Reading Between the Lines

What’s legal and what’s not in reselling?

June 2009

multipage

You and I know. We're printing resellers: brokers, agents, distributors or whatever name we choose to call ourselves. Fair enough? Not quite. Our monikers alone could defeat us in court, and some of our day-to-day practices could destroy our businesses if handled poorly.

The "how" and "why" are contained in an obscure document known as the Uniform Commerical Code (U.C.C.). Every resellers' worst nightmares can be avoided or reworked through the clever, mostly favorable-to-intermediaries, tenets of this venerable document.

To see how the U.C.C. applies to your company, here are the five worst-case scenarios taken from real-life cases.

1. You advertise your company as a solutions provider with access to specific equipment and facilities, perhaps picturing these on your brochure or website. This is a problem because solutions are not a product, and the U.C.C. doesn't protect the interests of a service provider. Besides, you sub-contract and deliver a tangible product, and don't bill a fee for the solution. If the customer refuses to pay because the printed matter did not solve the problem, you lose.

2. You have proven yourself to your customer and, in turn, are promised more work. Unfortunately, your supplier makes a mistake and the buyer opts to take the business to another source, refusing to pay you. A buyer has the right to "cover" when a supplier fails to perform, and may subtract the entire difference from your claim, even demanding payment from you for the excess cost of the "remedy."

3. Because the supplier cost you future business, you think the supplier should pay for the mistake. Unfortunately, that's not the case. A promise of future business is a common ploy to get a price concession, and we typically use the same tactic with manufacturers. Under U.C.C., each order is a transaction, the contract of which is unenforceable for anything beyond it unless "in a writing." The supplier owes you nothing except specific performance, and may demand payment if it can prove the job was "acceptable by commercial standards."

4. Your salesperson quits and "steals" your customers, denying you future profits. You try to take them to court. If you don't have a written contract with the salesperson, your relationship is terminable "at-will" and without consequence. No one "owns" a customer.

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