Independent manufacturers’ representatives – interview with legal counsel Gerald M. Newman

VentureOutsource.com caught up with Chicago-based legal counsel Gerald M. Newman with Schoenberg, Finkel, Newman & Rosenberg, LLC. Transcripts from that discussion follow.

March 2, 2007

VO: Its often said, the easy part for the contract manufacturing sales representative is booking the business and the more difficult part is servicing the account (while going out and getting new business for the contract manufacturer). This balance can often create challenges and frustration for both parties. How can sales representatives and contract manufacturers put together meaningful business engagements to addresses specific objectives?

Newman: Servicing the account typically involves quality issues; delivery issues, changes in price, design changes, component sourcing and substitutions, and similar matters.

The contract manufacturer must be held to specific standards in these areas which must be met as the project moves forward. On the other hand, the sales representative must be available to communicate the customers' concerns to the contract manufacturer and vice-versa. If time commitments for servicing accounts exceeds the time available to the sales representative, the sales representative must consider increasing sales force efforts by hiring more sales personnel.

Business agreements between the contract manufacturer and the sales representative must also include provisions for the sales representative to hire additional personnel, if necessary.

The agreement should also place certain penalties on the contract manufacturer for failure-to-live-up-to understandings with the contract manufacturer's customer, which may then require the sales representative to spend more time resolving problems and issues and, therefore, prevent the sales representative from pursuing new business.

VO: Aside from the above, can you please share three other common types of disputes your law offices see that often surface between sales representatives and electronics contract manufacturers?

Newman: Most of the disputes in which we our law offices become involved in are between sales representatives and electronics contract manufacturers where the contract manufacturer becomes unwilling to compensate the sales representative commissions in accordance with the contract agreement. Sometimes, the contract manufacturer will take the position the sales representative was not responsible for booking the business in question.

In other instances, the contract manufacturer may take the position that the business was procured from outside of the sales representative's territory defined in the agreement, even though the contract manufacturer may have encouraged the sales representative to seek and pursue new business opportunities outside of the territory.

Another type of common dispute involves ‘split commissions' between two or more sales representatives where each claims to represent the contract manufacturer in different aspects of a business sale transaction.