What is Commission Agreement Drafting?
A commission agreement is a legal contract between an agent and principal (a company) that determines how agents receive compensation for generating business and providing specific services to the company. It’s common in sales and real estate, when one party wishes to increase their sales by using an external agent’s services.
The agreement must outline important aspects of their working relationship, such as what commission is agreed on, what the parties’ roles are, and so on.
To prevent disputes, there are specific key terms and elements to include in your commission agreement draft.
Read the rest of this article to explore what information you should include in a commission agreement, how to draft it, and how a qualified lawyer can help you with the commission agreement drafting process to prevent disputes.
What are Key Terms in a Commission Agreement?
A commission agreement usually contains key aspects such as the following:
- Parties. This specifies details of the principal and agent.
- Work scope. The services or products the agent represents must be clearly outlined.
- Commission. How the commission will be organized, such as if it’s a fixed or variable rate tied to performance milestones, must be specified.
- Duration. This states the agreement length, with effective start and end dates. The agreement can involve a fixed term or be open ended, depending on the type of working relationship.
- Termination. If either party wants to exit the agreement, this clause defines how they can do so. It could be a mutual agreement or breach of contract, for instance.
- Obligations. The parties’ obligations or duties must be specified. For example, the agent might have a duty to keep the principal updated on market changes or customer feedback.
- Confidentiality. To protect the business’s sensitive information, there must be a confidentiality clause prohibiting the agent from sharing private information with third parties.
- Non-compete. This clause restricts the agent from working with the company’s competitors in specific locations or industries.
How Do You Draft a Commission Agreement?
When writing up a commission agreement, it’s important to consider the following tips so that it’s clear and accurately reflects the working relationship between parties.
Specify Performance Goals
The agent must agree to reach specific performance goals that must be outlined in the agreement so that they know what’s expected of them. This could include achieving a minimum sales target within a specific amount of time.
You should also consider when and how agents should provide the principal with work updates and reports. The reports could include client feedback or sales figures.
Calculate Commission
Since commission structures, and payment terms in general, can be a common source of disputes, the commission agreement must clearly specify how commission is calculated and what payment schedules will be followed.
In many commission agreements, commission can depend on agent performance. This structure can serve as a powerful way to motivate your agent to achieve more for greater reward.
Clarify Confidentiality
You might make provisions in the agreement to safeguard private information during the term, but consider what will happen after the agreement ends. The agent might still be prohibited from using the business details, as a way to protect the company’s interests. If so, there should be breach consequences, such as damages or lawsuits, to deter prohibited behavior.
Include Non-Competes
When specifying that the agent isn’t allowed to work in a certain location or for a specific employer after the agreement ends, take care to check your local laws. Non-compete clauses must meet all local laws and regulations, or they could lack enforceability in court.
Provide Termination Details
There are various ways in which a commission agreement can end, such as if both parties have fulfilled their duties and the agreement naturally comes to an end.
Alternatively, both parties might agree to end the agreement early or one party might fail to meet the agreement terms, resulting in a breach of contract that forces termination. In other cases, there could be a force majeure event, such as a natural disaster, that’s beyond either party’s control.
Specify processes involved in terminating the agreement so you prevent disputes.
How Does a Lawyer Assist With Commission Agreement Drafting?
It’s worth consulting a lawyer if there’s anything you’re unsure of including in your commission agreement, or if you’d like a professionally-drafted agreement that protects your interests. A lawyer can help you by:
- Drafting clear commission agreement terms that are easy for both parties to understand, reducing ambiguity and minimizing the risk of disputes.
- Ensuring all clauses are legally enforceable and aligned with tax, contract, and employment laws.
- Defining commission structures correctly so that they’re fair and reasonable.
- Clarifying both parties’ roles and duties so that their goals are aligned.
- Considering your risks and including protective clauses to mitigate them.
- Conducting activities beyond drafting the agreement, such as negotiating with the other party for mutually favorable terms.
- Reviewing the finalized commission agreement to ensure that everything is in order, giving you peace of mind.
Where to Find a Lawyer for Commission Agreement Drafting
If you need to hire a lawyer to draft a commission agreement, use an online legal network to make the process easy.
ContractsCounsel is one of the largest online legal marketplaces. It provides clients with access to a network of vetted lawyers. All the lawyers on the platform possess years of experience and expertise in contract drafting and review.
From the comfort of your home, you can find a lawyer to draft your commission agreement. Here are the easy steps to follow:
- Go to the ContractsCounsel marketplace.
- Post your project for free. You can include a few details to help you find the most suitable lawyer, such as by stating why you need a commission agreement.
- You’ll receive multiple bids from lawyers directly on the platform who have the experience to help you.
- Review the lawyers’ profiles. Go through the platform’s lawyer data that you can conveniently access on the platform, such as their location, client ratings for previous projects, expertise, and credentials.
- Connect with one of the platform’s lawyers you think is best suited to your requirements and hire them to draft your commission agreement for a flat fee.
