The Requirements of Sales Representative Agreement

Quality time is key in the development of every business.  A Sales force can be utilized to help solicit leads. A detailed contract should be in place to govern the relationship before engaging the service of a sales representative.




Parties Relationship: There must be a clarification whether the sales representative to be employed is an independent contractor or an employee. Income taxes should be withheld, as well as social security and Medicare taxes if the sale rep is an employee. Wages and unemployment taxes should be paid to employees. Independent contractors do not need taxes paid to them. Independent contractors maintain means and methods of the work to be performed. And employee is a person whose work and mode of working is determined by an employer. An employee is also a person whose details of how services are performed are controlled by an employer.

Duties and Responsibilities of Representative: The representative must be able to conform consistently to the reputation of the company. He must use all the available materials and effort to promote and sell goods. When a sales representative is forwarding orders, he must do so promptly and proper method of doing so must be described. He must be trained and reliable. There should also be prohibition from some actions. Some of them are; right to choose whether to accept orders or not can be demanded by the company, representation may not be allowed for the representative on behalf of the company, terms of sale and prices cannot be changed by a representative, a representative might not be given the ability or opportunity to collect payments and debts, the representative might also be restricted from selling competing products while still in the company.

Products: There should be specification on the products and services your representative sells. Attaching a complete list of approved products to the agreement between you and the representative is a means of enforcing him not to sell unauthorized products. This should be periodically updated when there are changes in products. The areas where the products can be sold should be included as a limitation for the sales representative. Existing customers list can be of help to the sales representative to know who to sell to and who not to sell to; therefore, it should be attached with the agreement. Information in the agreement should be included if you decide to set a sales quota for your representative. The past performance of the sales representative will help to know what to expect of him.

Commissions: The mode of payment of the sales representative is also important in the agreement. The mode of computation of the commission and the specific commission should be stated in the agreement. The fact that the compensation the sales representative will receive aside other incentives and bonuses will be the commission should also be stated. Commissions are paid usually after shipment to customers; nevertheless, the time commissions will be paid to sales representative should be stated in the agreement. The periods the company will send statement to the sales representative and how often it will be sent should be included in the agreement. The sales representative should be given the opportunity to object to the statement also. There should be a clarification whether representative expenses will be reimbursed and limitations on reimbursable expenses.

Confidentiality: The Company tends to trust some confidential information of the company with the sales representative. The agreement should consist of the information the representative is not allowed to share with outsiders. Some of that information includes; sales list, business plans, price structures, commission rates, customer lists, vendor lists, financial information, operating procedures, computer programs, design formulas.

Termination: Grounds for termination of contract are included in the agreement. Cause or convenience can be the basis of contract termination. Failing to meet specific quota can be an example of termination for cause. Deciding not to need the services of a sales representative and termination of contract can be an example of termination by convenience. Either ways, the process of termination should be clearly stated in the agreement signed.

After Termination: The sales representative should be aware that all materials provided by the company to him must be returned and he also should stop seeing himself as a part of the company after the termination of contract. This should be included in the agreement. Working for a competitor after termination of contract should not be allowed over a period of time and this should be included in the agreement. This is to prevent the representative from sharing confidential information of the Company to the competitors. Choice of law and severability should also be included in the agreement with the sales representative and this can call for visiting your attorney before hiring a sales representative.