Tips to a Better Rep Agreement
A sales representative typically will review a sales representative agreement twice— at the start of its relationship with a new principal, and then at the end.
If the rep takes the time to read, understand, question, and yes, even negotiate the terms of a rep agreement at the start, there should be no surprises, and hopefully no problems, at the end. It’ s the difference between fire prevention and extinguishing a raging fire. But, too often, reps belatedly learn that their multi-year contracts can be terminated upon 30- days’ notice, or that they won’ t receive posttermination commissions, or that their principal has the right to unilaterally change the rep agreement, including by reducing commission rates.
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Bad rep agreements often are authored by a principal’ s attorney who doesn’ t have a clue what a rep does, or a rep’ s contribution to the sales process, or how a rep should be fairly compensated. However, the blame cannot be affixed solely on principals and their attorneys. The primary reason bad rep agreements exist is because reps accept them. Reps are so anxious to sign an agreement with a new principal that they don’ t consider or just ignore the adverse terms in the rep agreement until after they are terminated and discover they will not get paid for huge orders they spent months or even years procuring, or after their principals designate a key customer as a“ house account.”
It is at that point I get the call asking:“ Can anything be done?” Regrettably, despite my many years successfully litigating commission collection claims and recovering millions of dollars in