns during the preceding cycle exceeded 20 percent). Likewise, it is appropriate to limit the length of time that royalties can be withheld as reserves, because most returns can be expected within one or two accounting cycles after delivery to booksellers. In general, writers should negotiate for language in the contract providing that the publisher may withhold the royalties for no more than one or two accounting cycles.
Royalty Statements
Another common complaint is that royalty statements are often indecipherable or erroneous and that publishers have been known to understate sales. A way to help prevent this or at least provide some cure is to include an auditing clause when working out a contract with a book publisher. This type of clause provides that the writer, at the writer’s expense, may examine the publisher’s books and records upon giving reasonable advance notice. Bear in mind, though, that the cost of such examination may be quite high. Therefore, the auditing clause should provide that if any discrepancy exceeds 5 percent of the amount received by the writer, the publisher will pay all expenses attributable to the examination. If any discrepancy is less than 5 percent, the writer will bear the cost.
FORMAT AND CONTENT OF THE MANUSCRIPT
Most book contracts require the writer to submit a printed copy of the manuscript and a digital text file. Contracts will also address other issues, such as the delivery date, schedules for returning proofs, and who has responsibility for preparing the preface, endnotes, and index, if any. Publishers usually assume the burden of preparing book covers and layouts and typically retain the sole discretion regarding their design. Few publishers will give the writer the right to approve them, although some are willing to allow the writer to review and comment on them. Similarly, publishers generally retain the discretion to change book titles.
A typical book contract will contain a clause in which the writer promises to deliver a manuscript that is satisfactory in form and content or one that is in all regards acceptable. Failure to produce a satisfactory manuscript can have several consequences. First, the publisher will not be required to pay further installments of the advance. Second, depending on the terms of the contract, the writer will either have to repay whatever portion of the advance has already been received or make such repayment if the book is later sold to another publishing house. Third, the writer will have to revise the manuscript in a limited amount of time if the contract so provides or if the publisher is willing to consider a revised version.
Whenever a manuscript is rejected as unacceptable, the meaning of the term “satisfactory or acceptable” becomes crucial in determining the rights of the writer and the publisher. Unfortunately, contracts almost never provide a standard for what is acceptable and what is not. While the publisher’s decision will generally be subjective rather than objective, courts have imposed an obligation of good faith on publishers. Generally, publishers are allowed to reject manuscripts when they have good-faith concerns regarding the quality of the material. However, publishers are not free to reject manuscripts because their appraisal of the market has changed or because they have altered their publishing objectives. A particularly messy case involving a rejected manuscript was filed by Random House against the actress Joan Collins in 1995. The actress had negotiated a two-book contract with the publisher in 1991 for a $4 million advance to be paid in installments. Random House rejected the manuscripts and sued to recover the $1.2 million it had already paid. As befits a matter involving a glamorous celebrity, an established publishing house, and substantial commercial stakes, the media buzz surrounding the case was replete with speculation, rumors, and accusations.
Collins’s editor at Random House stated that the manuscripts were rejected because they were primitive, jumbled, and disjointed. However, there was speculation in the press that Collins had lost her market appeal after her television series Dynasty was canceled and that Random House wanted to back out of the deal. Collins conceded that the manuscripts needed some work, but asserted that Random House refused to provide the editorial assistance that she had expected. There was also speculation that she may have dumped the manuscript on Random House in the belief that the publisher valued Collins’s celebrity status more than the content of the manuscripts and would rework them as necessary. Collins counterclaimed against Random House for the remainder of the $4 million she contended she was owed under the contract.
The case went to trial and the jury ruled that the actress could keep the advance already paid and was entitled to recover another $1.3 million for the first manuscript. It also ruled that the actress was not entitled to any recovery regarding the second manuscript because it merely rehashed the first. The decision is generally regarded as a victory for writers, since it is believed to have made publishers more wary about rejecting manuscripts.
