What Happens if the Publisher Doesn't Pay?

A publishing contract often contains stiff penalties for author nonperformance, but authors should also make sure that the contract has consequences for publisher nonperformance, too - especially where royalty payments are concerned.

In addition to termination rights when the work goes out of print, authors should try to seek termination rights (and rights reversion!) if publishers fail to pay royalties when due. Like all termination clauses, these can be tricky to read, and it’s important the author know what to look for in the language.

1. Termination Timing. The contract should specify how long the author must wait before terminating for non-payment of overdue royalties. (Note: this is different than the publisher's failure to pay if the book doesn't sell. No sales means no royalties are due.) Sometimes the contract will state how much the publisher must owe the author before termination becomes an option (for example, allowing termination only if the publisher fails to pay $250.00 or more in royalties owed). A contract which gives the author ambiguous termination rights also gives the publisher ambiguous rights to keep the contract in force. As always, clarity is key.

2. Rights Reversion. Contract termination is meaningless if the author's rights to the work don't revert immediately and automatically upon termination. Remember: rights reversion should be automatic - not dependent upon the publisher sending a statement of rights reversion.

3. Mandatory Notice. When the contract gives the author specific termination rights for failure to pay royalties due, it’s fair for the publisher to have the right to notice and an opportunity to cure the default. This means the author usually needs to send a written demand describing the publisher’s breach (in this case, non-payment) and the publisher then has a stated period of time to correct the problem (here, by payment of royalties due) before the author can terminate the contract. Read the notice provisions carefully and ensure you understand how to comply if the need arises. If you can’t understand the procedure, or find it unreasonably difficult, you need to revise the provision before you sign.

4. “Grace Period” aka “opportunity to cure.” This is normal and reasonable. Just make certain the cure time is clearly stated (usually 10-45 days) and that you are willing to agree to the length of time the contract describes.

5. Don’t panic. Not all contracts have specific clauses describing the author's termination rights if the publisher fails to pay royalties on time. This doesn’t mean the author has no rights. Any time a party to a contract fails to perform as the contract requires, the other party has rights and remedies. (Though they're easier to enforce when clearly stated.) 

 If the publisher doesn’t pay your royalties, you still have rights and also the ability to demand the money owed to you. However, if the contract doesn't state your rights specifically, you may need legal assistance to help interpret your remedies and options.

As always, if you have questions about this or any other publishing law issues, please feel free to ask in the comments or find me on Twitter, @SusanSpann.

Posted by Susan Spann

Susan Spann is a California publishing attorney and the author of Claws of the Cat (Minotaur Books, July 16, 2013), the first novel in the Shinobi Mystery series featuring ninja detective Hiro Hattori.