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How to make a Sales agency agreement

A sales agency agreement is a document that appoints a sales agent to negotiate and enter into a contract of sale on a principal (supplier's) behalf. It sets out the basis of appointment of the agent, duties of principal and agent, minimum sale targets, commission amount and the processes for payment and ending the agreement.

Protect yourself when appointing an agent to sell your products or when you are being appointed as a sales agent with this sales agency agreement. Use this agreement to appoint an agent on an exclusive or non-exclusive basis.

This straightforward sales agency contract contains everything needed to protect a principal with a product to sell as well as the appointed sales agent, ensuring that both comply with the law. It covers the basis of appointment, the geographical areas, or territory, duties of the principal and agent, minimum sales targets, commission and how to end the agency agreement.

Use this sales agency agreement:

  • to appoint an agent to sell your products in a defined geographical area or territory
  • to appoint an agent on an exclusive or non-exclusive basis

This agreement covers:

  • the basis of appointment of the agent
  • the duties of principal and agent
  • the minimum sales targets
  • the commission amount and process for payment
  • ending the agreement

You need a sales agency agreement when you want to appoint an agent to sell your products in a defined geographical area, territory or on an exclusive or non-exclusive basis.

An 'agent' is someone who acts on the supplier's behalf. Although an agent may arrange sales, the sales contract will be between the supplier and the end customer (ie an end-user of the product).

A 'distributor' is a supplier's customer. The distributor sells the product to their own customers.

Exclusive agency gives an agent exclusive rights to sell the principal's products in the territory and the principal agrees not to appoint other agents in the same territory. In a non-exclusive agency, the principal can appoint other agents in the territory and the agent will need to compete with others to promote and conclude sales. Normally, the territory will be defined as the geographical area the agent is appointed to operate.

A supplier can prevent an agent from selling competing products from another business in the set territory for the length of the agreement or for a time after the agreement ends. A supplier can also restrict the agent from exceeding an expenses limit in the specified period of time and may require an agent to provide a guarantee payment that protects the supplier in case a buyer fails to make a payment.

Yes, in this agreement you can set minimum sales targets.

If the agent does not meet a target, a supplier can choose to take steps such as:

  • supply directly to customers in the territory
  • appoint another agent to promote and sell the products in that territory
  • and/or remove or add products to the list of those that the agent is authorised to sell

You can also choose to end this agreement by giving the agent a written notice of termination. In this document, you can specify the notice period.

This agreement can be terminated:

  • by giving notice to an agent if he fails to meet the minimum sales target
  • by giving appropriate notice (eg one month for the first year or two months for the second year)
  • when the other party commits a material breach of the agreement and fails to remedy it within a specified period of time
  • when either party is dissolved or is at risk of bankruptcy

Ask a lawyer for:

  • appointing a distributor who buys goods before reselling them
  • appointing a franchisor who has a licence to offer similar products
  • appointing a marketing agent who cannot conclude contracts on your behalf
  • appointing an agent to sell services or mixed goods and/or services

This sales agency contract complies with the Commercial Agents (Council Directive) Regulations 1993 and is governed by the law of England and Wales or the law of Scotland.

Other names for Sales agency agreement

Sales agency contract, Exclusivity contract and Exclusivity agreement.