Agreement For Appointment Of Sales Agent

Sales form the core revenue earning activity of a business. An organisation that does not concentrate on sales activities cannot ensure growth and progress. It does not matter whether the company offers products or services- the importance of sales permeates across all business types. There are a number of ways in which sales is carried out. The most common way happens to be the appointment of in-house employees for carrying out sales. They may be rewarded through fixed salary, commission or a combination of both. A company may adopt other methods like franchising, dealerships, agencies and other forms of outsourcing sales. Appointment of a sales agent is one of the common ways of effecting sales for a company.

Who Is An Agent?

An Agent, according to the law is a person authorised to act on behalf of another in order to create a relationship with a third party. The person who authorises is called Principal. The word person includes artificial persons like Companies. Usually, in businesses, agents are authorised to make sales on behalf of a principal. The acts of the agent are deemed to be acts of the principal. Purchasing from the agent is equivalent to purchasing from the principal. The principal also authorises representations made by the agent while conducting sales to third parties. The most common example is that of insurance agents who solicit sales on behalf of insurance companies.

What Is An Agreement For Appointment Of A Sales Agent?

An agreement for appointment of a sales agent is a document that creates a Principal-Agent relationship between a company and an individual. It describes the terms and conditions to be followed throughout the subsistence of the contract by both the parties and also mentions the monetary compensation payable to the agent as commission.  

An agreement for appointment of a sales agent can include the following details:

Description Of The Parties

The details of the parties need to be summarised in brief. Usually, the first party is a company which shall be called the principal. Details related to incorporation should be mentioned.

The agent is usually an individual. So, the introduction may be limited to age and address. It is implied that the agent is capable of entering into a valid contract under sec 10 of the Indian Contract Act.

Nature Of Operations Of The Principal

The company’s business operations can be specified in order to make the nature of the contract clear.

Qualification Of The Agent

If the work involves special qualifications or certifications on part of the agent, his/her eligibility details should be provided.

Principal-Agent Relationship

It should be mentioned that the relationship between the parties is that of a principal and agent. A principal-agent relationship is different from a relationship with Independent Contractor because the element of control exerted by a principal is higher compared to an independent contractor who is free to choose the method of working. The principal shall also be liable for all acts done in the course of work of the agent acting in a bonafide manner.

Declaration By The Agent

The agent can be made to declare that he/she is not in employment with any company or organisation prior to accepting the agency.

Agent Not To Work Simultaneously For Competitors

It should be made clear that double agency is not permitted with competitor companies.

Non-Disclosure

This prevents the agent from disclosing trade secrets and other knowhow related to the principal to outsiders. The penalty for the same should also be recorded.

Nature Of Tasks

A detailed description of the responsibilities of the agent should be mentioned.

For example, it may be sales of computer peripherals manufactured by the principal or distribution of cosmetic products for a commission.

• The Geographical extent of the region where the agent shall operate should be written. It may be district/state/nation wise.
• The requirement of an agent to obey the instructions given by the principal is specified.
• The duty to act in interests of the principal and to avoid selling to third parties who may illegally resell the products in territorial areas outside the regular operation without consent of the principal can be mentioned.
• There is also a duty on part of the agent not to make any false representations for the purpose of sale which cannot be kept by the principal.
• The agent may also be required to keep records of transactions in a systematic way as required by the principal.

Remuneration

The percentage of commission that shall be payable to the agent for sales should be specified. Agents usually get paid a good deal of the total amount received. The method of payment shall also be given.

Other Duties

The agent may be made to help promote the products/services through means like attending trade shows, seminars etc. This can be mentioned as a requirement along with a need for cooperating with Sales managers and other staff of the company.

Non-Assignment

It means the requirement of the agent not to assign, transfer or charge his/her duties to a third party.

Remittance Of Sales Proceedings Received

This shall make the agent responsible for remitting regularly the payments received on behalf of the principal on time and without fail.

Support By Principal

The amount of support to be provided by the company needs to be mentioned. It may be training, provision of materials like brochures for promoting sales, undertaking marketing activities, replenishing goods in time when empty, provision of manuals like owner’s manual, repairing manual etc related to the products to be provided to the buyers, etc.

Rights Of The Principal

The rights and remedies available to the principal in order to protect their interests needs mention.

It may be cancellation of the agency in full or to limit geographically in case of non-performance, to sell the products directly to any customers or through other agents in any territory, to transfer any rights given to the agent to any other agent subject to sufficient notice, etc.

Further, there can be other details mentioned like dispute jurisdiction, indemnification, termination, renewal and other details tailor made to the agreement.

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