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Sales Agency Agreement

Updated on: Oct 4th, 2023


5 min read

A Sales Agency agreement is made between a company and a sales agent. This agreement is required when the company hires a sales agent to make a sale of their products and services on their behalf. This agreement protects the interests of both the company and the sales agent. 

It outlines the terms of sale, payment terms and other provisions governing the duties and authority of the agent. It serves as a legal document in the event of any disputes between the agent and the company.

Major elements of Sale Agency Agreement

Appointment of Sales Agent: A company may appoint an agent on an exclusive or non-exclusive basis. Under exclusive basis, the agent can sell only that company’s products and is refrained from selling other company’s products in a defined geographical area or territory.

Payment Terms: The sales agent is generally paid in the form of commission. The agreement must provide the basis for calculation of commission for instance on the basis of sales amount or number of products sold, etc. Also, the time of payment of such commission to the agent should be mentioned in the contract.

Terms of Sale: The terms of sale imply making following provisions in the agreement:

Credit Approval: Deciding the credit limits of the customers.

Collection: Authority of the collection of payment from the customers.

Price: Deciding the prices of the products, delivery schedules, discounts to be allowed to the customer.

Duties & Obligations of Agent: The agreement may require the agent to adhere to following obligations:

Annual Sales Quota: Annual sales quota implies the minimum sales target to be achieved by the agent for the year.

Promotion of the Products: Promotion techniques to be adopted by the agent for the sale of products.

Customer Service & Product Complaints: Additional customer services to be provided by the agent and how to handle the customer complaints with regard to company’s product.

Terms and Termination of the Contract: The agreement mentions the duration of the contract i.e. starting date and ending date of the contract. Also, it should specify the right of either of the parties to terminate the contract including the circumstances under which contract can be terminated.

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Quick Summary

A Sales Agency Agreement is a legal contract between a company and a sales agent outlining terms of sale, payment, and duties. It ensures the interests of both parties are protected. Key elements include appointment terms, payment details based on commission, terms of sale like credit approval and pricing, agent obligations such as reaching sales quotas and handling customer complaints, and the contract's duration and termination conditions.

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