Commission Sales Agent Contract: Everything You Need to Know
Sometimes, a commission sales agent contract is helpful. A company will employ a sales agent to promote their brand.3 min read
Sometimes, a commission sales agent contract is helpful. A company will employ a sales agent to promote their brand. In exchange for each sale that the agent makes, he or she will usually be given a commission. Much like the agreement that is made between a general contractor and one of his clients, a sales agent will go into an agreement with the company they are representing.
What Does a Commission Sales Agent Contract Include?
A commission sales agent contract will include:
- How much commission the agent will make off each sale
- How much commission the agent will make for service plan sales
- Termination clauses
- Terms and conditions
- Geographical territories the agent can sell in
This contract will outline the responsibilities of the agent and which products or services he or she is to promote. It will also go into detail and explain what the various terms and conditions of the agreement are. There should always be a section included that outlines what constitutes a termination of the contract to take place.
In the event that the agent has to maintain a certain type of licensure to perform his or her services, the contract will need to state what conditions must be met in order for the license to be renewed. A sales agent will work on an independent basis, not as an actual employee of the company being represented; however, it is likely that the agent will still need to meet a certain quota.
In fact, in order to maintain status with the company, this quota must be met. The termination clause will likely outline how, if the quota is not met, the relationship between the agent and the company will be terminated. If there are additional terms and conditions to be included, they will need to be clearly stated in the contract.
It is also important for the contract to outline how the agent will have to pay for damages incurred as a result of his or her actions. For example, if the agent misrepresents the company and it causes monetary losses, then the agent will be responsible for compensating the company for these damages.
Are Geographical Territories Included?
There's a chance that the contract will outline the geographical locations for which the agent has been assigned. If the agent goes outside of these locations to make a sale, it may be deemed as a breach of contract. From this point, the contract will be terminated and monetary damages may be enforced upon the agent. If there is a geographical location for which the sales agent is to remain, it will likely include a list of customers the agent is to target.
Example of Commission Sales Agent Contract
Here is an example of a sales commission agreement. A jewelry company chooses to hire a sale agent and the agent speaks with a prospective customer. The customer then chooses to purchase one of the company's jewelry boxes. According to the commission plan, the agent receives a two percent commission from the sale as well as a commission for any service plans acquired by the customer. The customer purchased the jewelry box for $200, paying the agent a $4 commission.
The annual service plan that the customer purchased is for $200 a year. It allows the customer to have all of her jewelry cleaned and inspected at any time throughout the year. The commission for the service plan is $8. This gives the agent a total of $12 in commission off of this sale.
This type of agreement gets tricky, though, because what happens when the sales agent is no longer representing the company? Does he or she still continue to receive a commission from the annual service plan if the customer chooses to keep paying it? The answer to this question depends on where the sale was made. Some states allow the agent to continue keeping the commission, while other states will say that the agreement is terminated if the agent is no longer representing that company.
The key here is to make sure that all of this is outlined in the initial agreement. If it is stated in the agreement that the sales agent will no longer continue to receive commissions from annual service plan renewals after he or she quits, then this clearly dictates how the commissions are to be handled.
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