Contracts and Commissions
I’m in discussions with a company that wants me to be a sales representative for them. Basically, I would get commissions ‘to infinity’ from any new customers I generate for the business within my assigned territory. My attorney says that ‘to infinity’ doesn’t really mean anything that the contract should say I get commissions ‘in perpetuity’ and that the contract doesn’t say specifically that I continue to get commissions even after the contract terminates. My attorney made the necessary corrections and I sent it to the company president, who was outraged that I had spoken to an attorney and told me the language he originally drafted was ‘crystal clear’ and that he won’t change anything. Whom do I believe here?”
Believe your attorney. “To infinity” doesn’t mean anything legally. The correct language is indeed “in perpetuity.” Even with that change, there’s a good chance you will lose any right to future commissions if the contract terminates. If you are to receive commissions on any sales the company makes to your customers, even after your contract terminates, this has to be clearly stated in the contract.
I don’t like the way the company president responded to your legitimate concern. Even if he does agree to make the requested changes to your brokers’ contract, I would not go forward with this relationship. The company president is either ignorant of how this type of contract should be drafted, which should make you wonder what other “booby traps” there are in this contract; too cheap to hire lawyers to give him the right advice to run his business, which makes you wonder what other legal issues this company has that aren’t being resolved or corrected; or deliberately misleading you into thinking the contract language is clear when in fact it’s so loosey-goosey he will easily be able to wiggle out of his obligation to pay you your commissions anytime he feels like it.
“I’ve been working as a subcontractor for a company in another part of the country for the past two years. Although I have performed significant work for this company’s clients, I have not been paid my commissions in several months. My contract clearly states that I am entitled to receive 25 percent of ‘all contract value delivered by contractor’ and that payment is due within 30 days after the company receives payment from its client. The company president had the nerve to tell me he didn’t have to pay me anything because I didn’t actually deliver value to their clients. What can I do?”
You are right that this company is clearly raking you over the coals. You are wrong, however, about your contract being “clear” as to how much you should be paid. The phrase “all contract value delivered by contractor” is babble whose sole purpose is to enable this company to wiggle out of its obligation to pay you whenever it becomes convenient to do so. What you clearly thought the contract said was “25 percent of all revenue received by company” from clients for whom you performed services. Unless the term “contract value” is defined elsewhere in the contract, it is open to interpretation.
That being said, I don’t know too many courts that will allow this company to willingly accept hundreds of hours of services from you without paying you anything. At the very least, you are entitled to be compensated for whatever your services are worth — the legal term for this is “quantum meruit,” literally “whatever it’s worth” — based on the industry you are in, what similar contractors are paid for similar worth and other factors.
You will need to retain an attorney in the state where the company is located. Once the company president receives a nasty letter from a law firm in his backyard threatening him with suit, he will likely be highly motivated to contact you and try to work out a settlement.