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Document and article reviewed by Ekene Obi on March 17, 2024 Written by Easy Legal Docs Editorial Team
Commission Agreements are essential for businesses and individuals who earn through sales. EasyLegalDocs.com offers a downloadable template to simplify creating your own agreement.
A Commission Agreement is a contract between a service provider and a client. It outlines how the service provider will be paid, usually based on a percentage of sales.
These agreements are important because they ensure both parties understand how payment will be calculated and paid. This clarity helps prevent disputes and ensures a fair deal for everyone involved.
A well-crafted Commission Agreement should clearly define several key elements to avoid confusion and protect all parties’ interests. These include:
Additionally, consider these points:
Fixed commissions are pre-determined flat fees, while percentage-based commissions vary depending on the sales volume.
Tiered structures incentivize higher sales volumes by increasing the commission rate as sales targets are met.
Some agreements include recurring commissions for ongoing client relationships or subscriptions.
Setting clear performance benchmarks helps align the interests of the service provider with the business goals.
Using a Commission Agreement helps establish a transparent relationship between parties. It sets clear expectations and provides legal protection for both sides.
Commission Agreements can also include non-compete clauses to protect business interests.
Remember, this is a simplified guide. For a comprehensive and legally binding document, use the template from EasyLegalDocs.com or consult with a legal professional.
Begin by entering the Effective Date of the agreement. This is the date from which the agreement becomes valid. For example, if the agreement is to start on March 1, 2024, you would fill in [EFFECTIVE DATE] with March 1, 2024 .
Replace [COMPANY NAME] and [COMPANY ADDRESS] with the official name and address of the company entering the agreement. Similarly, substitute [AGENT NAME] and [AGENT ADDRESS] with the full name and address of the agent. For instance, [COMPANY NAME] could be ABC Corporation and [AGENT NAME] could be John Doe .
In the agreement section, clearly specify the product(s) or service(s) that the agent is authorized to sell. This should be a detailed description, replacing the long blank line in the template. For example, “home appliances including refrigerators, washing machines, and microwaves”.
Specify the duration of the agreement by replacing the blank line in the TERM section with a specific end date or period. For example, “December 31, 2024” or “12 months”.
Define the geographical area or territory in which the agent is allowed to sell the products. This is done in the GEOGRAPHY section. For example, “the state of California”.
In the COMMISSION EARNINGS section, describe the method and rate of commission earnings for the agent. This should include how and when the commission will be calculated and paid. For instance, “5% of all sales, paid monthly”.
Remember, each of these steps is crucial for the clarity and legality of the agreement. It’s important to ensure all details are accurate and agreed upon by both parties before signing.
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