When there is the sale of products, usually the manufacturer doesn’t go out in the market and sell his products himself. Rather, he would hire a salesman or what we refer to as agents who are authorized employees who make the actual sales. Most of the time, these agents are hired on a commission basis which means they get a small percentage of what they earn for the principal. The legal document that bounds principal and agent in mutually agreed terms and conditions for sales and commission earning is known as the sales commission agreement.
Top Free Commission Agreement Templates:
Here are our hand-picked Top Free Commission Agreement Templates, designed just for you!
***** Template Rated 1st *****
Source: Word-Templates.com
*** Template Rated 2nd ***
Source: miketemplates.com
*** Template Rated 3rd ***
Source: wordexceltemplates.net
*** Template Rated 4th ***
Source: sec.gov
*** Template Rated 5th ***
Source: signaturely.com
Key Elements to Prepare a Sales Commission Agreement:
Basics of both Parties:
A sales commission agreement should start with all the basic information i.e. names of both parties i.e. principal or manufacturer and agent or salesman, their contact details and complete addresses, the date on which the agreement is signed, the basic purpose of the agreement, and expiration of the agreement.
Description and Price of the products:
This part of the agreement is designed to give details about the pricing of the products. For instance, if the principal has already given a price to the product and wants the agent to only sell on that price, it will be mentioned here. If the agent has authorization to give a discount on the price, it will be stated here as well. With the pricing, the next important thing to mention in the agreement is the description of the products along with other specifications i.e. use, warranties, damage claims, etc.
Authorization Statement for the Agent to Sell:
In the sales commission agreement, this part will include a clear and full statement from the principal stating that he is allowing the agent to legally sell the products in a specified territory. This is an important part of the agreement as it authorizes the agent to make sales on behalf of the manufacturer where it also specifies a geographical area where the agent is allowed to make sales. This portion may also include the legal rights an agent has and the duties that he is responsible for other than making actual sales i.e. going to the office at the end of the day and recording all the sales.
Non-compete Conditions:
Sales commission agreements are about specifying how much commission the agent will get but it also includes more information like the non-compete clause. This clause is designed to benefit the principal as it will prevent the agent not to getting involved in the sales of a competitor. This means the agent is not allowed to work with any competitor in any aspect and he is also not allowed to sell their products as well.
Non-Disclosure Cause:
Every sales commission agreement has a clause that specifically prevents the agent from leaking or disclosing any secret information to third parties, especially the competitors. When there are multiple companies in the same market, they try to get inside information about each other’s company to help them in sales and if an agent shares this hidden information with another company, the principal might see a decrease in the sales. To prevent that from happening, this clause is added in the agreement and according to this clause, the agent is not allowed to talk about the company’s secrets i.e. retail price, manufacturing price, and profit margin with third parties.
Commission Payment Terms:
This is a sales commission agreement which means it should include all the specifics and details of how much commission will be paid and when it will be paid. This part is very important from the perspective of both parties; principal and agent. Here you need to mention if the commission will be calculated on the sales value or retail price of the product.
This portion will also tell that both parties agree to a particular percentage of the commission that the agent will get, the date of each month when the commission will be paid to the agent, method of payment i.e. check, cash, or bank transaction. Another important element of this portion is the commission cap which specifies exactly how much commission the agent can earn. If this limit is achieved, no matter how many further sales the agent makes, there will be no commission for him.
Termination of the Agreement:
It is highly unlikely that when an agreement is signed, either party will intentionally try to breach it but it happens. In case it actually happens that somehow someone violates any terms and conditions, this part of the agreement will help mediate the dispute between them. Here the details of when the agreement will be considered violated can be added along with what will happen when the agreement is violated and if both parties agree to a third-party mediator to solve the dispute.
Signature of Both Parties:
In the end, there should be space for the signature of both parties involved in the agreement. By putting their signature on the contract, they both agree to all the terms and conditions mentioned in the document and each party will be legally secure in case of violation of any clause.