Publisher’s Duty to Edit
While the standard manuscript acceptance clause does not explicitly impose a duty on the part of the publisher to edit manuscripts, some courts have ruled that the obligation to act in good faith imposes a limited duty on the part of the publisher to edit. This implied obligation stresses the need for communication between authors and publishers, particularly when specific faults are found. This includes the obligation to provide appropriate editorial work.
Although publishers have some duty to edit, they are not obligated to expend whatever effort it takes to salvage an inferior manuscript. The duty to edit does not extend to an obligation to provide skillful editing. Further, the extent of the publisher’s duty to edit will depend on the specific language of the contract between the publisher and writer and may be limited to when the writer requests editorial assistance.
Standards of Acceptability
Rather than depend on any implied duty to comment or edit, a writer should discuss standards of acceptability with the publisher and include criteria for judging the finished product in the contract. The Authors Guild, an advocacy organization for authors and dramatists, suggests a clause providing that the manuscript submitted must be, “in style and content, professionally competent and fit for publication.”
Another suggestion is to reference the proposal submitted by the author, along with language specifying that the manuscript will be deemed acceptable if it conforms to the proposal. In addition, writers should attempt to negotiate a clause that requires the publisher to specify in written detail why the manuscript is not satisfactory and provide the author with a period of time (e.g., sixty days) to submit a revised manuscript.
Timeliness
Finally, writers should request that the contract specify the period of time that the publisher has in which to state that it has accepted or rejected the manuscript. One reason for this is that production can get stalled if a manuscript gets placed in a pile and is allowed to languish there. This situation is not unheard of when the acquiring editor leaves the publisher and the manuscript is assigned to an editor with little personal interest in the book. The other reason is that many contracts specify that acceptance of the manuscript is the event that triggers the publisher’s obligation to pay a portion of the advance. By specifying a reasonable period for evaluation of the manuscript, writers can ensure they get paid in a timely fashion.
ALTERATIONS
The writer generally agrees to pay the costs of making author’s alterations or corrections on galley or page proofs that exceed a certain percentage of the manuscript. This clause is designed to discourage authors from rewriting the book after it has been edited. It is a good idea for writers to try to modify such a clause by requiring the publisher to absorb the cost of changes made for the purpose of updating material when a significant event has occurred. It is also important to make clear that the writer is not responsible for changes that merely correct the publisher’s errors.
PUBLICATION
The publication clause requires the publisher to publish the manuscript within a given time after accepting it. These clauses are important to writers because some books will lose their commercial viability if not published in a reasonable amount of rime. In addition, books that were acquired by editors that have since left the publisher may get stalled at the publisher for lack of attention. Without a publication clause, the writer will be left without the leverage needed to prompt publication or to reacquire the rights to license the work to another publisher (while keeping the advance).
REVISIONS
The revisions clause generally provides that if the publisher decides that it wants to publish a revised version of the book (e.g., a second edition), the writer must be given the first option to make such a revision. This situation is generally relevant only to nonfiction works. If the writer is unable or unwilling to undertake the job, the publisher is then free to contract with someone else to do it. When the writer chooses to revise the book, the contract may provide that the royalty scheme for the revised edition will remain the same or revert to the base percentage. The base percentage is the lowest percentage paid when royalties are determined on a sliding scale based on volume of sales. Some contracts provide that the author’s royalty rate is to revert to the base percentage if the revision involves a substantial resetting.
To understand how this might work, assume that a writer agrees to revise the first edition and that the revision costs exceed the stated 50 percent. Further, assume that royalty rates on the first edition were 10 percent for the first 5,000 copies sold and 15 percent thereafter, and that 7,000 copies of the first edition were sold. If the contract calls for the royalty rate to revert to the base percentage, the royalty on the revised edition will start at 10 percent, even though the writer is receiving 15 percent on the prior edition.
