Sales Rep Articles
… When a principal terminates a contract not for any legitimate or neutral reason, but to shed the rep before a sale closes and commissions become due, raising a bad faith claim, which may make additional damages available, should at least be explored.
Factors such as long-term and stable relationships with principals and customers, selling products with a promising future in the market, and the firm’s commission income stream on the rise, tend to increase the price.
With surprising regularity, principals are taking legally flawed positions when reps must resort to legal action to collect commissions due, particularly following a termination.
Sales rep lawsuits commonly seek to recover unpaid commissions following the termination of a rep contract.
Unscrupulous principals might originally plan to pay the agreed-upon commissions to their reps, and will perhaps honor the contract terms for a while, or at least until the orders start coming in reliably.
“Hey, Adam,” begins many an incoming office call, “the principal who owes me back commissions didn’t remember that our contract says Tennessee law (or Utah, Colorado, New Jersey, Georgia, etc.) applies. I can get triple commissions, right?”
“Well,” begins the formal, technical response to many such calls, while stalling for time. Then, the very first legal phrase taught in law school is invoked: “That depends.”
Many independent reps are familiar with sales rep protection statutes. These state laws are generally intended to help level the playing field with their principals when a commission dispute arises.
Most reps hunt for some valuable takeaways when a relationship with a principal ends badly. No hard searching was necessary after a recently completed rep-principal trial in Chicago, where the final count of useful “lessons learned” proved nearly as abundant as the sales rep’s recovery.
In certain industries, sales reps are accustomed to fighting tooth and nail to recover commissions from manufacturers, both during and after their representation. And in situations where the rep procured sales before termination that do not close until after — when a new rep is in place — the hunt for commission dollars can grow fierce, even cutthroat.
Raise your hand if this sounds familiar: A rep agreement plainly provides for a fixed commission rate. After the rep secures orders, the principal claims the parties orally agreed the rep would accept a lower commission rate on those orders. The rep disputes making any such agreement, but the commissions get paid at the lower rate.
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