A Brief Introduction of a Sales Agent Agreement?
A sales agent agreement is a contract between a company that manufactures certain goods and a sales agent who will sell those goods in a particular territory. This agreement may also be created between a supplier and a sales agent. This contract may also be called a “sales agency agreement” or a “sales agent commission agreement.”
Through this agreement, a sales agent is appointed for a certain geographical area, and his duties and responsibilities are listed out. The sales target for such an agent, and the manner in which he shall earn a commission is also laid down. The agreement seeks to govern the appointment of the agent and to make sure that the agent does not commit any act that damages the reputation of the company. This contract creates a principal-agent relationship between the company (or the supplier) and the sales agent.
Who take the Sales Agent Agreement
The people involved in a sales agent agreement are the company or the supplier who manufacture or supply the goods, and the sales agent who will be given the authority to sell those goods.
Purpose of the Sales Agent Agreement
The purpose of this agreement is to appoint a sales agent for a specific region and to give him permission to sell certain goods. This agreement for the sales agent is necessary to lay down the conditions of the appointment of the agent. Every sales agent is only allowed to sell goods in a particular territory, and hence, it is very important to mention that territory in the agreement.
The agent may be appointed on an exclusive basis or non-exclusive basis, and this will also be mentioned in the contract. The agreement is necessary to ensure that both the supplier and the agent manage their duties in an effective manner.
Contents of the Sales Agent Agreement
The agreement should firstly, clearly identify the name of the company and the sales agent. It must mention the territory in which the agreement shall be enforceable, and the term of the agreement.
There must be a clause through which the agent is appointed and given authority to sell the goods. The manner in which the commission will be computed and paid to the agent is an integral part of the agreement. The responsibilities and obligations of the agent must be clearly listed down. Any special requirements that the company or the supplier has must also be included in.
The company or the supplier may set a minimum sales target that must be achieved every month by the agent. If this is not done, the company or supplier may have the right to terminate the agreement. The contract should specify whether the marketing of the products is to be done by the sales agent, or if all marketing activities are taken care of by the company itself.
How to Draft the Sales Agent Agreement
The following are the steps to follow while drafting a sales agent contract:
- The sales agent must be informed about the basis of his appointment as an agent, and the various duties that the company expects him to fulfill.
- Once the parties have agreed to all the important terms, the agreement must be drafted in such a manner that all such terms are given effect to.
- There must be remedies in place in case the sales agent fails to fulfill his duties or meet his sales target.
- The situations in which the agreement may be terminated by either party must also be clearly stated.
- It is essential that the agreement is signed by both parties.
- The agreement must be negotiated in such a manner that both parties get a fair deal.
- The sales target and the commission must be decided according to market standards
Benefits and Drawbacks of the Sales Agent Agreement
The following are the benefits and drawbacks of having a sales agent agreement:
- A major benefit of this agreement is that it helps to prove the conditions upon which the sales agent was appointed.
- It also helps to prove the amount of commission that should be paid to the agent for the number of sales achieved by him.
- The company will have a remedy in place in case the agent exceeds his brief under the agreement.
- The agent will also have a remedy in place in case the commission is not paid by the company.
What Happens in Case of Violation?
There will be a clause in the agreement that lists out what acts will amount to a breach of agreement, and what remedies will be available to the non-breaching party. In case the agent does not manage to meet the sales target required of him, the company may send a notice to him notifying him of his non-performance and, thereafter, terminate the agreement(1).
If there is any breach by either party, the non-breaching party can send a notice to the breaching party notifying them of their negligent act or omission and ask them to cure the breach within a certain period of time(2). If this is not done, the non-breaching party can terminate the agreement.
In conclusion, a sales agent agreement is essential and must be created whenever a company appoints a sales agent. A written agreement is very important to evidence the transaction and to protect the interests of both parties.