Opinion ID: 180299
Heading Depth: 1
Heading Rank: 2

Heading: Puerto Rico's Sales Representatives Act

Text: In 1990, the Puerto Rico Legislature enacted Law 21 to protect sales representatives from the unjust termination of their contracts. [2] P.R. Laws Ann. tit. 10, §§ 279-279h; see also Orba Inc. v. MBR Industries, Inc., 49 F.Supp.2d 67, 71 (D.P.R.1999). The statute provides that no principal or grantor may terminate [the principal-sales representative] relationship, or directly or indirectly perform any act that may impair the established relationship, or refuse to renew said contract..., except for just cause. [3] P.R. Laws Ann. tit. 10, § 279a. If the principal terminates its commercial relationship with an exclusive sales representative without just cause, it is liable for the damages caused. Id. § 279c (stating the criteria courts should employ to calculate damages due to an unlawful termination of a sales representation contract). Under Law 21, a sales representative is [a]n independent entrepreneur who establishes a sales representation contract of an exclusive nature, with a principal or grantor, and who is assigned a specific territory or market, within the Commonwealth of Puerto Rico. Id. § 279(a) (emphasis added). In turn, a sales representation contract is [an] agreement established between a sales representative and a principal, through which, and regardless of the way in which the parties establish, delineate or formalize said agreement, the party of the first part commits himself to making a reasonable effort and due diligence in the creation or expansion of a market which is favorable for the products that the principal sells, directed at capturing clientele to offer it a product or service marketed by him in Puerto Rico, and the party of the second part is bound to comply with the commitments that may result from the sales representative's efforts and coordination and to pay the previously-accorded commission or remuneration. Id. § 279(c). The recent Puerto Rico Supreme Court decision in Cruz-Marcano v. Sánchez-Tarazona, 2007 TSPR 198, 172 D.P.R. 526, 2007 WL 4171221, 2007 PR Sup. LEXIS 190 (certified translation provided by parties) outlines the characteristics a sales representative should bear to enjoy protection under Law 21. [4] According to the Puerto Rico Supreme Court, a sales representative is a business intermediary who: (1) exclusively promotes and processes contracts on behalf of a principal in an ongoing, stable manner; (2) operates in a defined territory or market; (3) is responsible for creating or expanding the market for the principal's products through promotional efforts; (4) receives commissions for his services or a pay previously agreed upon by the parties; and (5) operates as an independent merchant. See id. 172 D.P.R. at 548-49, 2007 WL 4171221, 2007 PR Sup. LEXIS 190, at . [5]