Hi. I’m looking at my first publishing contract. I’m a real greenie, here. It has these words:
“In all instances in which the Author shall have received an overpayment of monies under the terms hereof, the Publisher may deduct such overpayment from any further sums payable to the Author in respect to the Work.”
I don’t understand. Under what conditions would I be overpaid? And would I ever have to refund royalties to the publisher?
When a publisher sells to a bookstore, the bookstore then tries to sell the book. If they can’t, they can return the book to the publisher. The publisher may have already paid you royalties on that sale. If they have, they deduct it from what’s due in your next batch of royalties.
If the returned books are still in good condition, the publisher can resell them and you’ll get the royalty on that second sale. But if they’re beat up, they may have to be written off as a loss, or sold as “scratch & dent”—in which case, you probably would not get a royalty.
If more books are returned than are sold (hopefully that won’t happen to your book), some publishers may require you to return royalties. (Yes, I’ve seen it in some contracts.) I think that is a stinky policy and would refuse to sign a contract with that in it.
In your case, since it isn’t spelled out, I’d ask your publisher what would happen if returns overbalanced sales, and have them spell it out in the contract along the lines of, “in no case shall author have to return paid royalties”.
*Clarification: I think returning royalties that have already been paid is a stinky policy. The part about subtracting returns from future payments is fair. This situation is one of the reasons why many publishers only pay royalties twice a year.
4 thoughts on “Overpayment Refunds?”
Since you mention that you wouldn't sign a contract with a certain clause here, LDSP, I thought I'd go ahead and ask: what would be the deal-killers in a contract in your opinion? ROFR, ROFLR, etc.?
Wow. I'm so glad you post these things. I am learning a lot about what should and shouldn't be in contracts.
It is always best to have someone legal (attorney) who is versed in such things read over any contract you're offered, especially if your new and feel uncomfortable. But, this should be the case even if it is your tenth contract. That is just common sense.
This issue (the sell-through number vs the copies bought by the store) is why many contracts (like mine) have a return-reserve clause.
In my case, 10% of earned royalties are held back until the next check in hopes of covering any potential store returns and keeping the author from going into the red.
If returns are less than the return-reserve, I get the 10% repaid in the next check. It's a bit of a safeguard for both sides.
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