Creating a Commission Agreement

Note: Want to skip the guide and go straight to the free templates? No problem - scroll to the bottom.
Also note: This is not legal advice.

Introduction

Commission agreements are a must-have for any employer and employee. These legally binding and enforceable documents define the exact terms of an employee’s pay for a particular job, outline their duties and responsibilities, and can help to prevent misunderstandings between both parties.

For employers, commission agreements provide legal protection by outlining the terms of compensation, protecting against potential liabilities, and ensuring that they are properly compensated. For employees, commission agreements give them a better understanding of their job obligations while allowing them to negotiate better rates if they feel the rate offered is too low. In addition, having such an agreement in place can reduce the costs associated with litigation in case of disputes over employment conditions.

Aside from protecting both parties from legal risks and potential disputes, commission agreements also help protect employers from violations of labor laws by ensuring that employees are properly compensated for their work. This helps ensure that everyone involved in the agreement is treated fairly and their rights respected.

The Genie AI team has created the ‘world’s largest open source legal template library’ to make drafting high quality commission agreements easier than ever before - without needing to hire or consult with a lawyer directly! Our millions of data points teach our AI what a market-standard commission agreement looks like while our community template library allows anyone to customize these documents at no direct cost today - perfect for anyone looking to quickly draft such an agreement but not wanting to go through complex paperwork or extensive research themselves!
Read on below for our step-by-step guide on how you can create your own customised commissions agreement today using Genie AI’s services – so why not get started now?

Definitions (feel free to skip)

Commission Percentage – A percentage of each sale that a sales representative receives as compensation for their work.
Duration of the Agreement – The length of time that an agreement is in effect.
Scope of the Agreement – The duties and responsibilities that both parties are expected to fulfill.
Duties of Both Parties – The specific tasks that each party is responsible for.
Conflicts of Interest – A situation where the interests of two parties are in opposition to each other.
Dispute Resolution Process – A process for resolving disagreements between two parties.
Termination Clause – A clause in an agreement that outlines when and how the agreement can be terminated by either party.
Ownership of Customer Data – The right to use, store, and manage customer data.
Intellectual Property – Creative works that are protected by copyright or other legal measures.
Payment Structure – The schedule and conditions for payment, including any taxes or fees.
Additional Terms and Conditions – Additional clauses or restrictions that are included in an agreement.
Legal Counsel – A professional who specializes in providing legal advice and guidance.

Contents

• Outline the terms of the commission agreement
• Including the commission percentage, duration of the agreement, and any other details
• Discuss the scope of the agreement and the duties of both parties
• Address any potential conflicts of interest
• Such as the relationship between the parties or any competitive activities
• Specify the payment structure and any other financial details
• Determine the ownership of any customer data and other intellectual property
• Establish a dispute resolution process
• Draft a termination clause
• Include any additional terms and conditions
• Review the agreement with legal counsel
• Create a copy of the signed agreement for both parties
• Ensure that both parties are in agreement with the terms of the commission agreement
• File a copy of the agreement with local or state authorities, if required
• Exchange contact information between both parties
• Schedule regular reviews of the agreement
• Sign and date the agreement

Get started

Outline the terms of the commission agreement

• Draft a commission agreement that outlines the terms of the commission
• Make sure it includes the commission percentage, duration of the agreement, and any other details that are relevant to the relationship
• Outline any other terms in the agreement that the parties need to be aware of, such as payment terms and conditions
• Review the agreement with the other party and make any necessary changes
• Once both parties have agreed to the terms of the commission agreement, have both parties sign the agreement
• Keep a copy of the agreement for your own records

Including the commission percentage, duration of the agreement, and any other details

• Specify the commission percentage, taking into account any minimums, maximums, and incentives
• Include an end date for the commission agreement, if applicable
• Add any other details that may be pertinent to the agreement, such as payment method, payment schedule, and payment address
• Once all of the relevant details have been included, review and revise the agreement as necessary to ensure that it is accurate, clear, and legally sound

You’ll know that you can check this off your list and move on to the next step when you have included all of the necessary details for the commission agreement and you have reviewed and revised it to ensure that it is accurate, clear, and legally sound.

Discuss the scope of the agreement and the duties of both parties

• Determine what services or goods are being provided by the commissioning party
• Agree on a timeline for services or goods to be provided
• Define the duties of the commissioning party
• Define the duties of the party receiving the commission
• Discuss and come to a mutual agreement on any other details that are relevant to the agreement
• Draft the agreement and review it with both parties to make sure it meets the needs of both parties

You’ll know you can check this off your list and move on to the next step when both parties have agreed on the scope of the agreement and the duties of both parties.

Address any potential conflicts of interest

• Identify any potential conflicts of interest that may arise from the commission agreement and discuss them with both parties
• Determine if any of the parties involved have any current or potential involvement in activities that would be in competition with each other
• Agree on how to handle any potential conflicts of interest that may arise
• Include a clause in the agreement that outlines the parties’ responsibilities in case a conflict of interest arises
• Make sure all parties involved are aware of the clause and are comfortable with it
• Once all potential conflicts of interest have been addressed and agreed upon, the parties can move on to the final step in the agreement.

