Many reps would rather get a cavity filled than think about hiring a lawyer. I will explain the top ten reasons why manufacturers’ representatives don’t need lawyers.

I Have A Handshake Deal — That’s Good Enough

“Why bother with a written agreement — I have a handshake agreement with a guy I trust.”

This is one of the best reasons not to hire a lawyer. A deal is a deal, right, even if it is not written down?

Sort of. Sometimes verbal agreements are enforceable, but often they are not — or, if they are, they are subject to shorter statutes of limitation. A more common problem is that they cost a lot more money to enforce. You spend more time arguing whether there was a deal, and, if so, what the terms were. It’s a “he-said/she-said” situation, meaning that the judge or jury might not believe you, even if you’re telling the truth. If the pathological liar was convincing enough to get you to do the deal without a written agreement, maybe he will be convincing to the judge or jury. This translates to a higher risk of losing, and therefore likely a lower amount being offered in settlement.

More problematically, having a handshake deal opens you to situations where there could be an honest disagreement down the road. Here are a few of the problems that are commonly seen when there is no written agreement.

• Here today, gone tomorrow. There is a change in management. The new management is not told about the deal.

• Lou OatesLou OatesSale of the business — change in ownership. The new owner was not part of the old agreement, so he does not feel morally bound.

• Management might forget. Sometimes people forget what they agreed to do, either innocently or (coaxed by financial incentives) not so innocently.

• Misunderstanding the Terms. Sometimes people think there was a meeting of the minds, but they really never agreed, particularly on complex or difficult items.

• Changing His Mind. If the company economics change — times get hard — the company might feel justified in changing the deal; if the deal is not written down, it is harder to block that type of change.

I Dislike Confrontation

“If I don’t get the lawyers involved, I can stay in my comfort zone.”

True enough, but you likely won’t get what you want, either. The process does not have to be contentious and confrontational. A skilled lawyer can guide the process along without it being confrontational. And, if the process does get into the zone of discomfort, it is the lawyer’s job to absorb the conflict for you — and to guide the process to a conclusion in which both parties are glad to have a deal done.

If I Insist On Having My Lawyer Review The Contract, I Won’t Get The Job

“I won’t be perceived as a team player if I ask to have my lawyer review the contract.”

Not so. If you’re dealing with a serious manufacturer, the company will have experience with sales rep agreements; they probably have their own format. They will not be thrown off by a request to have your lawyer review it.

Just say, “I have to run this by legal.” You will be perceived as an experienced player. It will also focus the company on its responsibilities towards you.

 

What I Don’t Know Won’t Hurt Me

“I sleep better at night because
I don’t worry about the details.”

Really? Knowledge is power. Are you taking advantage of the laws designed to protect you?

Many states have statutes designed to protect sales reps. In California, one such statute is called the Independent Wholesale Sales Representatives Contractual Relations Act of 1990. Other states have similar laws. Among other things, California’s law requires:

• A written, signed agreement.

• Specifics on commission rate and time of payment.

• Specifics on assigned territory and any exceptions.

• Specifics on chargebacks and withholds.

• Commission reports with an accounting for orders.

• Payment of treble damages for willful failure to comply.

Many manufacturers don’t know about this statute. Unless you consult a lawyer, you might not get the benefit of these terms. There are many other things your lawyer would likely cover, that you might not think of:

• Is the agreement clear, unambiguous, and internally consistent?

• If the company is sold, does the new buyer have to honor the agreement?

• What happens to your commission rights after you are terminated?

• When can you be terminated? For cause? For any reason?

• What rights do you have to compete after termination?

• Where and how will disputes be resolved?

If your manufacturer has its own form, you can bet that these are covered in ways that protect the manufacturer, not you. You’ll probably sleep better knowing someone has reviewed these terms for your benefit.

I Want To Save Money 

“Lawyers cost too much.”

This is often a valid complaint. What can you do about it? Set a budget with your lawyer; tell her what you can afford and ask the lawyer to stay within the budget. Interview more than one lawyer and compare rates. Ask for a discount.

Remember, it will often be more cost-effective in the long run to involve your lawyer at the outset. If you need to sue for unpaid commissions, you will be in a much better position if your lawyers handled the written agreement. Your case will probably be stronger, making it more likely that you can hire a contingency-fee-based attorney at reduced out-of-pocket cost to you.

I Downloaded A Good Form Off the Internet

“Isn’t it great how the Internet makes everything free?”

Maybe you’re one of these people who likes to do everything for themselves: fix your own cars, cut your own hair, and sew your own clothes. By all means, represent yourself. The old adage “a lawyer who represents himself has a fool for a client” hopefully will not apply to you.

Unless the form was specially prepared for you, it’s a fill-in-the-blank form. You can’t be assured that the form has all the right blanks. Nor will it tell what to put in the blanks. The little things can cause big problems if the agreement ends up in court.

I Can Always Talk To A Lawyer Later

“I wish I had talked to you
before I signed this agreement.”

You won’t be the first person to tell your lawyer that. Unfortunately, once the agreement is signed, it is usually too late to enforce the deal you wanted.

It’s Okay To Ignore The Warning Signs

“My powers of denial
are incredibly strong.”

Some people are crazy. I once read about a woman who spent years telling her loving family members that she was not going to seek medical treatment for that lump on her lip — even as it grew bigger, uglier and more painful. The outcome was not pretty. The moral of the story is that if your instincts tell you that it would be a good idea to hire a lawyer, trust your instincts. If you think you need a lawyer, you probably do.

It Takes Too Long To Involve a Lawyer

“I have a deadline to meet;
I need to get started now!”

Tell your lawyer that you’re in a hurry. Give him a deadline, and tell him to jump through that hoop. He’s there to serve you, and you have plenty of choices if he won’t. Plus, just having the lawyer involved may enable the process to move forward — and he will assure that the deal gets signed before it’s too late.

It’s Too Hard To Find A Good Lawyer

“How do I go about finding
a good lawyer?”

This is where your MANA membership pays off. Get some names from MANA; they keep a roster of experienced attorneys. Don’t feel as if you need to hire your divorce lawyer, estate planner, or personal injury lawyer. Instead, ask them for referrals to experienced business attorneys. Or ask your colleagues, CPA or a trusted business advisor. Often your local bar association will maintain a referral list, but they may give out names in rotation rather than based on experience level, so be careful of that source.

Meet with two or three lawyers before making a decision. Pay attention to chemistry. Ask: how many of these transactions have you done before? Are you familiar with the other side? What will it cost? Will you negotiate your fees to a level I can live with? How long will the process take? Do you have a form you like to use? Are you going to propose solutions that will allow me to close the deal? How long will it take to return my calls? Will you be the attorney I am working with? If you have a dispute: how many of these lawsuits have you handled? What are the strengths and weaknesses of my case and how do you propose to deal with them? Once you get the answers to these questions, you’ll have a good idea who you want to work with.

Conclusion

Remember, before your lawyer can help, you must open the door.