Better Termination Provisions for Sales Reps (And Why You Need Them)


An electronics sales rep contacted our office and said he had been terminated after taking two years, and tens of visits with purchasers and engineers, to gain a lucrative design win from a new customer. Based on the rep’s prior dealings with this customer (on behalf of other principals) the rep was able to procure the key design win which had produced no sales as of the termination but would result in long‑term substantial sales after the termination. The win was clearly attributable to the rep, as evidenced by an attaboy email from the regional sales manager stating: “great design … Read the rest

Arbitration — A Four‑Letter Word to Plaintiffs


Alternative Dispute Resolution (ADR) refers to alternatives by which parties can keep a legal dispute out of the public court systems — Superior Courts in each state and U.S. District Courts around the country. That sounds like a very good idea on paper; but certain ADR agreements can be a death sentence for a good plaintiff’s case, depending on the level of damages.

Principals will normally include an ADR clause in their representation agreements. That might include agreements between the parties to mediate a dispute (submit the dispute to a “neutral” who tries to bring the parties together in a … Read the rest

Key Considerations in Assessing Potential Litigation for Independent Sales Reps


Whenever a sales rep contacts our firm about a sales commission dispute, we evaluate several initial factors before deciding whether or not to proceed with a case:

  • What are the known or estimated damages under the contract?
  • Which states’ sales commission protection laws might apply to the dispute?
  • What is the best our client can do, monetarily?
  • What is the worst our client can do, monetarily?

What Are the Known or Estimated Damages?

This can sometimes be difficult to assess because usually customers’ commercial relationships and ordering processes are with the principal, not with the rep. Most often, orders are … Read the rest

Our Contract Has Been Breached, What Now?


A Sales Rep’s Options if Their Principal Breaches the Contract and How to Prevent It

Part Two

Author’s note: When our firm is contacted by a rep whose contract has been breached, overwhelmingly the principal in question is not a MANA manufacturer member.

Option 1: Trying to get the principal to retract a commission reduction or sign a more protective contract

This may be useful in situations where the principal could be liable for the payment of long-term sales commissions, based on either the Procuring Cause Doctrine, a violation of the Covenant of Good Faith and Fair Dealing; … Read the rest

Our Contract Has Been Breached, What Now?


A Sales Rep’s Options if Their Principal Breaches the Contract and How to Prevent It

Part One

One of the most common and pertinent questions I get from sales reps is, “My principal breached one of the commission payment requirements of the contract but they are still paying me on other sales. What should I do?” That’s a very good question that depends on the circumstances. My intent in this article is to explore the various options.

You signed a representation agreement with a highly desirable manufacturer, and although it took several years to cultivate business, you landed the big … Read the rest

Potential Ways Around 30-Day Termination Clauses — Part II


Continuing a discussion on how a sales rep might recover post-termination sales commissions under a terminable representation agreement, and having previously discussed Procuring Cause, I turn now to Bad Faith (BF).

Bad Faith

A claim for BF in a principal-agent relationship will be more readily available. First, because there are fewer limitations on bringing such a claim, such as the limitation on a PC claim if the contract at issue addresses post-termination commission rights. With a claim for BF, a principal may follow a contract’s termination provisions to a tee, but a claim for BF may still be a winning … Read the rest

Potential Ways Around 30-Day Termination Clauses — Part I


Let’s face it. When it comes to sales rep-principal relationships, sustainability often boils down to “What have you done for me lately?”

That answer, unfortunately, is oftentimes “Not enough.” Or, we sometimes hear the term that principals want “added value” from their sales reps, which usually comes up when an agent is earning their hard-earned commissions on a longer-term basis. Having previously written about expedited terminations of sales reps, and having recently litigated some of these issues, in various jurisdictions throughout the United States, there are two different possible means to protect sales reps who must sign representation agreements with … Read the rest

30-Day Termination and the Covenant of Good Faith and Fair Dealing


Does 30 Days Really Mean 30 Days?

The poison pill for any independent sales agent that relies on building up and establishing a territory, or booking business, is the dreaded 30-day at will termination provision. Unfortunately, such provisions are found in the great majority of sales agent contracts I see. Is the agent left with any leverage, legally speaking, when the principal complies with such a short termination notice provision? The answer, surprisingly, may be yes!

One doctrine that may override a poison pill provision in an agent’s contract is the Covenant of Good Faith and Fair Dealing. In … Read the rest

Misunderstood Contract Terms


Many agents come to my firm with great confusion about the more “boilerplate” terms in their written contracts. There seem to be several universally misunderstood terms that just keep getting bandied about erroneously:

  • Venue
  • Jurisdiction
  • Choice of Law
  • ADR

Each of these terms, often referred to as boilerplate, should be included in your contract, especially when considering that your principals are often headquartered and operate in different states than you.

Venue is the place where a lawsuit or other form of dispute resolution will take place.

Jurisdiction means that a particular court has authority to hear a particular dispute.

Choice Read the rest

Key Contract Terms Every Agent Needs


Although most manufacturers abide by the MANA code of ethics and pay their agents in a timely manner all commissions owed, sometimes unfortunate circumstances arise causing an agent not to be paid. In the case where litigation thus arises, it is critical to have certain key contract terms to protect your rights.

Having seen many different representation agreements (contracts between sales agents and their principals) presented by sales agents in a wide variety of industries, there seem to be several universally misunderstood, absent or poorly written terms:

  • Venue
  • “Choice of Law”
  • “ADR” (Alternative Dispute Resolution)

Each of these terms really … Read the rest

How the Procuring Cause Doctrine Can Garner Long-Term Contract Protection: Or How I Learned to Stop Worrying and Got What I Was Worth


The Scenario

Having represented sales agents in contract negotiation and litigation since 1989, I have seen a wide variety of contracts addressing the principal-agent relationship. Most often, reps will settle for contracts completely lacking in long-term commission protection. There seem to be several reasons for this. The rep:

• is new to the industry, has no true book of business, and will take anything to get in the door;

• does not understand there is no long-term protection;

• is so dependent on the commissions from this principal that they would rather accept a one-sided agreement than risk termination.

Read the rest