Such as the relationship between the parties or any competitive activities

• Outline the roles and responsibilities of each party
• Identify any non-compete clauses or any other restrictions on the parties
• Describe the duration of the agreement
• Specify any limitations or conditions both parties must agree to
• Set out any obligations of either party

When you’ve outlined the relationship between the parties and any competitive activities in the agreement, you can move on to the next step.

Specify the payment structure and any other financial details

• Determine the payment amount and frequency (e.g. a one-time payment, recurring payments, etc.)
• Establish the currency of payment (e.g. USD, EUR, etc.)
• Specify the payment method (e.g. direct bank transfer, PayPal, etc.)
• Specify the payment timeline (e.g. on a monthly basis, within 5 business days of the month end, etc.)
• Include any bonuses or incentives based on performance
• Specify any payment related penalties or deductions
• When all payment related details are finalized, you can check this step off your list and move on to the next step.

Determine the ownership of any customer data and other intellectual property

• Decide if the commission agreement will include any customer data or other intellectual property owned by either the company or the individual
• Make sure that the commission agreement clearly states who owns the customer data or other intellectual property
• Ensure that both the company and the individual understand the terms of ownership
• Once all the details regarding ownership of customer data or other intellectual property have been included in the commission agreement and both parties agree to the terms, you can check off this step and move on to the next.

Establish a dispute resolution process

• Decide on the preferred method for resolving disputes – such as arbitration, mediation or court proceedings
• Identify the governing law and jurisdiction that will govern the dispute resolution process
• Consider any limitations or exclusions of liability that will apply to the dispute resolution process
• Outline the process for escalating a dispute if it is not resolved at the first level
• Once all of the details are agreed, document the dispute resolution process in the commission agreement

When you have established the dispute resolution process and documented all the details, you can check this off your list and move on to the next step.

Draft a termination clause

• Outline the circumstances under which the agreement can be terminated
• Specify the notice period for either party to terminate the agreement
• Specify any termination fees or penalties
• Specify any obligations that remain after termination
• When done, review the termination clause to ensure it meets the parties’ needs
• Once reviewed, check this off your list and move on to the next step of including any additional terms and conditions

Include any additional terms and conditions

• Identify any additional terms and conditions that should be included in the commission agreement
• Outline the specific terms and conditions in the document
• Be sure to include the following information:
• The start and end dates of the agreement
• The commission rate
• Any other fees that may be applicable
• Any restrictions on how the commission may be collected
• The consequences of non-compliance with the agreement
• Ensure that the terms are clear and easily understood
• Ensure that all parties involved understand the terms and conditions
• Have all parties involved sign the agreement

Once all parties have signed the agreement and all information has been included, you can check this step off your list and move on to the next step of reviewing the agreement with legal counsel.

Review the agreement with legal counsel

• Identify a lawyer to review the document
• Discuss the contractual terms with the lawyer, including any additional terms and conditions included
• Make any necessary changes to the agreement based on the lawyer’s advice
• Check with the lawyer to make sure the changes are accurate and complete
• When the lawyer is satisfied with the agreement, you can check this off your list and move on to creating a copy of the signed agreement for both parties.

Create a copy of the signed agreement for both parties

• Make two copies of the signed commission agreement
• Ensure that both copies are complete and legible
• Distribute a copy of the agreement to each of the parties involved
• Secure the original copy in a safe place
• Check that both copies have been received and signed by all parties
• Once you have confirmation that both copies have been received and signed, you can check this step off your list.

Ensure that both parties are in agreement with the terms of the commission agreement

• Review the commission agreement with both parties to ensure all terms are understood and agreed upon
• Ask questions and/or provide clarification on any sections that are unclear
• Have both parties sign the agreement to signify their understanding and acceptance of the terms
• Obtain proof of both parties’ signatures (e.g. email, scan, photograph, etc.)
• Once all parties have signed the agreement and proof of signatures is collected, the step is complete.

File a copy of the agreement with local or state authorities, if required

• Determine if the agreement needs to be filed with any local or state authorities.
• If required, make a copy of the signed agreement and submit it to the necessary government office.
• Monitor the submission to ensure that it is accepted.
• Once accepted, you can move on to the next step.

Exchange contact information between both parties

• Gather the contact details, such as name, address, email, and telephone number, of both parties to the agreement.
• Exchange the contact information, either in person, via email, or by mail.
• Confirm that the contact information is up to date and accurate.
• When all contact information has been exchanged, this step is complete.

Schedule regular reviews of the agreement

• Decide on a timeline for regular reviews of the agreement, such as annually or on a specific date each year
• Discuss and agree on the review process, including who will initiate the review and what kind of changes can be made
• Make a note of the agreed-upon timeline and review process in the agreement
• When the review process is agreed upon and added to the agreement, the step is complete and ready to move on to the next step

Sign and date the agreement

• Have both parties sign the agreement
• Provide legible signatures for both parties
• Sign and date the agreement
• Make copies of the agreement for both parties
• Keep the original agreement in a safe place
• You’ll know you’ve completed this step when both parties have signed and dated the agreement and you’ve made copies for both parties.

