The Importance of a Contract

by Lisa Wilson, L.S. Wilson & Associates, Inc.

A fellow sales representative on the West Coast, who happens to sell for the same principal that I do, recently phoned to let me know that the company management wanted to know from her, why I did not want to renew my contract. My initial response to her was “Why are they asking you, and not me?” I guess I shouldn’t have been surprised this took place given everything that has happened over the past two years.

This exchange occurred after my best principal — the one who inquired about the contract, and the one I made the most money with — sold their company to a private equity firm. At that time, I recall the previous owner stressing how important it was for me to have a written contract with the new owners. He must have told me this at least three or four times, but in the same breath, he emphasized that this could provide some great opportunities for me. Thankfully, with the help of a great MANA attorney, I had negotiated a contract and felt confident about moving ahead with the company’s new management.

Well, about six months after the sale, problems started to set in, including:

  • Lack of timely payments.
  • Errors on commission checks.
  • Declining potential for sizeable sales opportunities with the number-one liquid crystal display manufacturer in the world.
  • Quality problems with the product they were producing — and I was selling.
  • Then, to top it off — COVID-19 dropped on us.

It was at that point that I received an email from the vice president of sales stating that he was going to take away certain accounts and effective immediately, I was not going to receive commissions for those accounts.

I immediately contacted the vice president and asked him the following:

  • Was he aware I had a formal, written contract? I did.
  • Was he aware that the company was in breach of contract? According to the terms of the contact, it was.
  • Were the CEO and CFO, both of whom signed my contract, aware of this? Their response was “I cannot tell you.”

I ended the conversation by stating: “You will be hearing from my attorney.”

I immediately contacted one of MANA’s rep-savvy attorneys and described the situation. From there, I decided to have a letter drafted and sent to both the CEO and CFO. Within one hour of emailing the letter, I was instructed to disregard the original email from the vice president of sales. They added that the terms of the contract would be honored.

Regardless of what had happened, six months later, the company stopped paying commissions on the accounts that were originally to be taken away from me. I immediately communicated with the accounting manager who sent me a copy of that original email from the VP of sales. I turned around, sent her a copy of the email from the CEO stating that the company would continue to honor the terms of the contract. I was told a commission check would be mailed immediately.

Obviously, they had a serious failure of communication within their organization.

As I reflect on what transpired, it remains clear why the original company owner kept asking me about the status of my contract. Moving forward, it’s just as clear that it is imperative for the rep — and principal — to memorialize their relationship in the form of a mutually agreed-upon contract.

Lisa Wilson is president & owner of L.S. Wilson & Associates, Inc., a manufacturers’ representative firm based in Bristol, Wisconsin that has been in business since 1998. Before opening her rep firm, Wilson spent 23 years in manufacturing positions that included purchasing management, production scheduling and planning, and customer service. Wilson also is on the Board of Directors for the Chicago Rail Mechanical Association.