When the Break-Up Happens

By Attorney Michael O’Shaughnessy, Managing Partner at Colombo & Colombo, P.C.

Representative agreements are an integral tool in the creation of a relationship between a manufacturers’ representative and a supplier or principal. It is imperative that the representative contract spells out responsibilities and obligations of both parties during as well as after the life of the contract.

Much like a courtship, the relationship between a manufacturer representative and a supplier go through stages that might include adoration, commitment, power struggles, stability, and unfortunately, sometimes eventually, the break up. As a representative you choose a principal whose product you are attracted to and are committed to spending time with, for the mutual benefit of both of you.

It might be difficult to plan for the “break up” at the beginning of the relationship. It is however, important to have a contract that addresses both the operational aspect of the relationship but also the end of it. This is important both for building trust and developing the relationship.

The relationship likely may only last as long as both parties are reaping a benefit. And just like a marriage, once this is no longer the case for one or both parties, the partnership may be dissolved.

A well-written contract addresses termination and protects the interests of both parties. It dispels fears of both the manufacturers’ representative and the supplier. Namely, fears of the representative, such as unjust termination and loss of hard earned compensation and fears of the supplier, such as inability to terminate a rep whom is not performing to expectations.

Agreements that balance the power between the representative and supplier reduce or eliminate mistrust and add to productive energy but they also reduce the likelihood of litigation when the relationship does comes to an end.

Suppliers and manufacturers’ representatives usually understand that responsibilities of the parties must be defined during the period that the contract is operational. However, fewer truly understand that responsibilities must be thoroughly defined for the period after termination.

Remember that the contract serves an important purpose during the time that the relationship is operational but also for the period after termination. It serves as means to unwind the relationship when the time comes with both less animosity and likelihood of litigation.

Rep agreements are a legal specialty. It is prudent to find an attorney knowledgeable with manufacturer representative agreements and industry expertise to write or review your agreement.

A poorly written contract often leads to a legal quarrel that in turn consumes time, financial resources and the involvement of attorneys and courts. In comparison, a well-written contract can eliminate expenditure of resources and allow the representative and manufacturer to go about their respective businesses at the end of the relationship.

About the Author
With 30 years of experience as a litigator, attorney Michael O’Shaughnessy knows how to cut through any hidden agendas or manipulation his client might be up against and get the best possible outcome for the client. He is known for the depth and breadth of his expertise and for his approach to client service that is responsive, concise and straight to the point. He knows the work he does directly impacts his client’s business. Michael is the Managing Partner at Colombo & Colombo, P.C. You can contact him by calling his office at 248-645-9300, or by sending an email to [email protected].