BILL ANALYSIS



C.S.S.B. 533
By: Leedom (Goolsby)
4-25-95
Committee Report (Substituted)


BACKGROUND

A principal who fails to comply with provision of a contract or who
fails to pay a required commission under Subchapter G, Article 35,
Business and Commerce Code, is liable to the sales representative
in a civil action for three times the damages sustained by the
sales representative plus reasonable attorney's fees and costs.

Section 35.81 (2)(A) as it relates to the definition of a
"principal" has been a problem in at least one case where a federal
judge ruled that principals outside the state should no be treated
differently from principals within  and refused to award treble
damages and subsequently held Sections 35.82, and 35.84, Business
and Commerce Code, unconstitutional because they violated the
Commerce Clause of the U.S. Constitution.

Section 35.81 (2) (B) under the definition of principal, this
section excludes a large number of manufacturer's and sale's
representatives who sell products to end users of the products
rather than to resellers.  The definition is unnecessarily
restrictive.

Without a damage provision, most sales representatives cannot
justify the time and expense of filing suit to collect delinquent
commissions, or if they do, the suit is likely to be settled out of
court at a substantial discount.  With the possibility of treble
damages, more principals will pay commissions due rather than face
a substantial penalty.

PURPOSE

S.B. 533 redefines "principal" regarding an entity that produces,
manufactures, imports, distributes goods for sale.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly
grant any additional rulemaking authority to a state officer,
department, agency or institution.

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Section 35.81 (2), Business and Commerce  Code,
to redefine the term "principal" to mean a person who manufactures,
produces, imports, or distributes a product for sale; uses a sales
representative to solicit product orders; and compensates the sales
representative in whole or in part by commission.  Deletes the
provision that the principal does not have a permanent or fixed
place of business in this state and that the principal's customers
purchase the product for resale.  Makes conforming changes.

SECTION 2.  Re-enacts Sections 35.82, 35.83, and 35.84, Business
and Commerce Code.

     Sec. 35.82.  CONTRACT.  A contract between a principal and a
sales representative under which the sales representative is to
solicit wholesale orders within this state must be in writing and
set forth the method by which the sales representative's commission
is to be computed and paid.

     Sec. 35.83.  PAYMENT IN ABSENCE OF CONTRACT.  If a
compensation agreement between a sales representative and a
principal that is not in writing is terminated, the principal shall
pay all commissions due the sales representative within thirty
working days after the date of the termination.

     Sec. 35.84.  DAMAGES.  A principal who fails to pay a
commission is liable to the sales representative in a civil action
for three times the damages sustained by the sales representative
plus reasonable attorney's fees and costs.

SECTION 3. Effective date:  September 1, 1995.

SECTION 4.  Emergency clause.

COMPARISON OF ORIGINAL TO SUBSTITUTE

The major points of difference between S.B. 533, as introduced and
the committee substitute are as follows:

     SECTION 2.  The substitute re-enacts Sections 35.82, 35.83,
and 35.84 under the Business and Commerce Code.  

SUMMARY OF COMMITTEE ACTION

S.B. 533 was considered by the Committee on Business and Industry
in a public hearing on April 4, 1995.  Testifying in support of
S.B. 533 was Richard A. Frazier, representing himself.  Without
objection, S.B. 533 was left pending before the committee.  S.B.
533 was considered by the committee on pending business on April
25, 1995.  The committee considered a complete committee substitute
to S.B. 533.  The committee substitute was adopted without
objection.  S.B. 533 was reported favorably, as substituted, with
the recommendation that it do pass and be printed and be sent to
the Committee on Local and Consent Calendars, by a record vote of
7 (seven) ayes, 0 (zero) nays, 0 (zero) present-not-voting, 2 (two)
absent.