If the publisher contracts with someone other than the writer to undertake and complete the revision, the publisher may compensate that party either with a flat fee or with royalties. The revision clause generally provides that the money paid to the reviser is to be deducted from any sums accruing to the original writer. In order to protect royalty interests, the writer may demand that no revisions of the original edition be made until a certain period of time has elapsed from the date of first release, usually one to three years. In addition, the writer may demand a phasing-out provision, whereby the author’s royalties may be reduced only by a stated percentage and no more upon each revision. Thus, the author’s royalties might be reduced by one-fourth upon the first revision, one-half upon the second, three-fourths upon the third, and be eliminated upon the fourth.
COPYRIGHT
The copyright clause establishes which party, the writer or the publisher, is to own the copyright in the published work. The norm in trade book contracts is for the writer to retain the copyright. Some publishers of nonfiction and scholarly texts ask that the copyright be assigned to them. They claim that this is justified because such works are frequently updated, and if the publisher retains the copyright, it can arrange for supplements or revisions even after the writer is no longer able to update the work.
However, this issue can be addressed in ways other than transferring the copyright. Most publishers will agree to allow the copyright to remain in the writer’s name.
In trade book contracts, the writer will generally grant the publisher a license to exercise certain rights included in the copyright, such as the right to exploit the subsidiary rights. Some writers will grant the publisher the copyright under the condition that the copyright reverts to the writer at some specified time or after some specified event (for example, when the book goes out of print). Since a copyright is divisible, the rights within it may be divided between the writer and publisher. Thus, the writer may grant the publisher the right to publish and sell the work in book form, but retain the movie rights for him- or herself.
The copyright clause usually requires the writer to inform the publisher if any previously copyrighted material (whether by the writer or someone else) has been incorporated into the manuscript. If it has, the writer may be required to get written permission to use the material from the original publisher or copyright owner, and to submit that written permission to the publisher. Often, there will be a nominal fee for reproducing material from another publication. As a general rule, the writer pays these fees. However, depending on the nature of the book and the parties involved, this should be negotiated.
Whether the writer or publisher retains copyright ownership, the publisher should be required to print the proper copyright notice on the completed book, register the copyright with the Copyright Office, and take any other actions necessary to protect the copyright. Sometimes a publisher will include a provision that the writer must agree to transfer ownership of the copyright in the event that the publisher wants to sue a party that has infringed the copyright of the work. Such provisions are reasonable, provided that the contract states that the transfer is required only if necessary for the publisher to bring the action in its name and that the contract states the record title will be transferred back to the writer at the conclusion of the action.
SUBSIDIARY RIGHTS
While the main focus of many writers is to see that their books are published and sold, in many cases, a substantial portion of the income from a given work will be earned from exploitation from the subsidiary rights. Subsidiary rights are defined as the rights of exploitation in markets not included in the primary grant of the right to publish and sell. For example, film rights would be subsidiary rights in a book contract, while book rights would be subsidiary rights in a film contract. Subsidiary rights in a publishing contract could include
• film rights
• television rights
• foreign rights
• translation rights
• book clubs
• paperback reprints
• excerpts in magazines
• newspaper syndication
• audiobooks
• abridgements and condensations
• anthologies
• dramatizations
• rights to alternative forms, such as electronic publishing
Subsidiary rights may be divided between the writer and publisher in any number of ways. However, the writer (particularly if the writer has an agent) often retains motion picture, television, dramatic, foreign, and translation rights, with the book club and paperback rights held by the publisher. The income from the sale of these rights split fifty-fifty. Since the definition of subsidiary rights can vary from contract to contract, the writer should review the definitions to make sure they are precise and not overly broad.
Recently, authors have been arguing for—and winning—a larger percentage of subsidiary rights and more control over the way subsidiary rights are exercised. For example, the writer may demand that no license of subsidiary rights be granted by the publisher without the author’s consent. A publisher faced with a clause such as this may balance it with a provision in which it is agreed that the author’s consent will not be unreasonably withheld. But the writer may require that, if the publisher does not dispose of the subsidiary rights within a stated time (for example, one year), all rights will revert to the writer.
