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As a sales agent, you will eventually have to present a sales agency agreement to your clients from time to time as you intend to make the sales on their behalf. In fact, you cannot act as a salesperson for a vendor unless the vendor authorizes you through a mutually binding sales agreement.

The fact of the matter is that business relationships aren’t always smooth. Therefore, before you engage your client and agree to promote their products (as a sales agent), you need a contract that will govern the business relationship. This should be the case regardless of your business history with the client. Whether you opt to go for templates downloaded or purchased from the internet, or decide to have one drafted from scratch; there are essential clauses that should not miss from the document.

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1. Define your relationship

Before you proceed to any other business, the contract should specify the business relationship. Thus, as a sales agent, the sales agency agreement should not fail to determine that you are an independent contractor. As an independent contractor, you will have the room to define and maintain the means that the work is done – something employees cannot do. Also, the client will not withhold or pay taxes on payment to you. You will handle all of your tax obligations.

2. The scope of work and responsibilities

The sales agency agreement must mention the duties and responsibilities of each party. Therefore, you must define the tasks you will handle and your responsibilities. These duties and responsibilities include:

  • You will represent the client's company in good light by conducting yourself favorably.
  • You will use your best efforts to sell the goods. You may also need to mention the channels you will use to promote and sell the products.
  • You will engage adequately trained personnel.
  • You will not change the terms of sale, prices or brand names.
  • You may be required not to promote products that compete with your client's products.
  • You will not collect payment or collect debts.

These points are not exhaustive, but they give a scope of how the work will be conducted, and which boundaries you will not cross as the sales agent. There are tasks that only the client should handle, like payment and debt collection. The scope of the contract should always be clearly defined.

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3. The products to be promoted

Your client may have a variety of products that they sell, and thus, you will need to define which products you will promote as the sales agent. For example, a real estate agent may sell the house but not the furniture contained in the house. Your client may wish to limit the number of products you will promote on their behalf and thus, a list specifying these products will be included.

It is possible for the client to impose limitations on where the products will be sold or the particular type of customers. Your client will provide a comprehensive list of the products they need you to promote, and this list will be included in the products specification clause within the agreement.

4. Commissions to be earned

As a sales agent, you cannot sign a sales agency agreement that doesn't include specifics on your earnings. The contract should specify how the commissions to be earned and computed. The document will address the basis of the commissions. Besides commissions, the contract will also specify if there will be bonuses or other incentives that will be earned besides the commission.

Besides specifying the commissions, the agreement will also touch on the schedule that will be followed for payments. You can agree to receive compensation right after the products are shipped to the customers, or you can opt to have it remitted on a periodic basis (for example, on a monthly basis).

In essence

The sales agency agreement is the document that will cement the business relationship with your client. The document clearly defines how you would work, and how you will be compensated. It also allows you to work independently since you will enter into the contract as an independent sales agent and not as an employee. This gives you the freedom to exercise your skills without being monitored, as the contract defines how far the client will go concerning watching what your business. This document is not merely a paper with words printed on it – it is the binding factor between you and your client.