FAQ:

Q: Is a ‘Commission Agreement’ legally binding in the USA?

Asked by Max on June 3rd, 2022.
A: Yes, a Commission Agreement is legally binding in the USA and must be agreed upon by both parties in order to be valid. Generally, the agreement should be in writing and include the details of how the commission will be paid and when it will be paid. It should also include any other relevant information that the parties feel should be included, such as any restrictions or limitations on the payment of commission. It is important to ensure that both parties are aware of all of the terms and conditions of the agreement before signing it.

Q: What are some of the legal considerations when creating a Commission Agreement?

Asked by Alex on April 9th, 2022.
A: When creating a Commission Agreement, there are several legal considerations that need to be taken into account. Firstly, it is important to ensure that all parties involved understand the agreement and have agreed upon its terms, including any restrictions or limitations on commission payments. Additionally, it is important to make sure that all relevant laws are being followed when creating the agreement, such as those regarding minimum wage requirements and employment laws. Furthermore, any potential conflicts of interest must be taken into account in order to ensure that both parties are protected under the agreement.

Q: Is a Commission Agreement enforceable under EU law?

Asked by Bryan on January 13th, 2022.
A: Yes, a Commission Agreement is enforceable under EU law and must adhere to the relevant regulations and directives set out by the European Union. Generally, this means that any agreements between two or more parties that involve commission payments must comply with EU regulations such as those regarding personal data protection and anti-discrimination laws. Additionally, any restrictions or limitations that are included in the agreement must also comply with EU law in order for it to be enforceable.

Q: Are Commission Agreements only applicable to salespeople?

Asked by Jack on October 14th, 2022.
A: No, Commission Agreements can apply to any type of employee who is entitled to receive commission payments for their work. While it is typically used for salespeople who receive commission from sales they make, it can also apply to other types of employees who are entitled to receive similar types of compensation for their work - such as marketing staff or customer service staff who are paid based on performance metrics or targets achieved.

Q: Does a Commission Agreement need to include specific details?

Asked by Addison on May 5th, 2022.
A: Yes, a Commission Agreement should include specific details regarding how and when commission will be paid out. Typically this includes information such as how much commission will be paid per sale or transaction; when payment will occur (i.e., after each sale or after certain targets have been met); any restrictions or limitations on payments; and any other relevant information that both parties feel should be included in order for the agreement to remain valid and enforceable.

Q: Is there an industry standard template I can use when creating a Commission Agreement?

Asked by Abigail on August 1st, 2022.
A: While there is no one-size-fits-all template for creating Commission Agreements as each situation may require different terms and conditions depending on factors such as industry or sector, there are some industry standard templates available online which can provide guidance when creating your own agreement. Additionally, many legal firms also offer templates for creating Commission Agreements which can provide additional guidance as well as help ensure that all relevant laws and regulations are being followed when crafting your own agreement.

Q: Can I customize my Commission Agreement based on my industry sector?

Asked by Elijah on February 2nd, 2022.
A: Yes, you can customize your Commission Agreement based on your particular industry sector in order to ensure that all relevant laws and regulations are being followed while still providing flexibility for both parties involved in the agreement. For example, if you are in an industry where commission payments may vary based on performance metrics then you could include language in your agreement which outlines exactly what these metrics are so that both parties understand what must be achieved in order for payment to occur. Additionally, if you have specific restrictions or limitations on commission payments then these should be clearly outlined in the agreement as well so that both parties understand what is expected from them before signing it.

Q: What types of businesses typically use Commission Agreements?

Asked by Mia on March 6th, 2022.
A: Commission Agreements can be used by almost any type of business but they are most commonly used by businesses operating within certain industries such as sales companies or those providing services with variable payment structures based on performance metrics – such as SaaS companies or technology companies working with B2B customers – as they often require their employees to receive variable payments based on their performance while still maintaining certain restrictions or limitations on commissions paid out. Additionally, many companies use Commission Agreements as part of their recruitment process when hiring new sales representatives or other employees who will receive commissions for their work so that everyone involved understands exactly what is expected from each party before signing it.

Example dispute

Suing a Company for a Breach of a Commission Agreement

• Plaintiff might raise a lawsuit if they believe their employer breached an oral or written commission agreement.
• The plaintiff will need to prove that the commission agreement is valid and that the employer breached the agreement.
• Plaintiff may have to show that they were actually paid less commission than the agreement specified.
• The defendant (employer) may try to argue that the commission agreement was invalid or that the plaintiff wasn’t entitled to the commission they believe they were due.
• If the plaintiff can prove that the commission agreement is valid and that the employer breached the agreement, they may be awarded damages.
• Damages may include the total amount of commission the plaintiff was owed, plus any additional damages, such as interest or additional wages, that the court may award.
• The court may also order the employer to comply with the commission agreement in the future.
• If the plaintiff and defendant cannot reach a settlement agreement, the case might be decided by a jury.

Templates available (free to use)

Sales Commission Agreement
Video Production Commission Agreement

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