Are Your Invoices Legally Sufficient?

July 1999
by Ivan Hoffman, B.A., J.D.

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Ivan HoffmanIvan Hoffman (photo right) is a publishing, copyright, Internet law, recording, and music attorney as well as a published writer and author. He practices in the Los Angeles area. You may reach him at ivan@ivanhoffman.com or 818/342-1762.


Many publishers routinely issue invoices to purchasers such as bookstores, wholesalers and the like but fail to recognize the importance of such invoices and the terms and conditions under which they are issued. The invoice is a contract, and in the appropriate circumstances, it can become either very helpful or quite harmful to the publisher who fails to get paid or otherwise suffers a loss.Have you examined your invoices to see into which category they fall?

These are some of the additional provisions that should be included in those invoices, along with the normal provisions that you probably already have.

1. Risk of Loss

This provision deals with which party has the responsibility in the event that the books are lost, either during shipment or while in the possession of the bookstore, wholesaler or other party. It is not enough to provide which party is responsible for paying the costs of shipment from, or in the event of returns, to the publisher. The risk of loss provision covers more issues than that. If the invoice does not specify who is responsible and the books are lost or destroyed, there will likely be some costly and expensive litigation that could very likely have easily been eliminated had the appropriate provisions been included. The party that has this responsibility should have adequate insurance to cover such contingencies.

2. Returns Policy

Oftentimes books are actually not “sold” but are consigned, and in such an event, the bookstore, wholesaler or other party may return the books pretty much in any condition, at least while the book remains in print. However, terms can be worked out (see number 3 below) whereby the books are sold on a “no return” basis in exchange for a larger discount. This may also apply in the event books are sold as a premium to a specialty account.

3. Discounts or Free Goods

The “standard” discount may often vary if the bookstore, wholesaler or other party buys a certain quantity or agrees that the books are sold on a “no-return” basis. Additionally, sometimes books are sold at a certain invoice price but a number of “free” books are provided as an incentive. These “free books” should be set out in the invoice separately since the publisher may account for these books differently to the author or other royalty participant.

4. Cost of Shipping

The term “FOB” means “free on board” and refers to which party in a commercial transaction pays shipping. If the goods are shipped by the publisher and are shipped “FOB shipper” (publisher), it means that the bookstore, wholesaler or other party pays the shipping costs. If the books are shipped “FOB destination” (bookstore, wholesaler or other party), it means that the shipper/publisher pays the cost of shipping.

5. Retention of Title until Fully Paid

This is an extremely important point and is most often not included in invoices. In the event that the bookstore, wholesaler or other party goes bankrupt or transfers or assigns its assets either voluntarily or involuntarily, the ownership of the books becomes a key question. If the books are sold on a “return” or “consignment” basis, the publisher wants to have an express provision stating that the title to the books remains with the publisher until the books are fully paid for. Without this provision, a trustee in bankruptcy or someone purchasing the inventory of a bookstore, wholesaler or other party might claim title to these books even if those books have not been paid for. The likely result is that there can be yet another expensive litigation to get the books back, a litigation that again could have probably been easily avoided by paying attention to the terms of the invoice.

6. Attorneys Fees and Costs in the Event of Collection

Under the law of most states, unless there is a provision providing for the prevailing party to get their attorneys fees and court costs, the general law is that each party is responsible for their own such fees and costs. Therefore, since it is almost always the situation where the publisher is going to sue the bookstore, wholesaler or other party, it seems it is in the best interest of the publisher to include such a provision. This provision should be carefully drafted to make certain that it includes attorneys fees and costs even if no litigation is filed.

7. Choice of Law Clause

Since the transaction will likely involve at least two states, and since this invoice is drafted to protect the publisher, it should state that the law of the publisher’s state should control and include as well a statement that the other party expressly consents to the personal jurisdiction of that state.

Conclusion

Of course, there are other provisions that should be included in any well-crafted invoice and this article is not intended to be exhaustive of such provisions. It is important, however, that the publisher pay careful attention to this seemingly otherwise routine document for in the rare instance that it becomes an important document, it can spell the difference between winning and losing, collecting or failing to collect the amounts due. With a proper and adequate legal document, there is a good chance that it can save time and money that might otherwise go toward lawyer’s fees and court costs in an expensive litigation in which the parties never actually come out ahead.

Additionally, if the document is not carefully crafted, even if the publisher is owed money, the publisher may find it expedient to “write it off” when, with a solid document, that same publisher might have been able to collect the amounts due.The invoice should be drafted or reviewed by an attorney. This is one of the best examples of the wise publisher knowing the difference between value and mere cost. Knowing how and when to spend money can make the difference between winning and losing.

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