What Is a Sales Agency Agreement?

Prior to defining a sales agency agreement, perhaps we should get familiarized with what a sales agency is first. In simple terms, a sales agency is a type of business that specializes in promoting the sales of goods or services of a particular company. The said company can make use of the services of a sales agency to let them take full control of their sales activities or to enhance its in-house sales force.

A sales agency agreement is a business document that is used to employ the services of a sales agent to negotiate and sign a contract of sale on behalf of a principal. It also specifies the parameters that the sales agent will abide by if he/she works as an independent contractor for a corporation. Moreover, this document also outlines the rationale for appointing an agent, the obligations of the principal and agent, the minimum sale objectives, the value of the commission that the sales agent will receive, and the methods for payment and termination of the agreement. It also clearly establishes that the sales representative is not a firm co-owner, employee, or officer.

Important Components of a Sales Agency Agreement

Discussed below are the important elements that should be included when making a sales agency agreement:

Region of Appointment and Authority. This part of the sales agency agreement states the agreement to appoint the sales agency in question as an appropriate representative for the products and services that are listed in a given territory. And since the sales agency is only authorized to sell products or services in a specific territory, it is important that the said region should be clearly stated.Commission. This section of the sales agency agreement should state the nature of the commissions that the sales agent will receive as well as the method in which the commission is to be calculated and the method of payment. It should also state that all commissions will be subject to the existing governing laws of the territory that the sales agent is operating. Sale of Product. This part of the sales agency agreement outlines the procedure for what should be done during sales, as well as the procedures that should be followed post-sales. This includes any support and unpaid dues by the end-users. It should also state that the company will provide an updated copy of all the necessary documents such as the price lists, the delivery schedules, and the terms and conditions concerning the products or services being sold.Responsibilities of the Sales Agency. Part of the responsibilities of the sales agency that are defined in this agreement includes attaining the annual quota, conducting advertising and any other promotional activities within their scope, as well as providing the appropriate customer support. This clause of the agreement also states that the sales agency may attend any campaigns or trade shows at their own expense.Additional Requirements. The sales agency agreement should also list down any additional requirements such as offering the appropriate training to the employees of the sales agency which should take place where the sales agency office is located, providing sales and marketing collateral or information at the expense of the partner company and keeping the sales agency up to date on all the latest events that unfold or on all the latest changes regarding the products or services that their partner company is offering.Trademark. This essentially means that the sales agency will possess the rights to represent the products or services within their designated locale. This includes products that are under the trademark, copyright, or those that bear the trade name of the partner company. This section should also state that under no circumstances the sales agency will be able to modify or remove any existing trademarks in the product.Confidentiality. Since the sales agency will be able to gain knowledge that is valued by the company, a confidentiality clause must be included in this agreement. This element of the sales agency agreement serves to protect the sales agent’s intellectual property and any other sorts of sensitive information from being unlawfully sold, redistributed or shared without consent by the sales agency.Indemnification. This part of the sales agency agreement states that it is the company’s sole responsibility to develop, create, and manufacture all of its goods, as well as any patents and trademarks held by the company. It also states that the partner company of the sales agency promises to indemnify and pay any and all claims, losses, fines, or damages resulting from the infringement of the company’s patents, trade names, or goods. Additionally, the partner company should also reimburse the sales agency for any and all costs incurred as a result of claims regarding the warranty, product liability, or negligence.Termination Clause. This element of the sales agency agreement states that the agreement may be terminated when situations happen such as failing to meet the quota requirements, both parties file for bankruptcy, when a breach of agreement is reported and is not resolved within a given time period, and when either of the parties involved commits an action that severely hampers their performance or ability to abide by the terms that are agreed upon in the document.Property Rights. This part of the sales agency agreement states that even though the sales agency is authorized to promote and sell the partner company’s goods and services, they are in no way granted to take ownership of the said goods or services. They are only permitted to do so in accordance with the sales agency agreement and upon the termination of said agreement, they will subsequently surrender those rights.

Different Types of Sales Agents

Sales agencies employ sales agents to do their tasks, such as selling their products or services to the general public. With that being said, here are the different types of sales agents:

