[Originally published in the magazine Romance Writers Report, February 2011.]

Congratulations!  You’ve interested a publisher in your book.

Condolences!  Now, you need to parse the language of your publishing contract.  If you’ve never reviewed a formal legal document before, you might quail at some of the formal phrasing.  You might question specific wording.  You might wonder whether some clauses apply to you now, or if they ever will in the future.

Publishing contracts can be overwhelming – even for trained lawyers who happen never to have represented authors before.  While it is impossible to highlight every potential danger in every clause in every contract, a few phrases have appeared often enough that they are definite red flags.  This article highlights three red flags for you to watch for as you evaluate the contract language proposed by your new publisher.

One brief disclaimer:  This article does not constitute specific legal advice for your situation. It does not create an attorney-client relationship or any other expectation of confidentiality, nor is it an offer of representation.

Warranties, Representations, and Indemnities

Typically, publishing contracts require authors to make certain warranties (representations that certain statements are true) with regard to the manuscript under consideration.  These warranties typically include the author stating that:

• The work is original to her,
• She has the right to publish the work,
• All factual statements and materials contained in the work are accurate and true, and
• The work does not libel any living person.

To add teeth to these warranties, contracts usually contain an indemnity clause (e.g., “Author shall indemnify and hold harmless Publisher against all claims, demands, suits, costs, legal fees, and expenses that Publisher may sustain by reason of a breach of her warranties.”)  The indemnity clause means that the author will pay the publisher for all costs arising out of litigation about the work, including lawyer fees, court costs, and any monetary damages awarded to the other side.

At first blush, warranties and representations seem straightforward.  If an author hasn’t plagiarized another writer, and if she has not libeled any living person by misstating facts, then the author should not have any substantial legal concern.

Alas, the matter becomes more complicated, because any author or publisher can be sued at any time by someone who believes that he has a valid claim, even if that claim ultimately turns out to be without legal merit.  Furthermore, a publisher can decide to settle litigation against itself, even when an author does not want to settle.  An author who has signed an indemnification agreement is bound to pay for the costs of that litigation, including the cost of settling the case, even if the case does not stand on solid legal ground.

Therefore, the wise author attempts to limit the scope of warranty, representation, and indemnification clauses.  Such limitation can take many forms, including:

• Deleting the entire clause,
• Limiting warranties to the author’s “best knowledge”,
• Limiting the author’s financial obligation to any final judgment (thereby avoiding paying for the defense of frivolous lawsuits or ill-advised settlements), and/or
• Limiting the author’s financial obligation to the amount of the advance, if any.

Right of First Refusal (Option Clause)

Another red flag found in most publishing contracts is the publisher’s right of first refusal.  This right typically takes the form of an option on the author’s next work:  “Author grants Publisher the exclusive right to publish her next book.  Author shall submit the completed manuscript of such work to Publisher, who shall have ninety days to notify Author of its desire to publish the work.”  Especially egregious option clauses state that if a publisher declines its right of first refusal, but an author does not sell that manuscript elsewhere, then the publisher gets an option on the author’s next book.

Option clauses allow publishers to build on an author’s successful career, harvesting corporate investment in the author, including marketing, publicity, and good will.  Nevertheless, there are many ways that authors can attempt to limit option clauses, including:

• Limiting the option to the next book containing the same characters or set in the same milieu as the current work,
• Limiting the option to the next book in the same genre or suitable for a specific imprint of the publisher,
• Reducing the “submission” from a completed manuscript to a plot summary, synopsis, or outline,
• Reducing the amount of time for the publisher to review the work, and/or
• Limiting the option to a single book, regardless of whether that book sells elsewhere.

New Threat:  Non-Compete Clause

In addition, many publishers insist on another clause to restrict authors from selling elsewhere:  the non-compete clause.  A typical non-compete clause states:  “Author shall not produce any work similar to the Work that may, in the Publisher’s exclusive judgment, be competitive with or harm the sales of the Work for three years after the publication of the Work.”

Broadly-worded non-compete clauses represent a huge threat to authors.  Many authors need to produce and sell multiple works in a year (often in the same or similar genres), in order to earn enough money to support themselves.  Publishers, exercising their “exclusive judgment” may conclude that any work, regardless of genre or target market, competes with the contracted work.

Some authors have been unsuccessful in eliminating non-compete clauses.  Recently, several prominent authors have left their long-time publishers over this matter.  See, e.g., Carrie Vaughan’s blog post about leaving Grand Central, which had published several volumes of her successful werewolf urban fantasy: http://www.genreality.net/breaking-up-is-hard-to-do-choosing-to-leave-a-publisher

Other authors, though, have successfully limited non-compete clauses, modifying the language to:

• Limit the definition of “any work” to works in a specific sub-genre or genre,
• Limit the definition of  “any work” to works intended for a specific readership (e.g., “any work intended for a young adult audience”),
• Limit the duration of the non-competition period (including tying that period to events under the author’s control – such as “six months from the submission of the final manuscript of the Work” – rather than events beyond the author’s control – such as “upon publication of the Work”) and/or
• Limit the clause to works published as by a specific name or pseudonym.

Seeing Red:  Now What?

Recognizing red flags in publishing contracts is the first step to eliminating those dangerous limitations.  Some publishers will negotiate many clauses in their legal forms.  Other publishers stand firm, refusing to make any modifications.  Ultimately, only an author can decide if a specific publishing deal is right for her – especially when red flags continue to wave.