Legal Question in Business Law in California

contract termination

I entered a contract in 1998 to provide on-going engineering consulting for a manufacturing company. According to this contract, the company is to pay me 5% of the gross sales of a particular product.

The contract was written by myself in simple English and is less than 1 page long. It does not contain any references to how the contract is to be terminated and it specifies no ending date.

Can the company choose to terminate the contract now and only pay me for past sales? Or, do both parties have to agree on settlement terms that may include compensation for loss of income from future sales?


Asked on 6/20/06, 3:08 pm

4 Answers from Attorneys

Matthew Mickelson Law Offices of Matthew C. Mickelson

Re: contract termination

By its terms, there probably is no ending date, i.e. so long as there are sales, you will get your percentage. The other side may have arguments that there were oral understandings about terminating the contract, and these may or may not be admissible in court.

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Answered on 6/20/06, 4:03 pm
Terry A. Nelson Nelson & Lawless

Re: contract termination

Either party can terminate on 'reasonable notice', since there are no specified terms in the written document. You face the problem of disputing what the oral agreement was about commissions and payment dates and conditions. Contact me if interested in getting counsel and representation on this if you are not paid.

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Answered on 6/20/06, 4:28 pm
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: contract termination

Since the two opinions you've received so far seem to differ, at least somewhat, let me give you a third opinion.

The court will "supply" the missing terms in a bare-bones contract so as to do justice to both of the parties and to give the contract as a whole a reasonable interpretation.

As was pointed out, either side would be allowed to back out of the contract on reasonable notice to the other party. However, the manufacturer would still have to pay you for service already rendered under the contract. If your services tended mostly to support on-going, day-to-day sales and support functions, your right to earn royalties would probably terminate when you ceased to provide the services.

On the other hand, if the services you provided had a long-term value to the manufacturer, you could be more like the actor or performing artist who gets long-term royalties as long as the film is being shown or the recording being broadcast, even though you no longer appear on stage, so to speak. If your services created markets, led to product improvements, or the like, you'd be in a good position to argue to the judge that the royalties should continue as long as the product is being sold, or the markets you developed continue to buy it.

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Answered on 6/20/06, 7:21 pm
Norman Gregory Fernandez, Esq. The Law Offices of Norman Gregory Fernandez & Associates

Re: contract termination

I agree with Bryan's response. There is a lot more than can be argured on both sides. If you want to retain a lawyer to help you with this situation you can contact me through my website at www.best.law.pro or through this system.

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Answered on 6/20/06, 10:13 pm


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