you as an exclusive rep or with an exclusive territory that also tie commissions only to sales you procured or solicited, or which result from your efforts. Such language is diametrically opposed to a legitimate exclusive territory.
5. The term of the contract should reflect the sales cycle for the territory and / or the products— In some instances, your efforts may not result in orders for months or even years, such as sales of products connected to a construction project, sales of“ design-in” products to OEMs, or sale of capital equipment. In such cases, make sure the term of the contract gives you enough time to develop sales and to recover commissions. Make sure the rep agreement provides for the payment of post-termination commissions that also reflects the sales cycle. The longer it takes for an order to process and ship, the longer the post-termination period. A contract that only provides for shipments made through the effective date of termination will unfairly deprive you of commissions for sales already in the pipeline. At a minimum, you should insist upon commissions for all orders received through the effective date of termination, regardless of when shipped or paid.
6. A principal should not have the unilateral right to change commissions, territory and term— While there may be times it is appropriate to consider making changes to a sales rep agreement, such changes should be negotiated and agreed to in advance in writing. An agreement that enables the principal to unilaterally amend its material terms is hardly a negotiated agreement. Under no circumstances should changes be retroactive, such as allowing a principal to reduce commissions for orders already accepted.
7. Never, never agree to a post-termination restriction on competition— You should not be asked, and you should not agree, to give up your profession and your ability to make a living posttermination. Also, don’ t agree to a“ non-compete” provision hoping that a court will not enforce it. Courts in some jurisdictions may find well-drafted non-compete provisions enforceable. It simply is not worth the risk.
8. Do not give away or restrict your use of your own work product— A seemingly innocuous confidentiality provision in a rep agreement can sometimes be used as an alternative to a noncompete provision. To avoid that, a principal’ s“ confidential information” should only include information you receive from the principal itself. It should not include your own work product and resources. These are your intellectual property. They are the tools of your trade. They are why you were selected by the principal in the first place. Except under extraordinary purposes, the identity of customers or customer lists and information about customers that did not maintain a pre-existing relationship with the principal, should not be included in the definition of a principal’ s“ confidential information.”
9. Always include an indemnification provision— A principal should indemnify, defend and hold harmless its sales rep from any and all claims arising from or relating to the principal’ s products, including claims involving products liability, intellectual infringement, warranty issues, and violations of laws relating to the principal’ s products( including California’ s“ Proposition 65”). The rep also should be named as an additional insured under a principal’ s product liability policy( which typically does not add any cost or burden to the principal). Make sure the indemnification provision