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Sep 15, 2005

The Legal Line

Ed Maldonado

Dear Legal Line:I am a Sales Rep for a prepaid reseller business. I attended all the major conventions last year and I met several very good new prospects for our services from across the country. My problem is that although we talked, and talked, and talked some more, no one seemed interested in signing a contract like we discussed at the convention. They all wanted to just spot-buy here and there. They all wanted payment terms like we discussed but it was not for the volumes discussed at the shows. All wanted the rates we originally discussed. Only a few came through in the end as negotiated at the shows. I took a personal hit in my pocketbook this past year because of this. This year my orders from management are to not repeat this again. Are there any suggestions you may have from a legal perspective that may help a Sales Rep? Thanks.A Wiser Prepaid FoolDear AWPF:Conventions and shows are usually great times to meet and negotiate new business. Two things working against anyone trying to “ink that written deal” at a show are: 1.) Time – because most people will try to maximize all business potential with all the people that they meet at the show; and 2.) Preparedness as to the formalities of a contract – it is hard to present and sign a full contract without both sides first reviewing it completely and putting some thought, and detail, behind it and then negotiating the final version. Realistically, you cannot expect to walk a show, or man a booth, or hit an after hours happy hour expecting to have final deal done with a new prospect by the end of the show. It just isn’t a reasonable expectation, and is in fact, a reckless way of doing business. Too many things are involved and could go wrong.Now there is something that may be of benefit to you from contract law - the usage of simple written offers, and acceptance letters. At a basic level, most sales contracts are predicated on an offer with the particular terms and acceptance of that offer. Taking this idea to the next level, it may not be a bad idea to prepare some basic “offer” letters that establish the minimal terms your company is willing to accept should you move forward in business with anyone. These letters could be prepared prior to the show, and would be presented only to those prospects that seem real or of serious interest. A time limit can also be included in the offer (for example - “this offer is only good for the next ten (10) business days”) to weed out anyone that is not serious. The offer letter could also be subject to a final written agreement that must be completed within a certain amount of time after the offer is accepted. These are all terms that you and your legal counsel can work out as essential parts of the offer prior to your use of the offer letter. You can also identify the terms and conditions that you cannot modify at the convention – such as rates and minimal volume(s). The idea is to be prepared with written terms and minimal requirements prior to sitting down with a prospect. A simple canned offer letter can accomplish this.There are things that I generally do discourage a sales rep to do when “inking a deal” at shows or conventions and are as follows: 1.) Napkin Deals – By this I am referring to signing a contract based upon a chart or scribbled layout of a business plan (idea or deal) made in the heat-of-the-moment on a piece of available paper, white board, or napkin, and not formal terms of business. While I have been presented things alleged to be the “next-greatest-prepaid-idea” on napkins, I have yet to actually see such a document come to total fruition, and be memorialized in a written contract. Napkin deals are for brainstorming and it is best to keep them as such. As an attorney, I have yet to cite a napkin as a material Exhibit to a contract or use one as the format of the final deal. When true business terms are discussed, the napkin is usually tossed out immediately – so bear this in mind.2.) The Fifth Drink Deals – Happy Hours are for socializing, making new friends, exchanging business cards but not inking that final deal in prepaid. This is particularly true after a series of drinks at a show. My experience is that people tend to have selective hearing (and negotiating) after about five drinks. This becomes painfully clear when they talk to their attorney a few days afterward about the terms that were agreed upon at that moment. Somehow it usually never fits as well to them as it did at that happy hour. If people are serious, they will negotiate in a proper manner, and at the right time - not after the fifth round. It is better to celebrate the final deal than just the prospect– so bear this in mind.3.) The Name Dropper Deals – Anyone can drop a name at a convention. This is particularly true when the name is of a large company, foreign governments, or of a niche market provider that is not at the show. If a deal is being discussed under the premise that one of the parties has relationship, or business advantage, because of a commercial relationship with another company, ask for proof. I have seen signed Non-Disclosure Agreements between parties based upon discussions premised on a relationship with a major player that simply never existed. The result of these NDAs was that sales reps disclosed pricing, terms, and new innovations with parties that were simply “full-of-it”. This is not to your company’s interest. Conventions are great because they bring the industry together. If a commercial relationship is alleged by a prospect with a company at the show, ask to be presented to that company at the show. If it’s the real deal, a formal presentation at the show will only benefit you both. Be leery of names dropped that cannot be verified prior to “inking the deal”, it may be better to wait and have the details more carefully reviewed once back at the home.While undoubtedly there are more, these are commonly the types of problems about contracts negotiations I hear of after major shows and conventions. Stay away from them, AWPF. Stick to the “offer” letters that can be worked out with your legal counsel to be sure that they can pass legal muster. It is better to have something more formal in writing prior to the final deal than a handful of empty promises.Good Luck and Success in the Industry.Do you have questions for Legal Line? Send them tolegalline@prepaid-press.com.
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