Traditional Sales Agent. These are the individuals who are employed and work for traditional sales agencies. Traditional sales agents frequently have previous client profiles or portfolios that the organization may use once they are hired. Typically, traditional sales agents are paid on a commission basis on each transaction.Sales Agency Teams. Sometimes, sales companies often need the services of complete sales teams rather than individual agents. Companies may hire a sales agency team to help them outsource their sales job. Companies may then delegate sales agency management of the entire territory or client sector to the sales agency team. Instead of selling their products, this alternative allows internal sales personnel to focus on account management, market research, and detecting future company requirements.Online Sales Agents. Online sales agents make use of technology, social media, search engine optimizations, and other things to sell products and services. They are primarily used if companies tend to primarily sell their products or services online with minimal shipping and handling. They are also primarily used if the sales of a paid application or mobile game need to be improved. Online sales agents do this by targeting the appropriate customers in promoting products.Sales Lead Experts. When someone falls into a target demographic or inquires about a product or service, a company considers them a lead. You can engage sales lead firms or individuals to cold-call customers, contact potential leads online, or qualify leads in the same way that conventional sales agents do. This allows your assigned sales team to focus on selling, saving them time.Consultants. Business consultants can assist a company’s sales operations by offering items, business alliances, or any other services that may enhance revenue. This might be beneficial if the company’s primary focus is on contracting with other firms. For example, if a certain company specializes in developing computer hardware, a consultant may propose a computer company searching for a consistent source, therefore creating a business-to-business relationship.

Steps in Creating a Sales Agency Agreement

A sales agency agreement is made between a company that manufactures its own goods or services and a sales agency that wishes to sell and promote those goods in a specific area. With that being said, here are the steps to be taken when writing a sales agency agreement:

  • 1. Write the Introductory Elements of the Agreement

    Begin the sales agency agreement by writing the introductory details such as the parties involved in the agreement and their specific responsibilities, the title of the agreement, the nature of the business, as well as the region in which the sales agency will sell and promote the goods and services of the partner company. A definition of terms section of the agreement is not strictly required, but can always come in handy to avoid confusion regarding the complex business or legal terms that may be written anywhere in the agreement.

  • 2. Set the Scope of the Agreement

    After writing the introductory elements, this step will then define the scope of the sales agency agreement. In this step, write the elements such as the responsibilities that the sales agency will have throughout the duration of the agreement, the terms regarding the commission of the sales agents, the procedure regarding the sale of the products or services as well as the procedures post-sale, and any other additional requirements that the parties involved may have throughout the duration of the agreement.

  • 3. Write Down the Additional Clauses of the Agreement

    In this step, you will write down the additional clauses of the sales agency agreement. The additional clauses of the agreement generally include the trademark clause, the confidentiality clause, and the indemnification clause. Additionally, the duration of the sales agency agreement should also be stated in this step, which includes a concrete start date and finishing date. Indemnification clauses are especially important in this agreement since it states that the partner company will pay and indemnify any claims, losses, or damages resulting from patent infringements.

  • 4. Set the Termination and the Rights Clause

    After writing down the auxiliary clauses of the agreement, it is now time to define the termination clause and the property rights clause of the sales agency agreement. A termination clause is important to have in this agreement (or on any type of agreement) since it clearly defines all the situations or guidelines that can initiate the termination of the sales agency agreement. Having a property rights clause is also important in this agreement since it states that even though the sales agencies have permission to sell and distribute the partner company’s products and services in their area, they are not permitted to take ownership of the products of the company.

  • 5. Finalize the Sales Agency Agreement

    After writing all the primary and auxiliary elements of the sales agency agreement, it is now time that the agreement should be finalized. Add spaces for signatures in the document, verify if there are any elements of the agreement that are missing, and check for typographical or grammatical errors that may have been unnoticed. An important step you can do here is to have the document checked by a lawyer since this is a legal paper. Once everything is in order, then the parties involved can give it another careful reading before they sign the sales agency agreement. Once they sign the agreement, the terms stated inside that document will then take effect.


What role does a sales agent have?

The role of a sales agent is to sell items or services while also acting as a representative for the brand of the company that hired him/her in a particular area. Sales agents are frequently self-employed individuals who receive a commission depending on the volume of products or services that they have sold. Some sales agents work for sales agencies that subcontract their employees. However, both agency and non-agented salespeople can provide services dependent on the sort of sales you may require to enhance income.

Does a sales agent have restrictions in selling products?

Yes, restrictions can also be in place for sales agents. For example, a supplier or the partner company can prohibit a sales agent from selling competitive items from another company in the agreed-upon region for the duration of the agreement or for a period of time after the agreement expires. A supplier may also require an agent to give a guarantee payment that protects the supplier if a buyer fails to make a payment and may prohibit the agent from exceeding an expense limit in a specific period of time.

What is the comparison between a non-exclusive agency and an exclusive agency?

In a non-exclusive agency, the partner company has the power to appoint other agents in a given territory, and the agents must compete with each other in order to promote and close sales of the product. Typically, the territory is defined as the geographical region in which the agent is assigned to work. In an exclusive agency, the parent company grants a sole agent the only right to sell their products in an area, and the parent company promises not to appoint other agents in the same territory.

A straightforward and effective sales agency agreement should contain the necessary terms and clauses that are needed to protect a partner company with a product or service to sell as well as the sales agent that does the work. This agreement document also ensures that all the parties involved comply with the laws in the area that they’re operating. In this article, various examples of a sales agency agreement can be obtained if you need help in making one.