A sales contractor agreement is used to allow a business to procure staff on a contractor basis, instead of hiring employees. Situations may arise where it may not be ideal or appropriate for a business to hire employees on a permanent basis. Businesses will typically pay contractors more per hour than they would pay an employee, but with a contractor, the company doesn't have to pay taxes, Social Security, or benefits.

Independent Contractor Agreement for Direct Salesperson

It's essential that a company properly communicate its relationship with the direct sales staff in order to protect itself from unseen liabilities and losses. When hiring independent contractors to sell products, it's important for both parties to sign an independent contractor (IC) agreement. The IC agreement addresses how the IC will:

  • Perform services
  • Meet deadlines
  • Receive payment

What Is a Sales Agreement?

A sales agreement is a written document between a buyer who wants to purchase goods and a seller who owns those goods and wants to sell them. The agreement will contain the details and terms surrounding the transaction.

What Are Sales Agreement Used For?

A sales agreement may be used to purchase or sell the following:

  • Goods: A possession or a physical item (e.g., air conditioner, computer, car, animals, exercise equipment, etc.)
  • Services: Performing tasks or duties in exchange for payment (e.g., installing a stove)
  • Goods and Services: Includes supplying aid and the purchase of a possession or physical item (e.g., a furnace and installing the furnace)

Make sure to clearly identify the service and/or goods in the sales agreement.

Who Are the Parties in a Sales Agreement?

There are only two parties in a sales agreement:

  • Buyer: The business or individual that purchases the service or good from the seller
  • Seller: The business or individual that sells the service or good from the buyer

Determining Payment Details in a Sales Agreement

In order to complete a sales contract, a payment plan will need to be created. The payment type is the form of compensation that the seller will allow the buyer to use to pay for the goods/service. The typical payment types are:

  • Cash
  • Promissory note
  • Certified check
  • Bank draft
  • Paypal
  • Credit card
  • Email transfer

A receipt should be given to the buyer for all cash transactions. A deposit may be required when making a purchase. A deposit is specific amount of money determined by the seller that a buyer must pay to the seller to secure the transaction. The deposit will usually be applied as a credit toward whatever is being purchased.

Deposits may be nonrefundable or refundable. In order to make the sale transaction details as clear as possible, it's important to document all significant due dates for payment.

Sales Representative Contract Document

A sales representative contract document is used for two reasons:

  • A business is hiring a sales IC and needs to address the conditions and terms of services that will be provided to the company.
  • An IC is providing its services to a business, and it needs to address the agreement and terms with the company.

A sales representative contract should be used whenever a business hires sales staff to help grow the company. It will initiate communication between the two parties and help prevent any future misunderstandings. The contract may address the following:

  • Terms of the relationship
  • Services provided
  • Payment details
  • Non-compete clauses
  • Confidentiality provisions

Provisions About the Parties' Relationship

The sales representative contract should first clearly communicate whether the worker is an employee or an IC. Businesses are not required to withhold or pay taxes on payments made to an IC. An IC will perform the task as he sees fit. He controls the methods and means as to how the work will be completed.

When the business specifies how the work should be completed and what should be done, the IC may transition into an employee. If a business grants an employee freedom of action but still controls what tasks will be performed, then the worker is still considered an employee.

Provisions About Representative Duties and Responsibilities

The duties and responsibilities of the IC may include:

  • Conducting themselves in the best interests of the company
  • Guidelines for completing orders
  • Company and individual role training
  • Identifying questionable orders
  • Determining when the IC may change or set prices
  • Determining what payment types are prohibited

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