Protecting Your Contract and Post-Termination Commissions

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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
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Can Your Principal Not Pay Commissions and Enforce a Non‑Compete?

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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

Keeping Contracts Effective

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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

Say What You Mean and Mean What You Said

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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
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Protecting Your Rights Under the Contract

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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