A commission agreement is a type of contract by which a person or company acts as a sales agent on behalf of the (principal) exporting company delivering its goods to potential foreign market buyers. In return, they get a fee tied to the value of the transactions structured and payable to the principal. Much important information is included in a Commission agreement. This includes business name and address. It should also include the name of the contracting officer or employee involved.
10+ Agency Commission Agreement Templates in PDF | WORD
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5. Agency Commission Agreement Example
6. Broker Agency Commission Agreement
7. Estate Agency Commission Agreement
8. Buyer Agency Commission Agreement
9. Commercial Agency Commission Agreement
10. Sales Agency Commission Agreement
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6 Steps on How to Draft a Commission Agreement
Step 1: Identify the Parties
When you proceed to draft an agreement, you need to first identify the parties taking part in the agreement. The general structure follows one party providing some kind of information while the other party receiving that information. If some other third party is also a part of this agreement, it should be mentioned along with the details of the third party or parties. In the case of a commission agreement, one party acts as the sales agent to introduce the product or the service under question to buyers, while the other party provides the commission.
Step 2: Define the Commission
A commission agreement is generally made to help introduce a product or a service of a certain company to potential buyers. Before you start to draft such an agreement, the objective of agreeing has to be clearly defined. The agreement can be for any type of product or service depending on the company it is being made for. Once the objective has been outlined, the commission to be provided by the other party needs to be explained. As the party who is drafting the agreement, you need to make sure that the other party doesn’t find a loophole in the agreement.
Step 3: Scope of Obligation
The essence of the Commission Agreement is a two-part obligation on both the party who will act as the sales agent and the party that will provide the commission. The second party needs to be clear on the product or service that it wants to be introduced, including the fee that it will pay. This offer needs to be accepted by the first party who is willing to be a sales agent for that purpose. Such a scope of obligation must always be maintained by both parties.
Step 4: Exclusions
Some exclusions from the obligations or clauses may be provided in the agreement. These exclusions are designed to tackle circumstances in which perhaps making the payment of the commission or introducing the product or the service would be unfair or too burdensome for the one hand.
Step 5: Determine the Term
The term refers to the length of the contract and this term should be provided clearly in the agreement. The agreement can last forever or for a duration of a few years, depending on the needs of the party wanting to introduce its product or service. Both parties need to be clear and agree on this term. Generally, though, the term for a commission agreement lasts for as long as the sale of the product or service is not made.
Step 6: Sign and Date
Once you have followed all of the above steps, you will have your agreement prepared. The final step is to provide spaces for putting the signature of both parties and the date of issuance of the contract. This step is the only way to prove that both parties acknowledge and comply with the agreement. Such shall also serve to prevent the forgery of the document.
Sales Commission Plan
The commission strategy for your company forms the framework for the sales commission agreement. You need to develop this plan first and only can you proceed to agree. The elements of this plan that need to be included in the agreement are:
When the Commission is being earned:
It is crucial that the contract sets out explicitly and precisely when the sales representative is receiving his or her commission. For instance, there may be a significant difference between commending a sales agent with commissions on the booking of order versus when the order is paid for.
When the Commission is to be paid:
The contract should also assert when commissions are payable and the date up to the calculation of the amount of each payment.
Refunds, defaults, and/or cancellations:
Any sale a business makes in an ideal world is a final one. However, several events may turn a sale into a non sale. Whether it is the canclation of an order or a consumer who defaults on payment or the return of a product for a refund, the arrangement needs to account for these circumstances as well as the effect on commissions that they might have.
Most companies offer their sales reps benefits as a reward for more sales, such as rewards for hitting a certain number of sales, or a commission system where the amounts paid out are tiered.