Commissioned Sales Agreements

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A company that wishes to sell its products often engages the services of a commissioned sales agent. The agent agrees to represent the company and its line of goods or services, and, in return, the company pays a commission on any business brought to it. Like any legal relationship, having a document that spells out the agreements and obligations on both sides can make work go smoother. In the case of a disagreement, it may become much easier resolved when there is a written framework of commonly agreed principals. Often times a commissioned sales agreement also doubles as a commission plan.

Topics Covered

  • While every company is going to have its own version of a commissioned sales agreement, there are a number of topics that most have in common, including contractor relationship, territory, selling rights, product prices, commission, bonus, marketing materials, confidentiality, termination and non-compete clauses, among others.

The Need For One

  • Commissioned sales people are generally not part of the overall team of employees. No one else is compensated quite like they are and their allegiance is often more toward the client than the company. Often times they are completely independent contractors, working on their own.

    Having a firm agreement lessens the temptation and ability for the salesperson to walk out the door with the clients in hand and head over to a competing firm. It also lets the salespeople know they will be treated fairly when it comes to disputes over territory, clients, earned commissions and other flashpoints in sales.

A Measuring Stick

  • The same as a carpenter using a known measure before deciding where to cut, a sales organization needs to have a measure for deciding acceptable performance. An agreement provides one measure. If the salesperson is going outside the assigned territory, selling the product at a inappropriate price or providing too much information about the company to outsiders, the company has something to point to and say that this behavior is unacceptable. Without the agreement, it becomes harder for a company to justify unacceptable actions.

Simplicity

  • While certain legal jargon may be necessary to ensure the viability of the agreement, the best agreements are simple in nature. Explain what is expected of both sides and who is responsible for what. Answer all the questions that are likely to come up but don't get bogged down into too much detail. For example, a non-compete clause may say "any competing company" without having to name specific companies.

Disagreement

  • Commissioned sales agreements are almost always weighted toward the benefit of the company when disagreements arise. Many agreements force the salesperson to pay all legal fees if a judgement is awarded against him and to sue in the home state of the company if the necessity arises.

References

  • Photo Credit sales representative image by Peter Baxter from Fotolia.com
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