Indiana Sales Representatives’ Commissions 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 Indiana’s laws protecting independent manufacturers’ sales representatives, as of January 1, 2023.
The Indiana Sales Representative Act
Indiana Statutes, I.C. 24-4-7-0.1
Sec. 0.1. The addition of this chapter by P.L.238-1985 does not apply to contracts formed before September 1, 1985.
Indiana Statutes, I.C. 24-4-7-1
Sec. 1. As used in this chapter, “commission” means compensation that accrues to a sales representative, for payment by a principal, at a rate expressed as a percentage of the dollar amount of orders taken or sales made by the sales representative.
Indiana Statutes, I.C. 24-4-7-2
Sec. 2. As used in this chapter, “person” means an individual, corporation, limited liability company, partnership, unincorporated association, estate, or trust.
Indiana Statutes, I.C. 24-4-7-3
Sec. 3. As used in this chapter, “principal” means a person who:
(1) manufactures, produces, imports, sells, or distributes a product for wholesale;
(2) contracts with a sales representative to solicit wholesale orders for the product; and
(3) compensates the sales representative, in whole or in part, by commission.
Indiana Statutes, I.C. 24-4-7-4
Sec. 4. As used in this chapter, “sales representative” means a person who:
(1) contracts with a principal to solicit wholesale orders in Indiana; and
(2) is compensated, in whole or in part, by commission.
The term does not include a person who places orders or purchases on the person’s own account for resale.
Indiana Statutes, I.C. 24-4-7-5
Sec. 5. (a) If a contract between a sales representative and a principal is terminated, the principal shall, within fourteen (14) days after payment would have been due under the contract if the contract had not been terminated, pay to the sales representative all commissions accrued under the contract.
(b) A principal who in bad faith fails to comply with subsection (a) shall be liable, in a civil action brought by the sales representative, for exemplary damages in an amount no more than three (3) times the sum of the commissions owed to the sales representative.
(c) In a civil action under subsection (b), a principal against whom exemplary damages are awarded shall pay the sales representative’s reasonable attorney’s fees and court costs. However, if judgment is entered for the principal and the court determines that the action was brought on frivolous grounds, the court shall award reasonable attorney’s fees and court costs to the principal.
Indiana Statutes, I.C. 24-4-7-6
Sec. 6. For purposes of Indiana trial rule 4.4, a principal who contracts with a sales representative to solicit wholesale orders for a product in Indiana is doing business in Indiana.
Indiana Statutes, I.C. 24-4-7-7
Sec. 7. (a) If a principal makes a revocable offer of a commission to a sales representative who is not an employee of the principal, the sales representative is entitled to the commission agreed upon if:
(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 sales representative has obtained a written order for the principal’s product because of the efforts of the sales representative; and
(3) the principal’s product that is the subject of the order is shipped to and paid for by a customer.
(b) This section may not be construed:
(1) to impair the application of IC 32-21-1 (statute of frauds);
(2) to abrogate any rule of agency law; or
(3) to unconstitutionally impair the obligations of contracts.
Indiana Statutes, I.C. 24-4-7-8
Sec. 8. A provision in a contract between a sales representative and a principal that waives a provision of this chapter by:
(1) an express waiver; or
(2) a contract subject to the laws of another state; is void.
Indiana, 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 Indiana sales rep attorney may be appropriate.
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 firstname.lastname@example.org 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.