What is Authorized Sales Representative Agreement
An authorized sales representative agreement is a contract between a company and its sales representative enumerating all the conditions and terms governing the sales representation. This is a commonplace practice in the field of commercial contracts to determine a boundary within which a sales representative may function for the interests of the company. It authorizes the sales representative to conduct sales related work in the name of the company. It defines the services assigned to the sales representative, the territory of the work, product details for sales, targets of sale to be met among others. One should have clarity on the scope of work, mode of compensation, allocated areas, etc. before one sets out to draft an agreement for a sales representative.
Purpose of Authorized Sales Representative Agreement
The purpose of these agreements is to establish a set number of rules governing the relationship between a sales representative and the company. It allocates responsibilities to the sale representative. Through this agreement, a company is able to control the level of work done by a sales representative while fully furnishing the rewards attached to a good sale by way of commission clauses and the penalties to a bad one. It also assists in allocating the level of liability that a company will undertake in the event of a bad sale. By explicitly mentioning the responsibilities, it is able to determine what work would fall outside the course of business and what would be under the ambit of the allocated job.
Inclusions in Sales Representative Agreement
Apart from the operational clauses, a sales representative agreement should include certain standard clauses as well. Some important clauses which need to be included are: Effective Date of Termination, Services, Sales Representative’s Responsibilities, Orders, Commissions, Confidentiality, Trademarks and Trade, Names, Indemnification, Termination, General Provisions, Code of Business, Conduct, Market Area, Terms and Conditions for Commission, Dispute Resolution, Waiver, Remedies, Notice and Severability.
Key Terms of Authorized Sales Representative Agreement
The following are the major operational terms that need to be included in an agreement for sales representatives:
This provision establishes whether your relationship with the sales representative is exclusive or non-exclusive, and establishes in what geographical areas the sales representative will represent your works and the type of representation.
This refers to the area where the sales representative functions or the areas which have been allocated to him.
- Sales Representative Services
This Clause contains the sales representative’s services, such as assessing opportunities, carrying out work on behalf of the company and negotiating business opportunities.
This clause contains the commission or fee charged by the sales representative.
- Rights and Obligations of Company and Sales Representative
This clause lays down the company’s duties and obligations as well as the rights exercised by both the company and the sales representative.
- Intellectual Property
In the event, the sales representative wishes to use the company’s name or trademark for promotions, this clause should be inserted for brand protection.
Drafting an Authorized Sales representative Agreement
The following guidelines should be followed in order to draft an agreement for sales representative:
- Identifying the parties in the agreement and including their names and registered addresses.
- Recitals containing the purpose of the contract.
- Basic provisions such as appointment, location, and remuneration should be included.
- Enumeration of all the allocated duties of the sales rep and the deadlines that they must operate within should be contained in the agreement for a sales representative.
- Duration of the agreement should be mentioned clearly. For example, include the commencement and end date.
- The mode of reimbursement or remuneration should also be included.
- Provisions such as intellectual property, confidentiality, etc. are essential, because the sales representative may be privy to the company’s private information.
- Simple and crisp language should be used and the rights and obligations should be lucidly explained.
Benefits of Authorized Sales Representative Agreement
The following are the major benefits of an agreement for sales representative:
- Sales representatives help in promoting the business by assessing the market, promoting the product and negotiating with customers.
- Having an agreement for a sales representative is cost-friendly and leaves the company with more cash for other things.
- A sales representative has an exclusive experience of sales and hence the company does not need permanent employees for the same.
- Sales representatives can be excellent negotiators and the fact that they are not involved in developing the product, makes the customers trust them more.
- Payment on a commission basis saves costs.
- It helps the company in covering a larger territory without setting up operations there.
Cons of an Authorized Sales Representative Agreement
- A lot of customers expect special treatment from the company and would not want to deal with a sale representative and would instead be interested in talking to the product owner.
- The product owner may experience lack of feedback if he does not deal directly with the customers.
- Clients may not be satisfied with the behavior or the services of a sales rep and the company would still be liable to pay them for the services rendered by them due to the contract in place.
- Sales representatives may indulge in biased selling of products.
- It is difficult to monitor their progress. Chances of fraud and presenting inflated sales are also rampant.
The sales representative agreement deals with the contractual relationship formed between a company or artist and a person appointed to deal with the products so produced with a third party. This contract is important so as to determine the rights and liabilities of both the parties at stake and to take into account the interest of both the parties. In light of any dispute arising, the contract also provides for methods of dispute resolution and termination. In conclusion, this contract is essential to both parties to protect their business interests.
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