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Disputes among principals and sales reps are inevitable. Some lead to lawsuits, mediations or arbitrations.

Contrary to popular belief, winning your case does not usually depend on hiring the most aggressive lawyer. Winning your case starts much earlier, when you negotiated your contract and when you and the principal were performing it. Like succeeding in sales, winning your case starts with preparing to win it.

One general principle that has been reaffirmed over my 40 years of litigation practice is that the reasonable party usually wins. You want to be perceived as the reasonable party. That is the person with whom jurors, as well as judges, arbitrators, and mediators, identify. You want them to believe that you were as reasonable as they would have been if they found themselves in your circumstances.

Contract Terms and Negotiations

You’ve heard it before: It all starts, and often ends, with the contract. The contract will be Exhibit A to your case if you get into a dispute. Make sure that the contract says what you understand the deal to be. Pay special attention to the termination clause, as it is vital to your rights when things go wrong. If you are not using a lawyer, ask someone you trust to read proposed contract terms that you’re not sure of and see if they share your understanding.

Don’t leave in terms that do not comport with what you understand to be your deal, even if the principal assures you that they are “just boilerplate,” or “standard.” That is not what you will hear from the principal if a dispute arises. Add terms that you understood if they are omitted from the principal’s proposed contract. It is completely reasonable for you to insist that the language reflect what you were told the deal is. It may not be regarded as reasonable for you to sign a contract that you know does not say what you understand the deal to be.

Reasonable people save all of their negotiation communications — drafts, edits, statements of your intentions, any “take it or leave it” demands, texts, app messages, emails, everything. Don’t worry about whether they are privileged or not — your lawyer will figure that out if you get into a fight. Just save it. It’s probably all digital, so just organize it into a folder of negotiations with the principal. Date your documents as well as you can — chronological development of the deal terms can be important. And of course, save your signed contract — don’t depend on the principal to do that. You will want to refer to your contract periodically as situations arise that may call for exceptions, to make sure that you are responding reasonably.

Be Reasonable, But Don’t Be a Patsy

In the sales rep context, being reasonable most often means being willing to compromise and adapt when it makes sense to do so. It also means being reasonable, civil, respectful and even gracious about it. But always make clear that you are agreeing to something that you are not required to agree to under your contract. For example, “Sure, I’ll share the pain with the principal to match this competitive offer, even though my contract doesn’t require it”; “Sure, I’ll split the commissions because these circumstances warrant, even though the agreement doesn’t really require that split”; or “Sure, I’ll take a modest discount on the commissions I’m owed to help the principal discount to get this massive blanket order.”

All such communications will be exhibits in your case, so don’t write them in haste or anger — draft them, then read them over the next day before sending and make sure they have a reasonable tone. Make sure your communications are truthful and accurate. Even innocent inaccuracies can undermine the perception that you are the reasonable person. If you find that you made a mistake in something you said, own up to it and correct it. That can improve your position as the reasonable person, whereas digging in and refusing to accept responsibility can have the opposite effect.

And here’s the rub: Not being a patsy is just as important as being reasonable. As shown in the hypothetical examples above, whenever you can do so in a gracious and not grudging way — confirm in an email or text that you are glad to cooperate with the principal to achieve the common goal even though your contract does not require it. The latter point will be helpful to dissuade the principal from being able to say later that you waived a right to compensation in other similar (or sometimes dissimilar) circumstances. It will also help the jurors and judges regard you as the more reasonable party.

When you say “no,” again, be respectful, civil and reasonable about it. Explain in plain terms that your contract does not require what the principal is asking and that you do not see a reason in this instance to make the exception that the principal requested. Be open to further explanation from the principal about any specific reasons that this exception is really different and not just an effort to push a change in your contract terms on you.

On that point, make sure that the exceptions you make are really exceptions. There should be something specific that you can identify that is unusual about the circumstances and warrant the exception. If the exceptions start to multiply so that they subsume the rule, stop agreeing to them — they’re no longer exceptions and can be taken by the principal as an implied modification or waiver of your contract. Stop that before it happens.

Realistically, we know that the balance of power is almost always weighted toward the principal’s side and the rep often feels like they must just accept whatever changes the principal is making (often without even requesting, but just making unilateral changes). It is not correct that the reasonable rep must accept that. The rep always has the ability to protest and complain, and absolutely should do that in a prompt, polite and firm manner.

One of the worst mistakes a rep can make is to stay silent when the principal makes unwarranted changes to the rep’s deal. The reasonable rep should politely but firmly say, “No, that’s not right, that’s not our agreement.” Say it in emails or texts, repeatedly if need be. Even if the principal continues to do what it wants and disregards the rep’s protests, the rep will have staked out their ground and that’s very important to preserve that contract right for the future.

Reps are always uncertain when they should terminate, and that is inevitably a difficult business judgment for the rep. But the essential first step to determine whether you terminate or not is to protest the principal’s violations of your contract. Then, even if you don’t terminate, you have a reasonable chance to assert claims for damages for the breaches of contract. If you didn’t complain, you will have an uphill fight when the principal says that you agreed to the modifications. You may even find the principal complimenting you on being so reasonable as to accept those changes that the principal imposed unilaterally.

Terminate Reasonably

When a situation has gotten intolerable and termination is inevitable, consider well whether you want to be the one to terminate or if it would be better to be terminated by the principal. If you did not involve a lawyer previously, this is a circumstance in which you would be well advised to first consult a lawyer familiar with sales rep matters, because timing and method of termination can have a huge impact on your available remedies.

Remember that reps generally do not have to terminate your contract in order to claim damages for breach of the agreement. If you have laid the foundation with complaints as described above, you may be able to sue or make a claim in arbitration without terminating your agreement. Naturally, the principal may respond by terminating, but that risk is part of the strategy of your decision making that you should discuss with your lawyer.

If you are going to pull the trigger, pay attention and abide by the contract’s notice requirements for termination — the timing and method can make a huge difference in your available damages and therefore the value of your claim. Remember that your termination notice will be Exhibit B to your case.

If you are terminating because the principal breached its agreement with you, then say so in your termination notice. Don’t try to be a lawyer — you should not need to use legal terms and usually will not benefit from trying to do so. Instead, say in plain language what you have been saying previously about the things the principal has been doing or not doing that are inconsistent with your contract. Don’t soft-pedal to spare feelings, but don’t use the termination notice to express hostility to the principal. Just be straightforward and unemotional in identifying your reasons. Avoid accusatory language implying malicious motivations if possible — leave accusations of fraud and malice to your lawyer.

If you are drafting the termination notice on your own, it is especially important to set aside your draft for at least a day, then review it coolly and unemotionally from the perspective of a reasonable person. That is the standard the jurors, judge or arbitrator will use in reviewing your words. They are all of the belief that they are reasonable people. If you want to win you should do what they think they would have done in your circumstance.

MANA welcomes your comments on this article. Write to us at [email protected].