Terminated Before Your Sold Product Arrives...Now What?

Court Can ‘Declare’ a Rep’s Contract Rights for Future Sales, Even Sales to Iran

by:  Adam J. Glazer


What is a rep to do when terminated before the sales come in?


As many reps know by now, framing a claim for breach of contract requires that the rep has suffered “damages,” that is commissions withheld on orders received, shipped and/or paid for by the customer. But if orders have not yet come in despite the rep’s best efforts, is the principal able to escape liability?


The Swiss rep Pyrrhus AG, whose customer was the Iranian government during a relative lull in the sanctions regime, found itself confronting such a possibility.  Pyrrhus’s plight furnishes a helpful example of a rep making use of a “declaratory judgment action” to lay claim to commissions on sales not yet shipped.

Iran to Court

U.S. company Dresser Industries, Inc. had signed Pyrrhus as its exclusive rep for the 2-year period August 1986 through August 1988 of Dresser’s earth-moving products to the country of Iran. During 1987-88, the Ministry of Mines and Metals of Iran allegedly agreed to purchase 140 products known as “Dozers” for $255,000 per.  Pyrrhus also claimed its services culminated in the sale to the National Iranian Steel Company of 20 trucks and parts.


In exchange for its services, Pyrrhus was due 5% of:


“the net FOB value of any shipment of the Products of whatever origin made by Dresser or a Dresser Subsidiary to Iran and pursuant to either orders received and accepted or Contracts entered into during the term of this Agreement.”


The contract further provided:


“Dresser will pay or cause to be paid to Pyrrhus the foregoing amounts within fifteen (15) days of receipt of payment by Dresser or the relevant Dresser Subsidiary in respect of any order or contract with respect to which such fee is due.”


When Dresser refused to pay commissions on the Dozer or truck sales, sales that seemed to fit squarely within this contractual agreement, Pyrrhus filed suit in the Chicago federal court.


Its Complaint alleged that Pyrrhus’s services led to the formation of Dresser’s contracts for the sale of equipment to the Ministry and to the National Iranian Steel Company, both of which called for shipments to be made in the future.  The shipments on which commissions would be payable had not yet occurred, so Pyrrhus’s Complaint sought a “declaratory judgment,” a remedy calling upon the court to declare the rights of the parties under their contract.  When the shipments did occur, a declaration favorable to Pyrrhus would oblige Dresser to make payment.


The trial court, however, saw things Dresser’s way.  Dismissing Pyrrhus’s claims, the court construed the rep agreement to require that “the goods must have been shipped into Iran” to be commissionable.  Pyrrhus sought “commissions due on future shipments for sales that have not been consummated,” the court ruled, and Pyrrhus did not qualify for such commissions at the time of termination.


Pyrrhus quickly appealed.

Iran to Appeal

Fortunately for Pyrrhus, the appellate judges proved more willing to give the contract a fair read.  The federal appeals court determined the trial court improperly interpreted the language stating that commissions are only due on products that ship (“5% of the net FOB value of any shipment of the Products . . . to Iran”), and the timing provision (“within fifteen (15) days of receipt of payment by Dresser”) as pre-conditions for commission liability.  “But it is clear,” said the reviewing court, “that if ‘orders [are] received and accepted or Contracts entered into’ during the term of the instrument, Dresser owes Pyrrhus a commission for the sales.”


The contractual factors relied upon by the lower court, namely the actual shipment of products into Iran and payment received by Dresser, merely defined when payments were to be made, not Dresser’s obligation to pay.  Reversing the trial court’s decision, the appellate court noted: “While the payments may not yet have been due under the Contract because of shipments to Iran or payments to Dresser that are as yet unfilled,” this was no reason to dismiss Pyrrhus’s claims “since Pyrrhus may eventually be entitled to commissions for the sales.”


Bringing a declaratory judgment action was specifically approved by the court of appeals “to determine whether Dresser owes Pyrrhus payments when Dresser has shipped the products and received payment.”  The case was returned to the trial court to ascertain if the alleged sales took place during the contract period (August 1986 through August 1988) and were therefore commissionable to Pyrrhus, even if the shipments took place later.