Publishers are resisting the trend of subsidiary rights reverting to the author because a substantial percentage of the publisher’s profits often comes from the sale and exploitation of subsidiary rights.
Since subsidiary rights can mean money for authors as well as publishers, both parties should make clear in their contract which subsidiary rights belong to which party. Failure to do so may not only result in substantial financial losses, but may also cause the contract to be declared void for vagueness. To prevent this, a residual clause may be included in which one party is given all subsidiary rights not otherwise expressly granted to the other party. The residual clause recognizes that advances in technology are constantly broadening the uses of literary property and states which party will receive the benefits of subsidiary rights in new technology. If a residual clause is not included, the party in whose name the book has been copyrighted will automatically receive all additional subsidiary rights.
WARRANTY AND INDEMNITY
Warranty and indemnity clauses require writers to warrant that their work is neither unlawful nor obscene, and that it does not defame anyone or invade their privacy. These clauses also require the writer to indemnify or reimburse the publisher for any expenses incurred by the publisher in defending claims covered by the warranty. Publishers insist on these clauses because they are at the mercy of the writer with regard to issues such as defamation. Unless writers assume the risk of paying the litigation expenses if they write defamatory material or infringe a copyright, publishers fear that many writers will have insufficient incentive to refrain from such activities.
Warranty clauses are typically characterized by language stating that the work has not been previously published and does not plagiarize other writing. Such clauses are fairly comfortable from the authors’ perspective, because they have control over whether the works have been previously published and what materials have been incorporated. In other words, absent deliberate misconduct on their part, the only significant risk faced by writers under these clauses is that another person may have published their work without the writer’s authorization. The warranty clauses pertaining to defamation and infringement of privacy rights are more problematic because the laws covering these issues can vary among the states. In these cases, it is more likely that a writer could violate a person’s rights without intending to do so.
Although publishers will rarely agree to delete a warranty and indemnity clause altogether, writers can attempt to reduce the scope and effect of the clause. First, writers should try to limit the scope of the warranty. One reasonable request is to add a provision that the clause does not apply to claims that arise from the publisher’s changes or additions to the original manuscript. In addition, the scope can be limited by modifying the warranty with the phrase to the best of the author’s knowledge.
Second, writers should try to limit the effect by reducing the amount they might owe the publisher and the degree to which the publisher may withhold royalties from the writer to cover the indemnity. One way to limit the effect is to agree to indemnify the publisher if the lawsuit is settled prior to a final judgment, but only if such settlement is made with the writer’s consent. This gives the writer the ability to control an overgenerous publisher during settlement negotiations.
In addition, the writer might demand that indemnification will never exceed 50 percent of the damages. In other words, the cases of the claim or lawsuit are to be divided equally between writer and publisher. Finally, if the clause allows the publisher to begin withholding royalties when a suit is filed, the writer might demand that the amount of royalties withheld not exceed a reasonable estimate of the prospective damages.
COVENANTS NOT TO COMPETE
Most publishing agreements have clauses in which the writer agrees not to publish or authorize the publication of a work that might diminish the sales of existing works or the licensing of the rights granted under the contract without the publisher’s permission. While publishers have a legitimate business interest in protecting the commercial viability of books they have agreed to publish, writers need to be careful that the scope of the competing works clause does not unreasonably impede their writing career. Courts tend to narrowly construe provisions in contracts that limit competition but will generally enforce provisions that are reasonable in time, place, and scope.
IN PLAIN ENGLISH
Publishers will rarely agree to delete noncompete clauses, but are generally willing to modify them.
Writers should pay particular attention to how a competing work is described. Phrases such as similar or related should be deleted, since they can be interpreted broadly. For example, a writer whose first book is Ten Steps to Better Bowling might be precluded from writing other books about bowling if the clause prohibits related books. A better competing book provision would use a phrase such as “reasonably likely to injure sales of the book.” This would allow the writer to license other books about bowling without the publisher’s permission, provided they are sufficiently different so they would not encroach on sales of the other work.
