Contracts

What is the delivery clause?
What is the difference between licensing and assigning copyright?
What is the territories clause?
How much should the advance be?
How much should the royalties be?
What is the warranty/indemnity clause?
What is the termination/reversion of rights clause?
What if I get into a dispute with my publisher?

 

Authors and illustrators who have questions about publishing contracts should also consider consulting the ASA's contract templates or our books Australian Book Contracts and Between the Lines: a legal guide for authors and illustrators.

Disclaimer

This information is general in nature and will not necessarily apply to your individual contract or circumstances. It does not constitute, and should not be relied on as legal advice. We recommend you seek advice from a qualified lawyer on any legal issues affecting you. 

 


What is the delivery clause?

This clause sets out your deadline for delivering the finished manuscript to the publisher and the publisher’s deadline for publishing the work. Beware the delivery/publication clause that says your work has to be ‘satisfactory to the publisher’ or that fails to mention a publication deadline. In the first case your work may be rejected for no good reason; in the second the publisher could retain the rights indefinitely without publishing the book.

 

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What is the difference between licensing and assigning copyright?

An exclusive licence gives the publisher the exclusive right to publish the work, but you – the author – still own the copyright. If you ‘assign’ rather than ‘license’ the work to the publisher, you are transferring ownership of your copyright to the publisher. This means that copyright won’t revert to you once the book is ‘out of print’. It also means you may miss out on PLR/ELR payments and other income opportunities. Assignment might be reasonable if the price is right, but it rarely is. If you are considering assigning copyright, get advice first.

 

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What is the territories clause?

This clause defines the territories in which the book can be sold. This applies to eBooks as well as printed editions. The ASA recommends Australian/New Zealand rights only unless the publisher can exploit world rights. The publisher should be able to demonstrate considerable success in foreign markets before you give them world rights. Don’t be afraid to ask about other books they have sold overseas. A good compromise might be to grant world rights for two years only, after which rights revert to you for any territory where the publisher hasn’t secured publication for you.

 

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How much should the advance be?

The rule of thumb publishers use for an advance is half the estimated royalties on the first print run. For example, a $3000 advance on a book that will sell for around $30 suggests that the publisher expects to sell only about 2000 copies ($3000 divided by $3 royalty x 2). A $15,000 advance on the other hand ...

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How much should the royalties be?

For print books, the standard royalty is 10% of Recommended Retail Price (RRP), but established writers can negotiate higher rates. Authors of educational and romance books may have to accept slightly less. The ASA recommends rising royalties – 10% on sales up to 3500, 12.5% from 3500 to 5000 and 15% over 5000 copies. Beware royalties that are calculated on the publisher’s net receipts or price received: they will work out at 6% or even less of RRP. Also watch out for the withholding of royalties against returns. Some publishers try to withhold 50%.

If a book is being published both in print and electronically (e.g. as an eBook), the ASA recommends the author receives a minimum amount of 35–50% of Net Receipts on each eBook sold, or 10% of the RRP of the Primary Australian Print Edition, whichever is the greater. For digital-only agreements, the ASA recommends a royalty of 50-85% of the List Price where electronic editions (such as eBooks) are sold by the publisher. If the publisher makes electronic editions available for sale through an agency or distributor, the ASA recommends that the author is paid 50% of the amount received by the publisher, provided that the royalty is not less than 35% of Net Receipts.

 

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What is the warranty/indemnity clause?

Most publishers ask you to warrant that your work isn’t plagiarised, defamatory or obscene, and to indemnify the publisher – i.e. pay their costs – if you are incorrect. Authors can warrant that their work isn’t plagiarised, but authors can’t be expected to have complete knowledge of defamation or other legal matters. Because of this you should attempt to contain any indemnity to no more than what you earn from the work. Warranties relating to defamation should also be qualified with the words ‘to the best of the author’s knowledge’.

 

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What is the termination/reversion of rights clause?

Under most contracts the rights in the book revert to the author if either party breaks the contract, if the publisher goes broke, or if the work goes ‘out of print’ and is not re-printed within a given period. Definitions for ‘out of print’ should refer to a specific number of book sales in a set period, rather than just availability, since eBooks and POD make it easy to keep a book on the market. Once the rights have formally reverted to you, you’re free to enter into a contract with another publisher or self-publish the work. Occassionally, publishers try to assert their rights to Copyright Agency payments after the rights have reverted. The wording of the contract is crucial in situations like this.

 

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What if I get into a dispute with my publisher?

