Analyzing a Manufacturer’s Agent contract brought up the following core points.

5 Key Points

1. Sales Policies – “Principal establishes the price”
   This is a major point, because it stops the representative from setting their own product prices when trying to give the best deal possible to a customer. This allows control over the price products are sold and ensures profitability of the company.
2. Orders & New Clients – ”…subject to acceptance by Principal”
   With an economic situation as we are currently experiencing, it is vital to have proper credit checks completed on all accounts. If a customer is sold on credit and they file for bankruptcy, the company will end up taking a loss. This clause allows the Principal to not only do their own credit check before any sales are recorded, but also deduct commission from the Sales Agent if an account becomes uncollectable. This is important to reduce vulnerability and ensure all account balances are collected.
3. An Agent, not an Employee – “Agent is not an employee of Principal for any purpose”
   This clears the company of all expenses incurred by the Agent that have not been agreed to for reimbursement. The benefit here is that this frees the Principal from any obligations to the Agent, as they are a separate entity all together, not an employee of the company.
   The second part of this is vital as well. It states that the Agent CANNOT sell competing company product lines to the Principal. This ensures that the Agent will be solely selling the Principal’s product and not 2 competing lines as a ‘one stop shop’.
4. Commission – “commissions payable by Principal to Agent … shall be ___%”
   While this is a very simple clause, it is also extremely important. This lays out how much the agent will be paid on accounts and when the payments will be made. Something very basic, but important, as without, the agent could request higher commissions or go as far as to sue for lack of payment.
5. Entire Agreement – “Supersedes all other agreements”
   Being one of the final clauses, it ensures the legal rights of both the Principal and Agent fall within this contract. At times, new contracts will be signed for any changes in commission or company policies. This ensures that the Agent and Principal can only legally refer to this contract and no previously signed documents.

While there were many more points discussed, these were some of the primary concerns we addressed.