Publishing Law

Of all the provisions in a book contract, the satisfaction clause is the most controversial. Under the satisfaction clause, a publisher may refuse to publish an author's work and demand reimbursement for any advance payments if the publisher is not satisfied with the final product.

Publishers insist on including a satisfaction clause in book contracts to protect their own interests. A publishing company typically uses the clause when it has signed a deal with an author for a book that has not been completed. Such speculative deals are common in the world of book publishing. Many authors do not write books unless they receive an advance payment, and few publishers receive completed books that need no additional work from the author.

If a publisher is interested in a book or an idea for a book, it may seek an agreement with the author to gain the copyrights to the final product. The agreement may include an advance payment for the expected final product. When the publisher makes an advance payment, it must have a way out of the contract if the author submits a final product that is unsatisfactory. Without a satisfaction clause, authors would have less incentive to submit quality work, and publishers could be faced with manuscripts requiring an unreasonable amount of editing and rewriting.

For authors, the satisfaction clause is a potential trap. Some authors have argued that a publisher may use the clause as camouflage to reject a book for an invalid reason. For example, a publisher might reject a manuscript and claim it was unsatisfactory when the real reason for the publisher's rejection was that another publisher had beaten it to press with a book on the same subject. Such a rejection would be a bad faith rejection and would give the author a CAUSE OF ACTION against the publisher. However, bad faith is notoriously difficult to prove in court.

For decades, courts refused to examine the motives of publishers when they invoked the satisfaction clause to terminate a book contract. The first sign of a more stringent standard of review came in 1979 in Random House v. Gold, 464 F. Supp. 1306 (S.D.N.Y. 1979). In Gold, Random House rejected author Herbert Gold's novel Swiftie the Magician after learning that Gold's first two books had fallen short of commercial expectations. Gold had agreed to write four books for Random House in exchange for advance payments against ROYALTIES.

When Random House offered to renegotiate Gold's contract, Gold sold Swiftie the Magician to McGraw-Hill. Random House sued and won back the advance payments to Swiftie the Magician, but in its opinion the court observed that broad discretion for publishers in their predictions of commercial success "may permit overreaching by publishers attempting to extricate themselves from bad deals."

The case of Harcourt Brace Jovanovich v. Goldwater, 532 F. Supp. 619 (S.D.N.Y. 1982), created a new approach to author-publisher contracts. In Goldwater, author Stephen Shadegg and politician BARRY M. GOLDWATER contracted with Harcourt Brace Jovanovich to publish Goldwater's memoirs. In return for the book rights, Harcourt paid to Shadegg and Goldwater a $65,000 advance. Harcourt rejected the final manuscript nineteen months after the agreement was reached without giving the authors an opportunity to make revisions and without giving them editorial assistance. Harcourt demanded a return of the advance. Shadegg and Goldwater refused, and Harcourt sued.

The court acknowledged that the law must afford a publisher "very considerable discretion," but it also noted that a publisher does not have an "absolutely unfettered license to act or not to act in any way it wishes and to accept or reject a book for any reason whatever." The Gold court had said nearly as much, but the Goldwater court made new law when it declared that "there is an implied obligation in a contract of this kind for the publisher to engage in appropriate editorial work with the author." Goldwater therefore created a publisher's duty to provide editorial assistance to prevent its wanton use of the satisfaction clause. An additional duty, the duty to give an author the opportunity to make a revision, was established shortly thereafter in Dell Publishing v. Whedon, 577 F. Supp. 1459 (S.D.N.Y. 1984).

The satisfaction clause is likely to remain a standard provision in author-publisher contracts. Under the clause, authors will be held to their obligation to produce a satisfactory manuscript—that is, one the publisher can publish. Publishers, on the other hand, must be fair in their use of the clause against an author. Courts will no longer allow publishers to walk away from any author agreement just by reciting the word "unsatisfactory."