Most contracts between a manufacturer and a sales representative contain a trade secret and confidential information provision. Typically, this provision is one-sided — it protects the trade secrets and confidential information of the manufacturer and fails to address any such information for the sales representative — generically describes categories of information, is overly broad and includes all or almost all the information of the manufacturer’s business and not just its true trade secrets and confidential information. It also has the sales representative admit that all categories of information are true trade secrets and confidential information, and that the sales representative … Read the rest
Most contracts contain a choice of law provision.
Typically, a choice of law provision identifies the law of a particular state that will govern the interpretation and enforcement of the contract. This provision is one of the most important and neglected provisions contained in a contract. By choosing the law of one state over another, the parties are, in effect, placing terms in their contract that are invisible to them at the time the contract is signed (unless the party has received advice from his attorney) but that will become quite apparent if the parties become involved in a dispute … Read the rest
I, like many lawyers, advise my clients to document what the deal is with the principal in a written contract and amendments to the contract, so that each party can consult the contract to determine what each party’s rights and responsibilities are and, where the parties have some dispute they cannot resolve, a judge and a jury can do likewise.
However, in giving this advice, I stress that documenting each party’s rights and responsibilities is not enough. The sales representative must also make certain that each party’s rights and responsibilities under the contract are settled and fixed, preferably in plain … Read the rest
Lawyers rarely tire of advising their clients of the importance of contracts. After all, the contract establishes the rules that both parties are supposed to honor and, in the event that there is a dispute between the parties, the contract gives the court and jury a list of rights and responsibilities that each party has.
Of course, and as an example, this list of rights and responsibilities will be the starting point that a court and jury will use in deciding whether the sales representative is entitled to the disputed commissions it claims it is entitled to receive or the … Read the rest
When a sales rep receives notice from the principal that the principal is terminating the contract, especially when this notice follows the placement of a sizeable purchase order from a customer before termination or the customer has established a multi-year program of anticipated future purchases that are not submitted as of termination, the sales rep will generally ask his lawyer a series of questions.
Typically, the questions will include, but not be limited to, the three questions below:
- First, can my principal simply terminate my contract in bad faith to avoid paying me commissions on sales I have already made
Sales representatives can find themselves between a rock and a couple of hard places following termination by a principal. The sales rep may have not only lost a profitable line of business integral to his ongoing business model, but the principal may have failed to pay him all pre-termination and post-termination commissions the sales rep believes are owed to him and may have reminded the sales rep that the terminated contract contains a post-termination non-compete which the principal will not hesitate to enforce. Under these circumstances, does the principal get to have its cake and eat it too and continue … Read the rest
One of the ways that an independent sales representative can safeguard his business is to utilize effective contracts that are updated as circumstances change. Conversely, conducting business without the benefit of a written contract or under one that no longer reflects reality are likely to put the sales representative and his business in jeopardy.
Contracts establish the rules of the game. The sales representative should regularly establish and document the rules of the game with those with whom he conducts business. I have worked with many clients who have had disputes and/or lawsuits with others that could have been avoided … Read the rest
Many independent sales representatives have shared this experience: after negotiating an agreement with a principal that gives the sales representative a right to commissions on sales to certain customers or within a certain geographical territory, the principal announces to the rep that he is converting a customer into a house account or taking away a territory that is clearly identified in the contract. Although this situation may be common, it can present a difficult challenge to the rep. What should he do?
The sales representative has a number of options, including:
- He can continue representing the principal on the remaining
It goes with saying you should make certain that your contracts with principals are as clear as possible. Should a dispute end up in court, your contract will be reviewed by a judge who is more familiar with legal concepts than with your business, much less how you and your principal actually dealt with each other. Your contract dispute may turn on how the judge applies what the law calls rules of construction.
You should know what these rules are. You should consider them when you are negotiating a contract with a principal, considering a contract amendment or dealing with … Read the rest