In addition, authors should exempt scholarly or magazine articles from the restriction, since these activities would likely enhance the writer’s reputation and may even help sales of the book.
TERMINATION AND REVERSION
All good things must come to an end and the contract should address the writer’s rights once the book goes out of print. It is important that the contract provide that all rights will revert to the writer when the work goes out of print, because the author may want to publish the material again and therefore needs the right to do so. Because authors and publishers may not agree on when a work has gone out of print, the phrase should be clearly defined in the contract. From the writer’s perspective, the work should be considered to be out of print when the publisher is no longer putting forth sufficient effort to make the book commercially viable. The most specific way to effect this intent is to require a minimum number of sales within an accounting period for the book to be considered in print.
Another practical way is to specify that a book will be out of print when copies of the book are no longer available through normal trade channels. What the writer wants to avoid is the situation in which a publisher, for all practical purposes, stops distributing the book, but retains a minimal means of selling copies. The availability of technologies such as print-on-demand and electronic versions make this technologically feasible for publishers.
Contracts may also provide for termination if the publisher becomes bankrupt or insolvent. In theory, such clauses would protect the writer from having the rights sold during a bankruptcy proceeding, but unfortunately, they are unenforceable under the US Bankruptcy Code. Nonetheless, it is common to find such clauses in publishing agreements.
Regardless of how the contract is terminated, the termination clause generally requires that the writer be notified of such termination and be given the option to purchase the remaining copies of the book (and sometimes the electronic files, plates, films, or other media as well). If the writer does not exercise this option, the publisher may sell the remaining copies at any price to any other party. If the remaining copies are sold by the publisher for a reduced price, the writer may receive a reduced royalty or none at all. Moreover, the contract may require the publisher to destroy the electronic files, plates, film, or other media if the writer does not purchase them.
If the publisher had sold licenses to others for use of the subsidiary rights, the reversion rights of the writer will usually be subject to the third party’s license. In other words, even if the publisher’s rights revert to the author, the third party will still have a valid license as granted by the publisher, providing the publisher was authorized to create the license in the first place. The writer may get around this by demanding at the outset that any license granted by the publisher will be subject to the author’s reversionary rights. In this way, the writer ensures that all rights will revert. Few publishers will agree to do this because it significantly impairs the value of the subsidiary rights.
OPTION CLAUSE
The publisher may include a clause in the contract that gives the publisher the opportunity to review the writer’s next book-length work and make an offer before the writer submits it to other publishers for review. The rationale is that the publisher will have played a role in developing a writer’s career and should have the right of first refusal on the author’s later works.
Writers generally do not want an option clause because it restricts their flexibility. In any case, writers who agree to such clauses should ensure that limits are placed on them. For example, the writer may demand that the publisher accept or reject the subsequent works within thirty to sixty days after they have been submitted and that the publisher agree to make its decision based on an outline and sample chapters instead of a completed manuscript. Similarly, the clause should be limited to the next work and not bind the author thereafter.
It is not uncommon for publishers to have the option provision state that, even if the publisher rejects the writer’s next work, the option clause remains in effect until the writer places the book with another publisher. This is intended to preclude authors from evading the option clause by submitting an unpublishable work. In addition, the typical option clause states that the terms for the next work will be negotiated in good faith, but if an agreement is not reached, the writer cannot enter into an agreement with another publisher unless the terms are equal or better.
MULTIPLE-BOOK CONTRACTS
Publishers may attempt to hold successful authors by negotiating an agreement for multiple books. These contracts differ from those that contain option clauses. An option clause grants the publisher the first right to publish any subsequent book by the author, but does not obligate the writer to create another work. A multiple-book contract, on the other hand, obligates the writer to write two or more books for that publisher. The problems that can arise from this kind of contract are substantial.
