(A version of this post was first published in 2016.)
I’m often contacted by writers who are looking for an evaluation of a book or magazine contract they’ve just been offered (I’m not a lawyer–something I always mention upfront–but I do know a lot about publishing contracts, and am always willing to offer feedback).
Although they’ve often already spotted problematic language, nearly always there are also problem clauses that they’ve missed. One red flag clause that frequently flies below writers’ radar: fees for early contract termination.
A few examples of early termination clauses, taken from contracts I’ve recently seen, arranged in order of escalating expense:
The Author may petition the Publisher to terminate the Publishing Agreement at any time during the term of the Publishing Agreement, but it will cost the Author $350 fee for editing services and $100 fee for cover art services, formatting time and publishing costs, making the total fee Four Hundred Fifty dollars ($450.00).
The Author may terminate this agreement before the end of the term by means of a contract buyout….The Author will pay to the Publisher the sum of $500.00 (five hundred dollars) to exercise this contract buyout option. This fee must be paid to the Publisher by the Author at notification of intent to exercise the buyout option. (The Author will be responsible for full payment of damages and customary legal fees as a result of legal action stemming from failure to pay this buyout clause.).
If Author wishes to terminate this Agreement prior to the end of the initial seven-year term, Author may do so by paying Publisher the sum of $3,000 as a flat fee. Upon receipt of such payment, rights shall revert to Author in the manner described in Paragraph 2.c. above.
The Author can terminate this contract at any time by reimbursing the Publisher for all title-related costs, and for the editorial costs, as outlined by the Editorial Freelancers Association’s (ESA) common editorial rates on a per-page basis.
Why are termination fees a red flag?
Obviously, they are onerous for authors, who might have good reason to want to escape a contract early, and can’t do so without opening up their wallets.
More problematically, publishers can and do employ termination fees abusively. They may hold them over the heads of unhappy writers to shut them up, attempt to use them as an extra income source by offering to jettison dissatisfied authors at the slightest provocation (for example, now-defunct publisher Curiosity Quills offered an annual “escape clause” period where writers could request an invoice), impose them even in situations where, per their own contract language, they shouldn’t apply (as happened to this author as part of a dispute over publisher breach), terminate the contracts of writers who’ve pissed them off and demand the fee even though termination wasn’t the writer’s decision, or, in more than one case I’ve heard about, close the publisher down and refuse to return rights unless the writers paid to get them back.
The fourth termination fee example above is especially problematic in this regard–not only because the vague wording makes it impossible for the writer to estimate how much they might be charged, but because charging “all title-related costs” back to the author ignores the fact that, for a book that has been published, the publisher will already have recouped a portion of those costs from sales. In such a case, the termination fee not only makes the publisher whole, but yields a profit–potentially incentivizing the publisher to invoke it.
But termination fees aren’t just bad for authors. They can be bad for publishers, too.
From a publisher’s perspective, a termination fee may seem to make good business sense. “We don’t want to hold onto an unhappy author,” the publisher might reason. “But we invest a lot of work in editing, designing, marketing, etc. So if we can’t maximize our investment by selling the author’s book for the full contract term, it’s only fair that we should get some reimbursement if they decide to leave early.”
Even if the publisher is fair in its calculation of the fee, though, and resists the temptation to use it for punitive or mercenary purposes, there are still potential problems. If the unhappy author can’t afford the fee, the publisher is stuck with them anyway–along with, possibly, the extra resentment produced by the author’s knowledge that they could have escaped if only they’d had the cash. (I’ve gotten many, many complaints from writers in exactly this situation.) Alternatively, if the author can afford the fee, they may see it as an easy exit, and jump ship without giving the publisher the chance to address whatever problems the author has identified–thus losing the publisher a book it might have retained if it had been able to work things out.
For publishers willing to let their unhappy authors go, it’s far easier–and far more author-friendly–simply to allow authors to terminate the contract at will, without the potential complications and bad feelings of a termination fee. To protect its investment, the publisher can require a waiting period, such as one or two years, before the termination option can be invoked.
Even better, for publishers that are willing to try and resolve any problems that may arise: don’t include an early termination provision at all. Impose a reasonable contract term, and stick to it. This allows the publisher the best chance of recovering its investment in a book (and hopefully making a profit), while ensuring that the author can eventually regain their rights without opening up their wallet. (Though authors take note: if the contract is life-of-copyright and not limited-term, you should always be able to revert your rights once sales fall below a stated minimum).
If the contract you’ve just been offered includes an early termination fee, don’t assume it will never apply to you. As the above examples indicate, there are many circumstances where it may eventually bite you, even if you yourself never invoke it. (And that’s not even to mention the issue of unscrupulous publishers who attempt to impose termination fees extra-contractually–something about which I’ve gotten a fair number of complaints over the years.)
For some perspective on evaluating publishing contracts, especially if they include author-unfriendly language, see this blog post: Evaluating Publishing Contracts: Six Ways You May Be Sabotaging Yourself.