The ASA believes that the time to consider and hopefully resolve any potential disputes over a publishing arrangement is ahead of mutual signature of the formal agreement. But with the best of intentions on both author and publisher sides, disagreements and conflict do sometimes arise after a contract is signed, where it has not been possible to anticipate them or head them off during negotiations.

Unfortunately the ASA sometimes learns of disputes after they are well underway, when the author is anxious or upset and asks for advice on their rights. In these cases, our first response is to ask the author what their contract says on the means by which matters may be resolved.

Typically, book publishing agreements provide a number of means by which a dispute may be resolved and/or a contract may be ended, by either party. Breaches of one or other substantive clauses are usually the trigger. But if a breach is believed to have occurred it must also be proved.

For authors, some matters covered by a contract have their own, specific means of investigation and/or redress. Royalty accounting is one such area. It is almost universal for a publishing agreement to allow the author (or "proprietor") or their representative to examine the accounts of sales and payments for a title "upon written request". Such clauses also usually allow for reimbursement of the cost of the inspection, as well as correcting the accounting error, if an error is found.

The potential for problems nevertheless remains, especially if the publisher disagrees with the author’s interpretation. So, what then?

Mediation

Mediation may be one option. The ASA recommends this path be available to the author via a specific contract clause (see Australian Book Contracts, 4th Edition, 2009, p. 75, Clause 27 of the ASA's Model Publishing Agreement or Clause 22 of the ASA’s Model E-Publishing Agreement for a model clause). However, the ASA advises authors not to accept mediation as a compulsory first step in every dispute.

Mediation between the parties may or may not prove useful in the matters of, say, underpayment or of copyright infringement by the publisher. In which case, the next places of remedy may include arbitration or the courts, either of which are in theory available to the author but either of which may also prove very expensive to pursue.

Arbitration

What happens in the instance of arbitration? The ASA has seen evidence of the arbitration process in action, as well as the results of such a process. And the picture is not very comforting for authors. It is important that anyone considering legal arbitration of a publishing dispute over payments or copyright infringements (especially those that may happen offshore, subsequent to a sub-license being issued) should also be aware of the following (which has been provided by our legal advisers as guidance only):

Not commonly understood is the fact that arbitration is litigation; it is a process much like a court case. A typical order of proceedings is:

  • the initiating party states its case;
  • the respondent replies;
  • often, there is discovery and production of documents (such as publisher's records of sales/licenses/receipts; copies of sub-licenses; relevant correspondence (such as with prospective sub-licensees); copies of foreign publications);
  • the parties provide evidence in support of their case (usually, by affidavit);
  • there can be numerous interlocutory steps (meaning, arguments about discovery, pleadings, the timing of steps to be taken and the extent of directions given by the arbitrator);
  • the proceeding can be split into parts (with liability first, then quantum, and lastly interest and costs). Each part is, in effect, a separate proceeding; and
  • finally, as with any litigation, the successful party must (in yet another separate process) recover any award in its favour.

Arbitration may not be a cheap, quick or simple alternative to court proceedings. Arbitration can be as (or more) expensive and time consuming as a court case.

Recommendations

The ASA recommends that authors should not necessarily agree to submit to an arbitration of their disputes with publishers. Instead of a formal arbitration, authors may consider requesting that disputes are resolved by expert determination, especially where the matters to be determined relate to the amount or formula by which royalties are paid or the meaning of industry terms.

Expert determinations should be governed by rules which are set out in the publishing agreement. Once an expert is appointed to determine the matter and a timeframe agreed to, both parties must make written submissions and provide further information at the expert’s request. Both parties must agree to be bound by the expert’s determination, so there is no further recourse to litigation or any other form of dispute resolution. 

The ASA recommends that publishing agreements always include inspection of accounts/audit provisions, and that these provisions are invoked as a first step in cases of disputed royalty statements. Suggested wording for these provisions can be found in the above linked Model Publishing Agreements. 

Sub-licences and copyright:

Agreements should also include provisions that specify that "compliance with local legislation" is not itself sufficient for the purposes of attribution in foreign language editions. 

The ASA also recommends that agreements should include a requirement that the publisher disclose to the author any sub-licence or assignment to a third party within a reasonable timeframe. In relation to any sub-licencing or assignment arrangement, if the publisher intends to characterise as a "co-edition", the publishing agreement should stipulate that the author must be notified in writing, in advance, so that if the author objects to the characterisation, the matter can be referred to an expert for determination.

 

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