One thing about publishing contracts that often trips up authors, and even occasionally agents, is the question of who the contracting parties actually are. I know that sounds like it should be an easy question. Three parties are usually involved in the negotiations: the publisher, the agent, and the author. So shouldn’t all three be parties to the contract?
Actually, no. Or at least, not usually.
Unlike the author/agent contract, the publishing contract is typically an agreement between the author and the publisher, even if the agent negotiates the terms on behalf of the author. That’s why it’s very important for your agent to share the terms with you before asking you to sign. It’s also why, ideally, the agent should be consulting you relatively closely while doing the actual negotiating. The agent is acting on your behalf to negotiate the contract for you.
That’s why, if you look at the signature page at the end of the contract, you’ll usually only see spaces for two signatures: yours and the publisher’s. The agent doesn’t sign the contract because the agent isn’t a party to the contract.
There will usually be one or more clauses that identify the agent as acting on your behalf, often in relation to where notices and payments should be sent. That clause is often called a “notice clause” and may even be labeled “notices” or “notices and disbursements”, or something similar. It typically identifies the agent as your chosen representative for all official communications about the contract and for payments of royalties (whether by check, wire transfer or some other method).
However, the fact that the agent is identified as your representative for these purposes does not make the agent a party to the contract. The agent is what, in legal terms, is called a “third party beneficiary”. In layperson’s terms, this means the agent is a “third party” to the contract (rather than a contracting party), but is identified as someone who is intended to receive a benefit from the contract. The benefit is payment of the agent’s commission out of your royalties. Basically, both the publisher and author are acknowledging, in the publishing contract, that they intend the agent to take a commission out of the royalties. A third party beneficiary has a legally recognized financial interest in the contract without being a party to the contract.
Sometimes a publisher will set up “split payments” between the author and agent. This means that instead of the publisher paying the entire royalties to the agent—and the agent subtracting its commission and forwarding the balance to the author—the publisher will do the split itself and send the payments separately to the author and the agent.
In a split payment situation, if the author is receiving, say, an $1,000 royalty payment for the relevant accounting period, and the agent is taking, say, a 15% commission, the publisher would send $850 direct to the author and $150 direct to the agent. In a regular payment situation, the publisher would just send the $1,000 direct to the agent who would then forward $850 to the author and keep the agency’s $150 commission.
Split payments aren’t all that common, but they do sometimes arise either where the author has terminated the relationship with the agent and prefers to receive payment direct from the publisher or where the publisher and author are in a different jurisdiction to the agent. If, for example, the publisher and author are in Canada, and the agent is in the United States, split payment may be appropriate. If the publisher didn’t offer split payments in this situation, the author would potentially lose money in two sets of currency exchange transactions: the first when the publisher pays the agent from Canada to the United States; and, the second, when the agent pays the author (minus commission) from the United States back to Canada.
Whatever payment arrangement is in place, it doesn’t change the fact that the agent is typically not a party to the publishing contract, but is only intended to receive a legal and financial benefit from it.
When you think it through, this all makes logical sense, but given how much time the agent spends working on the contract with the publisher, and the fact that the agent receives payment (commission) from royalties paid under that contract, it is easy to mistakenly think that the agent is a contracting party.
And of course my usual disclaimer applies: nothing in this column is intended as formal legal advice, but hopefully it is helpful by way of background information.