An Author’s Guide to Agency Agreements

Reprinted from the Fall 2017/ Winter 2018 Authors Guild Bulletin

Agreements between authors and agents can be tricky things. Sometimes there’s a written contract setting out the terms of the relationship, sometimes there isn’t. And even when there is a contract, the language it uses can seem alien to non-lawyers. But, since this is one of the most crucial professional relationships in an author’s life, it’s vital that you understand it clearly. To help you navigate the mysteries of the agency agreement, we’ve compiled a guide of key points for you to keep in mind.

I. Literary Agent Representation — the Relationship

Before addressing the major issues to be considered in an author-agent contract, let’s explore what authors need to know about the relationship between author and agent.

The Agent Owes a “Fiduciary Duty” to the Author
A literary agent or agency has a “fiduciary” relationship with its author clients; this means that you are placing a greater level of trust in your agent than you do in other commercial dealings, such as your relationship with your publisher. Because of this heightened level of trust, an agency has a fiduciary obligation to its clients, and must therefore always put the author’s interests above its own and avoid any conflict of interest with its clients. If you find that your agent is not acting in this way, you may want to seek another agent (as well as note down any ways in which the agent has not met its fiduciary obligations to you, in case you want to pursue legal remedies in the future).

Agency Agreement vs. Agency Clause — Pros and Cons
A number of literary agencies do not provide their clients with written agency agreements, but instead rely solely upon the agency clauses that will be inserted into the publishing and motion picture agreements. It’s best, though, to have a written agency agreement in place to prevent any misunderstandings as to the terms of the arrangement, and to define the terms in the event of termination.

Recommendations
If the agency does not provide the author with a written agency agreement, it is best to ask for one to make sure all terms are understood and agreed upon. If the agency does not provide a contract and insists on relying on an agency clause, then before retaining the agency the author should ask to review and approve the clause used by that agency in the contracts it negotiates. It is best to do this by e-mail so that you have a written record and to acknowledge that you agree to the terms, so that there is a legally binding agreement.

The Agency Clause
An agency clause (such as is often added to publishing and other licensing agreements) may also set out the terms of the relationship between the author and the agent. Such clauses usually:

1. Provide that all sums payable to the author shall be paid to and in the name of the agency.
2. Stipulate the percentage commission that the agency is entitled to deduct from amounts payable to the author (these are generally standard and non-negotiable — see below); and
3. Provide that the agency is entitled to act on the author’s behalf in all matters arising out of the publishing or other applicable agreement.

Many agency clauses (and agreements) state that there is “an agency coupled with an interest”. This phrase should be deleted, since if the agency relationship is truly an “agency coupled with an interest”, the relationship would then be irrevocable. In fact, almost every agency clause is revocable by the author, and courts and legal commentators agree that merely inserting language in an agency agreement or clause stating that it is “an agency coupled with an interest” doesn’t create an unbreakable relationship unless the agent actually has an interest in the author’s work apart from the mere right to receive commissions.

Recommendations
Authors should carefully review the agency clause, as well as any agent representation agreements, to confirm that the scope of the agency clause or agreement does not exceed the rights the author intends to grant to the agent. If an agency clause is to be used instead of a representation agreement, the author should (i) review a sample clause provided by the agency and get a representation in writing (e-mail is fine) that the sample provided is the one that will be used in future agreements, and (ii) confirm agreement to the agency clause in writing (again, e-mail works) to create a binding agreement.

Beware of Reading Fees
The Association of Authors’ Representatives (the leading trade association for literary agents), includes in its Canon of Ethics a prohibition against members charging fees to potential or existing clients to read and evaluate their writings. If an agent charges “reading fees,” the author should seriously consider finding an agent who does not, since such fees are not customarily charged by leading literary agents.

II. Agency Agreements — Principal Provisions

Now that you have, we hope, a clearer understanding of how the agency relationship works, let’s move on to the contracts themselves. Here are some major points to consider when you’re asked to sign an agreement with a literary agent or agency:

What Works Are Covered
An agent may wish to represent only a client’s new work, all of the client’s work, or just every work the client writes during a stated period of time. (To be clear, the agent’s rights to represent the work are usually granted in perpetuity, or until the relationship is terminated under the terms of the contract or by the mutual agreement of the agent and the author.)

Recommendations
The agreement usually covers only one work (except where multi-book deals are involved) and that work should be defined as specifically as possible — at least by its subject matter and, if possible, by its tentative title.

Rights Granted During the Term of the Agreement
An agency agreement gives an agent the right to sell the work to a publisher for a specific number of months, or even years. Normally, the agent is appointed the author’s exclusive worldwide agent to sell, license or otherwise negotiate the transfer of rights in the work covered by the agreement, for the term set out in the agreement; this means that the agent alone is entitled to act on the author’s behalf in negotiating the exploitation of the work(s) covered by the agreement. The agent should also have the right to appoint sub-agents to handle the transfer rights that the primary agent may not be equipped to handle — such as outside the U.S. and Canada or in foreign languages, as well as other non-publishing rights, such as motion picture, television and theatrical rights.

