Sales Representative Agreement

What a good one includes

• A precise commission structure detailing exactly how commissions are calculated, when they are earned, and the specific schedule for payouts.
• A clearly defined territory or market segment clause to prevent channel conflicts and outline whether the representative has exclusive or non-exclusive rights.
• A comprehensive list of products or services the representative is authorized to sell, preventing them from representing unauthorized or competing lines.
• An explicit termination clause that outlines the notice period required and details how commissions on pending or recurring sales are handled post-termination.
• Robust confidentiality and non-solicitation provisions to protect your proprietary customer databases, pricing structures, and trade secrets.
• Realistic, measurable performance quotas or expectations that must be met to keep the agreement active or maintain territory exclusivity.

Common mistakes to avoid

• Failing to specify whether commission is earned upon the signing of a sales contract or only after the customer’s payment has cleared.
• Neglecting to clarify the trailing commission policy, which dictates how long a representative is paid for recurring accounts after the agreement ends.
• Using vague geographic or industry terms that create overlapping boundaries and spark bitter disputes over split commissions.
• Exerting too much control over an independent representative's daily schedule, which risks violating labor laws regarding employee misclassification.

Frequently asked questions