Reps are frequently terminated in situations where no commissions are due immediately upon termination, and the value of the rep’s work is only realized by the principal months or years later. If the rep generates orders, just as Pyrrhus did, compensation should follow. In the right cases, seeking a declaratory judgment from the court that the rep is entitled to commission payments when the sales are ultimately consummated is a highly valuable, if underappreciated, means to avoid walking away from a years-long effort with nothing to show for it.



Adam J. Glazer, partner in the law firm Schoenberg Finkel Beederman Bell Glazer LLC, known as the “go-to” law firm for sales reps nationwide, serves as legal counsel to MAFSI.  With decades of experience protecting the rights of independent reps, Adam can assist in commission recovery actions, mergers and acquisitions, and succession planning. Adam can be reached at 312-648-2300 or adam.glazer@sfbbg.com.

Mike Root's Wake Up Call

The Government is Finding New Innovative Ways to Tax Our Industry

This week there was an email dialogue between members of IHFRA’s Board of Advisors, that all in the industry should be concerned with.  It started with the observation that the new proposed “Infrastructure” bill in the Senate is going to tax miles driven.  This impacts everyone in our industry from retailers and their delivery trucks, factories on their freight, and reps doing their job of getting out to stores on a regular basis.  As a trade association for reps, IHFRA is very concerned about the impact this will have on additional costs in form of taxation for reps.

Posted on IHFRA.org in the blog section is a link to an article explaining this new proposal.


Very few news media outlets are reporting on this as of yet because it is so far buried in the proposal.  Those in our industry leadership positions should look into it and encourage their employees and lobbyist to get ahold of their political representatives and vice their displeasure on this new proposal.

The industry should not only be concerned with the new costs this legislation brings but with how they will track the mileage.  Another part of the legislation proposal is to add some form of breathalyzer device to every new car whether you drink or don’t drink.  The extra costs of these devices if legislation passed will be added to every new car.  Will they ultimately want to add another GPS type device to cars and trucks so the government can keep track of the miles you drive and where you go?

Being a rep is tough enough without more government oversight and taxation.  I encourage you to  contact your Congressmen and Congresswomen now before it’s too late.

In response to the gas tax and other ongoing issues, IHFRA recently sent a letter to President Biden expressing our concerns over this and other proposals that may negatively impact you, our member. To read that letter, or use it as a template to contact your local elected officials, click here:


IHFRA Sends Letter To President Biden

IHFRA Seeks Presidential Support For Reps

Dear President Biden,

I am writing to you with the utmost sense of urgency in my capacity as Executive Director of the International Home Furnishings Representatives Association, (IHFRA).

Headquartered in High Point, NC, our group represents some 1,600 independent home furnishings sales representatives whose livelihood may well be dependent on the level of relief you and our elected officials may provide them.

I know you are well aware of just how severely COVID-19 has impacted the lives of all Americans. The pandemic’s ability to challenge and disrupt every link in the supply chain has accelerated already spiking prices for just about every consumable, which continues to impede and threaten our country’s economic growth.

I would submit that no group of professionals has suffered the consequences of the pandemic as severely as the independent sales representative has.



IHFRA strongly encourages it’s members to use this letter as a template and to share your own concerns with your local elected official.  If you would like a copy of the letter in Microsoft Word format, please click to the button below.

Letter Template

Senate Infrastructure Bill Gives Feds Go-Ahead to Test Taxing Every Mile Americans Drive

Senate Infrastructure Bill Gives Feds Go-Ahead to Test Taxing Every Mile Americans Drive

Buried in the “Infrastructure Investment and Jobs Act” in the U.S. Senate is approval for the Department of Transportation (DOT) to test a new federal tax on every mile driven by individual Americans.

The bill directs Secretary of Transportation Pete Buttigieg to establish a pilot program to demonstrate a national motor vehicle per-mile user fee designed “to restore and maintain the long-term solvency of the Highway Trust Fund.”

Read More Here!