Sales Representative Agreements FAQ

What is a Sales Representative Agreement?

Because the responsibilities involved with being a company’s sales representative can be unique, a Sales Representative Agreement is a contract that allows for two parties to establish their relationship as clearly as possible. In these agreements, the business relationship that will be established is not only written out in detail, but terms regarding the regulation of business expenses will also be set forth. These agreements are generally standard procedure for any large company that hires entire teams of sales representatives.

Once a sales representative has been hired, they will typically be privy to a number of responsibilities that many employees are not. Writing down and agreeing to the various policies that both parties are agreed to should be a high priority in beginning this type of employment relationship on the right foot.

Why won’t a standard Employment Agreement work?

Employment Agreements are contracts that should be considered standard procedure for any business that does hiring – even if the team starts out small. But because the responsibilities and compensation packages of a sales representative can be so different from that of a “standard” employee, it’s important to establish these differences with a separate contract. You’ll see more about why a Sales Representative Agreement is so different in the question below.

What kinds of provisions are contained in a Sales Representative Agreement that make it unique?

There are a number of “standard” provisions in a Sales Representative Agreement, of course, such as the Designation of Parties – this provision typically starts at the top to establish the identity and roles of the people involved.

Where do the provisions of a Sales Representative Agreement stray off of the path of an employment or contractor agreement? In the following provisions:

• Advantage of Agreement: This provision establishes the consideration of the contract, which helps to signify its validity and enforceability later on (see questions relating to validity and enforceability below). In short, both parties must derive some special benefit from entering into a Sales Representative Agreement.
• Explanation of Expenses: The expenses of a sales representative will necessarily be different from that of traditional office-based employees, which is why an entire provision detailing how business expenses will be handled is necessary in this agreement.

Of course, these are not the only provisions usually contained within a Sales Representative Agreement. However, they are some of the provisions that most explicitly state the roles of each party involved and how those roles differ from standard employment.

My Sales Representative Agreement says I’m an independent contractor. Why not just sign an Independent Contractor Agreement?

Although the job status affirmed in the Sales Representative Agreement might identify you as an Independent Contractor, it’s important to remember that most Independent Contractor Agreements are not written with the role of “sales representative” in mind. That’s why it’s important to have an agreement that accurately describes your status and what will be expected of you in your line of work. Without that accuracy, it will be harder to enforce your contract should any problems (such as with an employer’s compensation) arise.

Where do I find out how I’m being reimbursed for business expenses?

If you’re looking at signing a Sales Representative Agreement, you should look under a section entitled “Expenses” or a provision with similar terminology in order to find out how your expenses are going to be handled. If you can’t actually find this section on your own, you should search through other provisions of the document – if there is no such section contained in the document, then you’ll likely want to avoid signing it or at least ask for it to be changed. It’s important that the policy of business expenses be laid out so that you as a sales representative will not find yourself being asked to cover all of your own expenses.

Do Sales Representative Agreements contain a confidentiality provision?

Yes, they typically do. Any type of employment contract (whether it is an Employment Agreement, an Independent Contractor Agreement, or a Sales Representative Agreement) should contain a provision on confidentiality in order to protect any information that a business is disclosing as a result of the relationship. From the sales representative’s point of view, it’s important that this confidentiality be honored even after the terms of the business relationship have expired.

What is exclusivity vs. non-exclusivity?

An important piece of the Sales Representative Agreement puzzle is whether or not a sales representative will be the only selling agent on behalf of the company. It is typically dealt with in the “Services” provision of the contract.

When is a Sales Representative Agreement enforceable?

Once the contract is validly signed, the Sales Representative Agreement will be enforceable. Each contract will lay out its own terms for the duration of the employment period, but the enforceability of the contract will stay valid even after this period has ended.

What are the requirements for a Sales Representative Agreement to be valid?

There are a number of elements that must be present here. First, the contract must be signed lawfully and willfully by both of the parties involved – for example, a minor may not be able to sign the agreement and create a valid contract. Additionally, consideration is an important issue here because it’s important that both employer and employee will receive compensation from this business relationship. For the sales representative, that can come from regular payments and commission, and for the employer, it will come in the form of the labor that is to be performed.

When is a Sales Representative Agreement effective?

The agreement will be effective once it is validly signed, but the provisions it contains may lay out an explicit time period in which the business relationship exists. Some provisions – such as that of confidentiality – will continue to be effective even after the business relationship has ended. But in terms of the consideration – both compensation and work performed – the contract will essentially be effective as long as both parties are still in an active working relationship as per the terms of the contract.