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MANA members, principals and representatives can access the Manual for the Creation of a Rep‑Principal Agreement on the MANA website (MANAonline.org). Much thought has gone into this document, and it is a useful tool. This document has been generated by a team of MANA member lawyers who have represented both manufacturers and representatives.
Likewise, a good number of principals have a standard representative contract generated at significant cost and through years of favorable experience with other sales representatives.
So, which one should be used as a starting point? The answer, I suggest, is neither and both.
Too often a principal will demand the use of its own template or a representative will plagiarize a prior contract in a shortcut effort to document and seal a relationship that has not appropriately developed to maturity. A problem with this is that the resulting agreement will not accurately document the true intent of the parties. Where there may be a “meeting of the minds” on a certain limited number of subjects (such as commission rate and territory), parties often fail to accurately transcribe their true meaning and intent (even on subjects where there is a consensus), and then fill in the blanks with the template of one party or the other. The result can be unintended consequences.
Finding the Right Fit
No contract is a good fit for every situation. This applies to the principal’s standard template as well as MANA’s model contract. Such templates should merely be tools and not absolutes. It is likely that neither template will be wholly acceptable to both parties and one size does not fit all. There should be more to the relationship over and above an agreement as to the commission rate and the territory, for example, and then forcing such limited agreements into the template of one or the other. Such is a mistake that I see often repeated with the relationship starting off as a pig in a poke for both parties. In such cases, neither party is doing its job properly.
Instead, the templates of the respective parties should serve as a checklist for the representatives and manufacturers alike and as an agenda for pre-commitment discussions geared towards promoting and developing a workable relationship. I’m advocating that the checklist should be generated by taking the paragraph titles of both templates and using those as topics for discussions, preferably face-to-face. Each party should listen to and comprehend the thoughts and concerns as to what is wanted regarding each subject on the checklist. Each party should express its own views and, if they vary from that of the other party, the parties should seek to find common ground through further discussion and/or compromise. Should one party mandate without reasonable explanation the use of its own template, that should serve as a red flag as to how that party envisions the relationship developing. Such fiat will likely breed discontent and tend to stifle enthusiasm, innovation, and future independently developed avenues towards the desired goal — sales. On the other hand, flexibility may be an indication of commitment towards the end goal as opposed to an anchoring devotion to a means.
“Beware the Jabberwock, My Son!” — “Jabberwocky” in Lewis Carroll’s Through the Looking-Glass, and What Alice Found There
Assuming the parties have afforded the relationship the opportunity of development through discussion and come to a workable understanding, the next objective is one of documenting the arrangement. This is where qualified legal counsel can be of use to wordsmith your agreement. Wordsmithing 101 was not a class taught at my law school. (I don’t know any law school where it is on the curriculum. Please understand that I’m not speaking of Legal Writing. Courses in Legal Writing too often produce jurists of composers and essayists adept at generating tomes of nonsensical Jabberwocky). Wordsmithing is the art of scribing with clarity your thoughts, intent and meaning. A qualified, experienced lawyer can be effectively used in documenting the results of your negotiation.
Nevertheless, no contract is perfect. For example, in my younger years I found myself employed as in-house counsel by a subsidiary of a large multinational principal. My client’s customer had accepted the standard terms and conditions of the multinational principal (applied to my client), which had been drafted by a plethora of highly paid Ivy League lawyers. One would have thought that, no matter what the facts or the issue, with the preferential, unwieldy terms and conditions favoring my client, the outcome would have been predisposed. Such was not the case. When things went wrong and a significant dispute arose, my client’s customer engaged an enterprising (but well-experienced), and innovative lawyer who came up with a theory that turned around the multinational’s partisan terms and conditions (found in the miscellaneous boilerplate provisions) back on my client to a degree that raised significant concern as to the eventual outcome. The interpretation promoted by my adversary was never the original intent of the drafters of the terms, but they were stuck with what was written. The result was that significant leverage was generated to motivate my client into a settlement far below the settlement value originally assigned.
There are other precedented examples. Expressions of an independent contractor relationship in a contract have not always been determined to be such. Judges have interpreted some representative contracts as agency agreements, distributorships, or even franchise agreements. How a commission is computed, when it has been earned and when it is payable as agreed upon in the negotiations of the parties is often not what is done in practice and/or is not accurately reflected in the resulting contract. Allocation of certain costs and expenses between the representative and principal are often mis-stated in the contract. Moreover, it’s often the case that even though the contract may have been accurately drafted initially, exceptions or amendments to such as practiced by the parties end up being not appropriately documented, and it follows that if it’s not in writing, it didn’t happen.
“I Meant What I Said and I Said What I Meant.” — Dr. Seuss, Horton Hatches the Egg
Absent ambiguous language, it’s a well-established legal principal that the court or arbitrator will be tasked with looking only at the “four corners” of a contract after the fact in order to determine the meaning attributed by the parties to their relationship, even though in reality, there never was an agreement that the language of the contract would apply to the situation up for determination. This means that the decision-maker will more than likely not consider other resources or even a party’s testimony as to the true intent as to the language of a contract. Instead, the determination will be made by only looking at the written contract itself, and only at the contract. Prior negotiations and agreements that contradict or modify the contract language will — in most instances — not be considered. A party will not be allowed to get on the stand and testify that the true intent of the parties was other than what is written. Extraneous evidence of intent is too susceptible to be self-serving and would be inconsistent with the concept that the parties were able to — and did — document their relationship. The written word will trump, and even prohibit, verbal expressions of intent. This rule of law ignores the truth of the fact that one party (or maybe both parties), never discussed and agreed about how a provision should be applied in any given instance. The likely result is often unintended consequences.
It follows, therefore, that a standard template will not universally apply to all situations; not the standard of the principal, nor that of the representative. The contract, as an expression of the parties’ intent, needs to be carefully customized and tailored to reflect the true agreement. As laymen, the manufacturer produces, and the representative solicits sales. As lawyers, counsel can effectively legalize your verbal agreements into legal written contracts. Use your resources appropriately.
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