Recommendations

1. Termination: As a general matter, an author should have the right to terminate the agency agreement if the agent doesn’t make a book publishing deal within the agreed upon number of months. Even if the agent agrees to such a right to terminate, however, the agency is normally entitled to receive commissions on deals the agency procured prior to the author’s termination of the relationship. Therefore, the agent should still be entitled to receive commissions if, within 90 days (or sometimes up to 180 days) after termination, the author enters into a publishing agreement with a house with which the agency negotiated the basic terms of a deal prior to termination. Some agencies will insist that they are entitled to receive commissions if they submitted the author’s work to the ultimate publisher, even if they did not negotiate the basic terms of the publishing agreement. The author should resist agreeing to compensate the agency in these circumstances. Remember, if another agent is subsequently retained and actually negotiates the deal, that agency is usually entitled to receive its own commissions. A fair compromise where the original agent submitted the work is to give that agent an additional period (of up to six months from the date of termination) in which to substantially negotiate a deal for that manuscript. As an alternative, the agency agreement should give the author the right to demand a list of places where the agency has submitted the author’s manuscript; if an agency insists on receiving commissions in perpetuity from deals that were negotiated but not concluded during the agency term, then the author should at least receive a list of those publishers to whom the agency submitted the work.
2. The scope of representation stated above (including the right to appoint sub-agents to transfer rights outside the U.S. and Canada in the English language, in foreign languages and other non-publishing rights such as motion picture, television and theatrical rights) is usually acceptable in the industry, except in the rare occasion where the author has a pre-existing relationship with a motion picture agent.
3. The agreement should require that the agency keep the author regularly advised as to all negotiations on the author’s behalf.
4. The agency should be expressly prohibited from signing any deal, memo, publishing agreement or subsidiary rights agreement on the author’s behalf. The client author is the only party who should sign such agreements granting rights to the author’s work. When an agent signs a deal on behalf of the author, misunderstandings can occur and rights can be granted without the author’s knowledge or approval. It is a recipe for the agency relationship to go sour.

Agent Commissions
The following rates are considered to be standard in the industry:

1. Commissions on domestic book publishing and performance rights (motion picture, television and live stage rights) agreements are generally 15 percent of the gross amounts payable to the author.
2. Commissions on foreign rights agreements are generally 20 percent of the gross amounts payable to the author on foreign rights deals (although some agents charge a higher commission on sales in certain foreign countries where the amounts received are generally very small for the efforts involved). These commissions are generally standard and non-negotiable, although it is best to seek to ensure that the 20 percent royalty rate (as opposed to 15 percent) only applies on foreign sales if a sub-agent is used.

Payments to The Author by The Agent
Most agency agreements provide that all advances and royalties payable to the author under any publishing or other agreement for exploitation of rights in the author’s applicable work will be paid to and in the name of the agency, which will deduct its commissions (and any expenses covered elsewhere in the agency agreement) and then remit the balance to the author.

Recommendations

1. The agency should be required to remit monies due to the author within ten days (or within a mutually agreed upon fixed period of time) after receipt by the agent.
2. The agency should be required to hold all monies received on behalf of the author in the agency’s client trust account rather than in the agency’s general account. (This is the practice of most reputable agents in any event.)
3. If the agreement (or agency clause) provides that the agency’s commissions are payable “as an agency coupled with an interest,” this phrase should be deleted (for the reasons set forth above).
4. The agency should provide the author with copies of all fully executed license agreements and royalty statements it receives for the work.
5. The agency should agree to give the author a semi-annual or annual accounting of monies it received on the author’s behalf.
6. The agreement should expressly provide that if the author terminates the agency agreement after the agency has made a sale, then the agency will sign an amendment to any [publishing or other] agreement [in which its agency clause was inserted] with respect to the work which would provide that:
   a. The agency is no longer authorized to act as the author’s agent with respect to the work covered by the applicable agreement (i.e., the agency will not negotiate any future amendments or new agreements regarding the work); and
   b. The agency’s share of commissions will be paid directly to the agency by the publisher and the balance shall be paid directly to the author or the author’s designee.
7. The agency should not be entitled to receive commissions on sales of rights in the work made after termination of the agency agreement by the author — unless the agency has been responsible for procuring such sale or such sale had been substantially negotiated by the agency prior to termination of the agency agreement.

Expenses
The agency may be expressly entitled to deduct from money owed to the author expenses such as those for postage, messengers, bank charges, photocopying a manuscript and sending copies of a manuscript to foreign publishers and /or sub-agents.

Recommendations
The author should be entitled to approve each expenditure in excess of $75.00 (or another mutually agreed upon amount) before it is deducted; or alternatively, the parties should establish a firm cap total of expenses after which additional expenses must be individually approved.

Warranties, Representations and Indemnities
Occasionally, agency agreements contain warranties, representations and indemnities from the author to the agency similar to those found in publishing agreements.

Recommendations
The author should seek to delete these provisions from the agreement. Although the author will have to assume such obligations in any book publishing agreement to protect the publisher against claims or lawsuits regarding the contents of the author’s literary work, the author’s agent is not exposed to such risks and therefore does not need such protections.

Assignability
The agreement may provide that it is assignable by the agency.

Recommendations
Because an agency agreement is a fiduciary one, the agreement should prohibit assignment by the agency of the agency agreement to another agency. However, there is usually no reason to object to the agency’s ability to assign its right to receive commissions.