What happens, for example, if the writer fails to comply with the contract? The publisher may be able to sue for breach of contract. While a court will not order a person to perform a personal-service contract—such as writing a book—against one’s will, it may award damages to the party whose economic expectations were dashed. In addition, the publisher may be able to obtain a court order prohibiting the writer from providing material to other publishers.
The amount of damages awarded the publisher would ordinarily be difficult to calculate in a case like this, since it would require speculation on the probable success of an unwritten book. For this reason, publishers will generally include a clause in the contract providing that the publisher can recover a specified amount, known as liquidated damages, in the event the writer fails to perform this part of the multiple-book contract.
AUTHOR’S MANUSCRIPT
In many contracts, the publisher will disclaim any liability that may arise from the loss or destruction of materials submitted by the writer. Moreover, the publisher may demand the right to destroy the author’s manuscript after publication if it is not properly claimed within a given period of time. The publisher may require the writer to retain a copy of the manuscript, illustrations, and any other materials submitted to the publisher. In most instances, writers retain copies of their works in either paper or electronic form, so the damages associated with a lost manuscript are minimal. However, if the publisher will be taking possession of rare documents, illustrations, and related material of personal and possibly financial value, the writer should demand that the publisher be held liable if the work is destroyed while in the publisher’s control. The writer should also demand that the material be returned within a stated time following publication.
IN PLAIN ENGLISH
Writers should avoid the issue of lost or damaged material altogether by not submitting valuable originals to the publisher.
ARBITRATION
Arbitration is simply an arrangement for taking a dispute to an agreed-upon third party for resolution rather than going through the formalities and expense of courtroom litigation. Some book contracts may provide for binding arbitration, in which case the parties agree that the decision of the arbitrator shall be conclusive and that the parties will not attempt to have this decision examined by a court. If the word arbitration is used alone, it is presumed to be nonbinding.
Some states require that disputes that involve less than a specified amount of money—for example, $50,000—are subject to arbitration. However, this form of arbitration is nonbinding and either party may have the matter retried before a judge or jury. A contract may provide for nonbinding arbitration. In this event, a party not pleased with the result has the right to appeal the matter.
The identity of the arbitrator is important, since a contractual provision that selects a friend of the publisher or writer will likely predetermine the outcome of any controversy. For this reason, an independent, nonpartisan arbitrator should be selected. It is common to state that arbitration will be held under the rules of the American Arbitration Association, which has procedures for selecting arbitrators. Unless the contract states how the arbitration will be initiated, commencing an arbitration can be difficult if the other party is not cooperative. In extreme cases, a party will need to petition a court to appoint an arbitrator.
Although binding arbitration may save time and money, be aware that the resulting decision cannot be appealed and the process will not contain many of the procedural safeguards that are a part of the judicial process. On the other hand, an arbitration clause may prove beneficial to a writer dealing with a large publisher, because it will decrease the publisher’s negotiating leverage in the event a dispute arises. For example, if a disagreement arises and there is no arbitration clause, the large publisher’s ability to absorb litigation costs may be much greater than the individual author’s. Thus, the publisher can take a harder line in negotiation. With an arbitration clause, the publisher cannot hold the economic threat of a lawsuit over the writer’s head.
It should be noted that the rules of the American Arbitration Association do not provide for any pretrial discovery, unless the contract provides for the American Arbitration Association’s Commercial Rules to be used. It is a good idea to modify any arbitration clause to include a provision in which both parties agree to have pretrial discovery similar to what would have been available if the case were tried in state or federal court rather than before an arbitrator.
