Arizona Sales Representative Statutes
Independent manufacturers’ sales representatives are typically hired by manufacturers, distributors, and importers to solicit orders for their products from potential customers in designated territories in exchange for a sales commission. Such sales representatives often spend many months or years building up a customer base in their assigned territory and incur substantial up-front sales and marketing expenses that can include travel, lodging, entertainment, and trade show expenses with the hope of generating a stream of future commission income. The sales representative is vulnerable if the principal suddenly terminates their relationship and/or fails to pay all commissions owed to the sales rep.
In response to these concerns, starting in the 1980s and 1990s, many states enacted statutes to protect the interests of these independent manufacturers’ sales representatives. These statutes often:
• Require the sales representative agreement to be in writing;
• Require the principal to provide a copy of the written contract to the sales rep;
• Require the principal to pay the sales rep for all commissions owed promptly following termination (or incur liability for statutory penalties, attorney’s fees, and court costs);
• Strictly limit the circumstances under which the principal can terminate, or fail to renew, a sales representative agreement (e.g., requiring the manufacturer to have “good cause” for termination); and/or
• Prohibit the principal from imposing terms (such as choice of law or exclusive venue provisions) in the sales rep agreement that would effectively require the sales rep to waive its statutory protections under the law.
Thirty-five of the fifty states have enacted some form of sales rep protection legislation.
This article sets forth the text of Arizona’s laws protecting independent manufacturers’ sales representatives, as of January 1, 2023.
The Arizona Sales Representative Contracts Act
Arizona Statutes, A.R.S. § 44-1798
In this article, unless the context otherwise requires:
1. “Commission” means:
(a) Compensation accruing to a sales representative for payment by a principal the rate of which is expressed as a percentage of the dollar amount of orders or sales.
(b) Any other method of compensation agreed to between a sales representative and a principal, including fees for services and retainers.
2. “Principal” means a person who does all of the following:
(a) Engages in the business of manufacturing, producing, importing, selling or distributing a product or service.
(b) Uses sales representatives to solicit orders for the product or service.
(c) Compensates the sales representative in whole or part by commission.
3.“Sales representative”:
(a) Means a person who does both of the following:
(i) Establishes a business relationship with a principal to solicit orders for products or services.
(ii) Is compensated, in whole or in part, by commission.
(b) Is not an employee or a person who places orders or purchases on the person’s own account or for resale.
4.“Termination” means the end of the business relationship between the sales representative and the principal, whether by agreement, by expiration of time or by exercise of a right of termination by either party.
Arizona Statutes, A.R.S. § 44-1798.01
A. The sales representative and the principal shall enter into a written contract. The contract shall set forth the method by which the sales representative’s commission is to be computed and paid.
B. The principal shall provide each sales representative with a signed copy of the contract. The principal shall obtain a signed receipt for the contract from each sales representative.
Arizona Statutes, A.R.S. § 44-1798.02
A. If an agreement of services is terminated for any reason both of the following apply:
1. All the commissions due through the time of termination shall be paid to the sales representative within a period of not to exceed thirty days after termination.
2. All the commissions that become due after the effective date of termination shall be paid to the sales representative within fourteen days after they become due.
B. The principal shall pay the sales representative all commissions due while the business relationship is in effect in accordance with the agreement between the parties.
C. A principal who fails to comply with subsections A and B of this section is liable to the sales representative for damages in the amount of three times the sum of the unpaid commissions owed to the sales representative.
D. The prevailing party in an action brought under this section is entitled to the cost of the suit, including reasonable attorney fees.
E. Commissions shall be paid at the usual place of payment unless the sales representative requests that the commissions be sent by registered mail. If, in accordance with a request by the sales representative, the sales representative’s commissions are sent by mail, the commissions are deemed to have been paid as of the date of the registered postmark on the envelope.
F. Unless payment is made pursuant to a binding and final written settlement agreement and release, the acceptance by a sales representative of a commission payment from the principal does not constitute a release as to the balance of any commissions claimed due. A full release of all commission claims that is required by a principal as a condition to a partial commission payment is null and void.
Arizona Statutes, A.R.S. § 44-1798.03
If a principal makes a revocable offer of a commission to a sales representative, the sales representative is entitled to the commission agreed on if all of the following apply:
1. The principal revokes the offer of commission and the sales representative establishes that the revocation was for a purpose of avoiding payment of the commission.
2. The revocation occurs after the principal has obtained an order for the principal’s product or service through the efforts of the sales representative.
3. The principal’s product or service that is the subject of the order is provided to and paid for by a customer.
Arizona Statutes, A.R.S. § 44-1798.04
A principal who establishes a business relationship with a sales representative to solicit orders for products or services in this state is doing business in this state for purposes of jurisdiction. A provision in a contract between a sales representative and a principal that purports to waive a provision of this article by an express waiver or a contract subject to the laws of another state is void. This section does not invalidate or restrict any other right or remedy available to a sales representative or preclude a sales representative from seeking to recover in one action on all claims against a principal.
Arizona Statutes, A.R.S. § 44-1798.05
This article does not apply to any of the following:
1. An individual or business entity engaged in providing insurance pursuant to title 20.1
2. A bank, trust company, savings and loan association, credit union, consumer lender or financial institution organized, chartered or holding a license or authorization certificate under the law of this state, any other state, the United States or the parent, subsidiary or affiliate of such entity.
3. A person who holds a real estate salesperson’s license pursuant to title 32, chapter 202 and who has a claim for payment of a real estate commission or compensation against the real estate broker with whom such real estate salesperson is affiliated.
Conclusion
Arizona, like a majority of states, has enacted sales representative legislation. Manufacturers, distributors, and importers typically bear the burden of compliance with these statutes and should ensure that their contracts and activities are consistent with applicable law. Sales representatives may wish to review applicable laws to understand their rights. If the laws of multiple states are involved, compliance with the relevant law may become even more complicated, and legal advice from an Arizona sales rep attorney may be appropriate.
If you are interested in the sales representative statutes of other states, click here to view our sales representative statute survey page.
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About the Author
Craig W. Trepanier is a sales representative attorney who handles disputes under the Minnesota Termination of Sales Representatives Act and the laws of other jurisdictions. He can be reached at craig@trepanierlaw.com or at 612.455.0502. Trepanier MacGillis Battina P.A. is a Minnesota sales representative law firm located in Minneapolis. If you need advice regarding your sales representative agreement, or are having a dispute regarding the termination, non-renewal, or modification of a sales rep agreement or unpaid commissions, please contact us. Mr. Trepanier can represent you in the State of Minnesota. If appropriate, we can co-counsel with an attorney in your jurisdiction to leverage our specialized knowledge of sales rep law.