Traits of Successful Representative Agreements

Suppliers and manufacturers' representatives often seek to gain advantage over their partners by incorporating a bias into the representative agreement favoring the author, placing the other party at a disadvantage. This technique rarely enjoys the benefits intended. The best agreements set balance as an objective between supplier and representative. If the relationship begins with a biased agreement, that bias works against development of a solid relationship. Since the agreement is the foundation of the partnership, it must flourish with words and phrases that elicit a spirit of trust and cooperation.

Each clause of a representative agreement should seek to strike a balance between the power of the supplier and the manufacturers' representative. If there is a clause of indemnification protecting the supplier for a specific set of conditions, there should also be a clause protecting the representative on a different set of conditions. If there is a paragraph outlining the duties and obligations of the representative, there should also be a paragraph outlining the duties and obligations of the supplier. A unilateral phrase only works to the ultimate distrust of one party by the other. Distrust always works against development of the relationship and ultimately against sales, growth, and profits, the original purpose of the relationship and the agreement.

Prepare for the future. Partnerships are born during a phase of euphoria. They develop during a phase of expansion and excitement. They mature during a long period of hard work. They unwind for a number of reasons, most of which are quite natural. Upon termination, both supplier and representative must be able to go about their own respective businesses. Spell out clearly the conditions under which either party may terminate the agreement and the responsibilities of both parties after notice of termination.

The supplier and representative must both have the ability to terminate the representative agreement for cause and convenience. Sometimes termination for cause achieves instant agreement between the parties, as in cases where the representative or supplier becomes insolvent. Getting both parties to agree that a particular cause is valid is often difficult. Gaining agreement as to which party is responsible for cause is routinely more difficult. Termination for convenience eliminates an avoidable and unnecessary argument.

Mature suppliers and representatives do not treat each other as the junior partner in a representative partnership. When a partner is able to insert a biased clause into the agreement, it must be because the other partner has less experience in terms of drafting and negotiating representative agreements. Remember that the junior partner will ultimately learn that a biased agreement is to its disadvantage. Keep bias out of the agreement and ensure that the relative power of the supplier and representative is balanced.

Glen Balzer is a management and forensic consultant involved with international and domestic marketing and sales. He advises parties involved with contracts between suppliers, manufacturers' representatives, global customers, and industrial distributors. He promotes conflict resolution between parties involved in representative and distribution agreements as an expert witness. During the past 30 years, he has established and managed marketing and sales organizations throughout America, Europe, and Asia.

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