Category Archives: Legally Speaking

Legally Speaking is a regular department in Agency Sales magazine. This column features articles from a variety of legal professionals and is intended to showcase their individual opinions only. The contents of this column should not be construed as personal legal advice; the opinions expressed herein are not the opinions of MANA, its management, or its directors.

Pet Product Rep Cleans Up After Manufacturer’s Mess, and Court Won’t Stop Barking About It

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In a sales rep contract drafted without attorneys and recently described by an appellate court as “doggone messy,” a pet supply manufacturer and its independent sales representative agreed the rep could be terminated “for cause” only under certain circumstances. As is so often the case, once the rep, Profit Pet, grew sales and the relationship was prospering, the principal, Dogswell, sought to tighten the contract terms and exercise more control. Not surprisingly, Profit Pet resisted, leading to its termination.

When Dogswell then attempted to classify the termination as “for cause,” Profit Pet sued to recover its commissions, and won

… Read the rest

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

Know Your Rights: And Obligations

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The playing field between manufacturers and their independent sales representatives has been — and continues to be in many cases — patently uneven. In order to level the playing field, many states have passed specific laws protecting sales representatives from heavy-handed manufacturers. As of 2007, 38 of the 50 United States had laws on the books providing special rules for a non-salaried independent sales representative doing business with manufacturers (condolences to Alaska, Delaware, Hawaii, Idaho, Montana, Nevada, North Dakota, Rhode Island, South Dakota, Vermont, West Virginia and Wyoming).

Not surprisingly, each state’s laws are different and specific to the actions

… 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

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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

Globalization — Current Events

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In previous articles and speeches, I have addressed you on international issues such as the relationship of the sales representative with foreign principals; contractual terms regarding international arbitration; and cultural and legal differences between “agent” and “representative.” Commercial globalization, however, is a metamorphosis, and as it evolves, it causes the business community, and at times our legal and business framework, to undergo its own changes. Unfortunately, the more at ease we are with it, the more lax we become about some of the rules that govern international trade, and we may miss changes that it brings to our domestic rules. … Read the rest

Independent Contractor or Employee: Are Your Workers Properly Classified?

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As state and Federal governments are more strapped for cash and in need of greater tax revenues, they are paying more careful attention to whether employers have properly classified their workers either as independent contractors or as employees. As important as the question is, often there is no simple answer. In fact, the IRS’ training manual on the subject, which it uses to educate its examiners, comprises over 160 pages of materials.

Misclassification can occur for a variety of reasons. Often it is a lack of knowledge of how to properly classify workers. Many times it is intentional

… Read the rest

How To Beat A Non-Compete Agreement: Five questions that might free you from a restrictive trade agreement

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In a nation that rewards competitiveness, non-compete agreements sound like an anomaly. While employers tend to favor them, anyone who has ever been asked to sign one will probably complain that they hinder the free and open competition that has made our economy prosper for 200-plus years.

Philosophical issues aside, what do you do if you ever have to deal with a non-compete? How might you negotiate a more favorable deal for yourself, prevail in court against one or, better yet, avoid the restrictions in the first place?

Dozens of state and federal court decisions, fortunately, suggest some practical

… Read the rest

What Is A Non-Competition Provision?

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Most reps are familiar with the term “non-compete provision,” but many do not understand the impact a pre- and post-termination non-compete can have on a rep’s business.

To some extent, all non-competes inhibit the rep’s ability to run its business. The scope is usually defined by the specific prohibitions, e.g., length of time, geographic territory, the principals and/or customers, hiring of personnel and other matters. Sometimes there is a non-compete or other prohibition that can be imposed on a principal (e.g., granting the rep the exclusive right to sell).

Most jurisdictions, at least to some extent, allow

… Read the rest

Don’t Hire a Swordsman When You Need a Gunslinger

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If you are sued or if you are thinking about suing someone, you should know more than you have learned from watching Law and Order or TheGood Wife. First off, it will probably take three years not sixty minutes. Second, every law school graduate is not a trial lawyer. We call trial lawyers litigators, gunslingers or sometimes egomaniacs. The lawyer who helped you buy your house, wrote your will, or did your taxes has probably only seen the inside of a courtroom on a tour of city hall.

Whether you’re suing or being sued, you should have … Read the rest

Top Ten Reasons Why Reps Don’t Need Lawyers

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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 … Read the rest

If It’s Not in the Contract, It’s Not Part of the Deal

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Businesspeople often think that once they’ve discussed and agreed upon the deal with the other side, the written contract is simply a formality. They tell me it’s the relationship that’s key and the contract is for worst-case scenarios.

The contract is often considered “boilerplate.” In fact, how many times have you thought that yourself or heard the following in response to your question/ objection to a clause in your principal’s contract: “Don’t worry about that term; we won’t enforce it, it’s just boilerplate”?

The boilerplate can be very important and may even preclude prior agreements you’ve had with your principal. … Read the rest