The Contractual Relations in Multi-level Marketing Companies

Abstract

In a MLM company, distributors whole buy the products and retail to end users out of a fixed commercial location. In addition to margin, they get retail commission for every sale. Also every distributor is able to recruit, train and sponsor new distributors – directly and indirectly- and get a percentage as an overall commission. In this way, there are two contracts between company and distributor in a MLM company. One is sales contract with a fiscal exchanged act condition in implied which contains the products purchase contract by distributor and getting retail commission by selling it to end users. The other is proxy contract whereby distributor (as the company’s proxy) act to recruit, organize, sponsor and train continuously new distributors. In practice it isn’t convened any contract between distributors, but with respecting the way they interact, the governing contract between them which recognized by law, is quasi lease contract.

Keywords

• multi-level marketing
• overall commission
• fiscal exchanged act condition
• implied contract
• quasi contract