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Paper-less Sign Up

Feb 8, 2008
With so much business being done with faxes and electronic mail, the signed contract seems to be going the way of the 8 track player. What about the law that you need my signature to hold me liable? Well, not always.

First, let's get the c.y.a. out of the way. I recommend that ALL contracts be dated, witnessed and signed by both (all) parties, preferably in blue ink so it is more obviously an original signature and not a copy.

Now we talk practicalities. Oral contracts are legal. The issue is not usually legality, but enforceability. Let's examine the lack of a signed contract from two perspectives, that of the company and that of the distributor.

The company wants distributors who order their products and services and bring them more distributors. Nothing in the signed or unsigned distributor contract makes the distributor do those things. They are a volunteer army, who can do nothing if they choose (and often do.) The significant document is the product or service ORDER. Numerous orders create a course of dealings of the parties bringing payments or obligations to pay to the company. These documents, much more than the distributor contract, are important in the sense that they are convertible to cash that goes to the bottom line.

The distributor contract often even contains a clause making it cancelable at any time by the distributor by giving written notice to the company. If you were a bank lending officer, which would be more impressive, lots of orders, or lots of cancelable at any time distributor contracts?

When everything is fine, the lack of a signature means little. It's when discipline up to and possibly including termination is needed that companies check the files to find the signed distributor application. It is evidence that these rules were in effect (right here on the document you signed) and you broke that one. Companies who do paper-less sign up have many choices after the fact (and before any trouble arises) to obtain a signed document for the files. They should check with their marketing and/or legal consultants to see what works best in their system.

The distributor has different issues that may be tied to signatures. Most distributor applications have a place for the distributor to sign, but not a place for the company to sign. If the distributor contract is viewed as an offer it needs to be accepted. Most often, something other than the return of a signed contract is the acceptance. Sending a welcoming letter or package, issuing an identification card, or merely starting to accept orders closes the loop. Again, when all is going well, flaws in the formal process mean little. It's when an expected bonus check does not arrive, or a disciplinary action is taken by the company, that the distributor starts reading the fine print, (or tries to find the fine print.) If a distributor seeks to hold the company to a particular clause (such as arbitration, or written notice of changes in the compensation plan) it is always better if completed paperwork is available. Keeping in a file all correspondence and documents from the company is a very good idea. Of particular importance is paperwork used in the annual renewal of the distributorship. Distributors are urged to save their canceled checks used to pay the renewal fee. Also, if the company communicates with the distributor by e-mail, send it to the printer before deleting it and save it in your paper file for a rainy day.

Bottom-line, paper-less sign ups work. Getting signed copies into the files latter is recommended for the protection of all parties.
About the Author
Gerald P. Nehra is an MLM-specialist, private practice attorney. He is one of only a few attorneys nationwide whose practice is devoted exclusively to direct selling and multilevel marketing issues. His 33 years of legal experience includes nine years at Amway Corporation, where he was Director of the Legal Division. He can be reached at 1710 Beach Street, Muskegon, Michigan 49441-1008, 231-755-3800, 231-755-4700 fax. His e-mail address is GNehra@mlmatty.com.
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