AUTHORSHIP CREDIT, FREE COPIES, AND WRITER PURCHASES
The writer may demand that credit for authorship be published in a particular manner, and may dictate the relative size and location of the name not only of the writer, but of a coauthor, illustrator, or a subsequent reviser other than the writer. In addition, most publishing contracts provide that the writer is to receive a certain number of free copies of the published work. Some contracts will allow authors to buy any number of books for a discounted price, but publishers will usually be careful in setting the price to avoid having the writer become a competitor. One method publishers have used to prevent this kind of competition is stating in the contract that free or discounted books are not to be sold by the author, or that if they are to be resold, the price must be no lower than what the publisher is charging. In other cases, the publisher may see that the writer is the best salesperson for the book and will encourage the writer to buy books for resale.
AGENCY CLAUSE
If the writer has an agent, the publishing agreement will most likely provide that the publisher will make payments that are owed to the writer directly to the agent, and that such payments will satisfy the publisher’s obligation to pay the writer. The intent of these clauses is to ensure that agents are compensated for their services. They are generally inserted because agents require their clients to agree to this method of payment.
Ethical agents will hold the money in a trust account until the check clears, then transfer the client’s portion to the client. In the event that an agent does not pay in a timely manner, the writer will need to proceed against the agent and not the publisher. Some publishers will agree to cut separate checks to the writer and agent, but most will not because of the administrative burden. In any case, it is always better to deal with an ethical agency.
BOILERPLATE PROVISIONS
The publishing agreement may include any or all of the following wrap-up provisions.
• Merger (also known as Integration). A merger clause will state that “the contract is intended to be the complete and final agreement of the parties,” or words to this effect. This statement is designed to prevent any outside deals from becoming part of the contract. It makes it clear that the written document embodies all prior understandings, negotiations, and promises. A clause such as this will probably help to prevent future misunderstandings.
• Modification. Another phrase likely to be found in a contract is “No modification or waiver of the contract is valid or enforceable unless signed by the parties.” This statement will protect both parties from an alleged oral change, which can be casually spoken and easily forgotten.
• Choice of Law. This clause determines which state’s law will be applied to interpret the contract if the parties are located in different states. Publishers generally prefer to apply their own state’s laws to interpret the contract. This is something that publishers are unlikely to give up.
• Venue. This clause specifies the place (or venue) where any litigation involving the contract must occur. It would be disadvantageous for an author to agree to a court battle in a location far from his or her home, but it would also be unlikely for a publisher to agree to a venue far from the center of their operations.
• Attorney Fees. This clause will generally provide that, if it becomes necessary to enforce the contract through legal means (by lawsuit or arbitration), the party who wins the case will be entitled to recover attorney fees from the other party, in addition to any other monetary award. Be aware that some jurisdictions require that fees at both the trial level and the appellate level be specified if the parties want attorney fees to be awarded following an appeal.
The fact that the contract provides that the winning party will be entitled to recover attorney fees does not necessarily mean that the prevailing party will be reimbursed for the entire legal bill. The courts have traditionally held that the amount awarded will be reasonable attorney fees. Some jurisdictions also require specificity when dealing with expenses, such as the identification of deposition costs, paralegal fees, or the like, or they will not be awarded to the prevailing party. It is not uncommon for a court to award an amount less than the actual bill. An attorney’s fees and costs clause tends to discourage parties from breaching the contract, since the breaching party runs the risk of paying most of the prevailing party’s expenses.
• Waiver of Breach. The contract might also contain a clause specifying that “a waiver of a breach of the contract shall not be deemed to waive any future breaches.” This provision allows a party to agree to less than strict compliance with the contract on one occasion, without giving up the right to strictly enforce the contract later.
• Severability. This kind of clause provides that if for some reason any part of a contract is not enforceable, the balance of the contract should still be enforced, and oftentimes states that if there is any way to read the contract to make a suspect clause enforceable, that the clause should be read in that way.
The clauses discussed thus far are those typically included in a contract between a writer and a book publisher. These clauses are by no means the only ones that could be included, and variations on these clauses are not the only possibilities. Since the law generally recognizes that contracting parties enjoy an unfettered freedom of contract, the publishing agreement can take almost any form provided it is not unconscionable or illegal.