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Legal Memorandum: Contracts and Post-termination Commissions

Issue: How have courts interpreted contracts regarding compensation for work in progress at the time the contract is terminated?

Area of Law: Business Organizations & Contracts
Keywords: Interpretation of contracts; Compensation; Post-termination commissions
Jurisdiction: Arkansas, Connecticut, Federal, Pennsylvania
Cited Cases: 92 F. Supp. 972; 978 S.W.2d 304
Cited Statutes: None
Date: 04/01/2006

In the case of Target Marketing Associates, Inc. v. Spartan Technologies, Inc., No. CV010510534S (Conn. Super. Ct. Mar. 16, 2004), there was an agreement between the parties under which the plaintiff worked as a sales representative for the defendant in a specific territory, receiving a flat annual payment plus commissions.  After several years, the defendant terminated the agreement, after which the plaintiff sued for breach of contract and unpaid balances and an accounting.  At issue were commissions on certain long-term sales agreements (LTAs) the plaintiff had negotiated and secured, and which often lasted for several years.  Under an LTA, a buyer and the defendant agreed to a series of periodic deliveries.  The buyer determined when and in what amount it would issue purchase orders during the term of the LTA.  The plaintiff located buyers, negotiated the terms of the agreement, and executed the LTA on the defendant’s behalf between the defendant/seller and the buyer.  Thus, the LTAs the plaintiff worked on were contracts for future execution, subject to the buyer’s determination of the date and number of items in each purchase.

The Target Marketing contract provided that before the plaintiff was entitled to a commission payment from the defendant, the buyer had to issue a purchase order and the defendant had to receive payment on the order.  There was a specific provision in the contract allowing that commission payments could be made on purchase orders within a year, without the plaintiff having to wait until the defendant […]

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