For many companies, their sales force serves as the public face of their company. The individuals and organizations that percent your services and products should be carefully selected so they can represent your company’s products and values well. Ensuring that your product will be marketed in a way that reflects your brand and business is crucial. You will need to explain to your sales representatives the products they can sell and where they can sell them. One of the best ways to ensure quality control for sales representatives is to have your sales representative sign a non-exclusive sales representative agreement.
The Benefits of Writing a Non-Executive Sales Representative Agreement
Small companies benefit tremendously from writing independent sales representative agreements. Most companies will not need to invest upfront since the sales representative will be paid on commission. The representative will be incentivized to sell products or services to receive payment, and both will grow their businesses together. The sales representative will be paid when the company is paid, making this scenario a win-win for many companies.
What is a Non-Exclusive Sales Representation Agreement?
A non-exclusive sales representation agreement is a legal contract between a person who sells the service or product and a company in exchange for compensation. The sales representation agreement will list the terms and conditions and recitals for the company’s independent sales representative. The contract needs to describe the role of the sales representative, the geographic area that the sales representative will work within, and the payment and commission structure.
The non-exclusive sales representation agreement should also clearly state the responsibilities and obligations of the sales representative and the business. The agreement needs to state with specificity all of the job requirements of the sales representative, and the company should ensure that the sales representative reads through the contract and understands what type of duties and responsibilities are expected.
When hiring a sales representative, the company should keep in mind the job requirements and hire a sales representative with the required experience and qualifications. A well-written non-exclusive sales representation agreement will list all of the company’s rights and responsibilities. The agreement must be in writing because verbal agreements often cause disputes and may not be legally enforceable. We recommend that the company requires the sales representative to sign the non-exclusive sales representation agreement before the sales representative makes the first sales call. Doing so will ensure that the contract governs all of the employee’s activities from start to finish.
Basics of a Non-Exclusive Representative Agreement
As with any type of contract, non-exclusive sales representation agreements must be legally valid to be enforceable. An experienced attorney can ensure that your sales agreement meets all of the legal requirements in the state in which you are implementing the agreement. The agreement will need to stay with the parties, such as the company paying the sales representative and the sales representative. The agreement should also list the terms, conditions, and recitals involved in the contract.
For the sales representative to understand what is expected of him or her, the contract will need to state the sales representative’s duties explicitly. Many conflicts between sales representatives and companies involve pay and job expectations. Taking the time to carefully consider the terms of the agreement can save you time and expense in the future. If the job description is not clear, the company or agent should call to obtain more details. The agreement should clarify what the sales representatives’ targets are that they will need to accomplish.
The agreement should also set forth any incentive pay that the sales representative can obtain with good performance. If any training is required before the sales representative can begin making sales, the contract should state when the training must occur and who will be paying for the train. Finally, the agreement should set forth what good performance includes according to the company’s standards.
Writing a Non-Exclusive Sales Representative Agreement
Customers and the public often view sales representatives as the company’s face that is paying them. The type of service the salesperson offers, the salesperson’s actions and statements, and the quality of the product the salesperson sells will all affect the company’s reputation. Before signing a non-exclusive sales representation agreement, both parties need to carefully consider whether they are able to meet the responsibilities and obligations set out in the contract. Each party should take the time they need to carefully go over the agreement, which will decrease the likelihood of a claim because one of the parties does not understand the terms of the agreement.
Take Time to Consider Your Goals for the Agreement
Working with a new sales representative can be exciting, and you may be excited to begin the employment relationship as quickly as possible. However, it is important that you take some time to consider your goals for this agreement. For example, do you want this agreement to be exclusive or non-exclusive? With a non-exclusive sales representative agreement, you, as the company owner, are entitled to hire other representatives to sell the same products. You may even decide to hire multiple sales representatives to sell the same products within the same geographic area.
These representatives would be competing with each other, which can be helpful for your company, but it may not depend on your goals. If you want to ensure that there is only one sales representative of your products in a geographic area, you should not use a non-exclusive sales agreement. For example, if you sell designer furniture paint that is highly in demand, you may want to only choose a limited number of salespeople in each geographic area. Doing so can incentivize the salespeople to produce a high volume of sales, keep their retail location in line with your brand, and continue to be awarded their geographic area by the sales agreement.
Perhaps you are unsure whether you need an exclusive or non-exclusive sales agreement. One of the best things you can do is discuss your case with an attorney who can help you understand the benefits and detriments of each type of agreement. If you would like to make sure that there is only one sales representative in a geographic area, your attorney can help you draft an exclusive sales agreement to protect that geographic area. You should also ask yourself the following questions before you decide to work with an attorney to draft your agreement:
- Will there be protections in the agreement to guard your company’s information?
- Is the commission percentage commensurate with the energy and time the salesperson will spend selling your product?
- Is your intellectual property protected?
Understanding Laws Regarding Independent Contractors
Every state has its own laws regarding independent contractors. Most sales representatives are considered independent contractors, not employees of a company. As such, there are different regulations regarding pay, overtime law, and other employment issues. Filling out a fill-in-the-blank contract can be dangerous because the contract may not be written with your state’s laws in mind.
That is why working with a prepaid attorney can help you ensure that your contract is not only legally valid in your state but also abide by all of the independent contractor laws in your state. In some states, it is more challenging for a sales representative to qualify as a legitimate independent contractor. States like New York and California are making it more difficult for companies to work with independent contractors.
Some have even started attempting to prevent employees from being independent contractors. There are certain requirements about an independent contractor’s freedom that need to be clear in the agreement. Suppose a court thinks that you have too much control and authority over the independent contractor. In that case, it may be determined that your employee is not an independent contractor but an employee. Classifying a sales representative as an employee, not an independent contractor, can cause potential liability. Many different anti-discrimination, wage and hour, and other regulations apply to employees but do not apply to independent contractors.
Do Not Sign the Agreement Without Carefully Reading It
Before signing the agreement, we recommend working with an attorney to make sure that you understand the provisions in the agreement. If you have not written the agreement yet, it is best to work with an attorney who can write an agreement tailored to your state, your business, your needs, and your goals. An attorney can make sure that all of the important clauses are included in your agreement. It is usually safer to be over-inclusive than under-inclusive when drafting contracts.
You should not assume that the terms or expectations have been agreed upon unless expressly included and written down in the contract. Both parties will need to sign the agreement, and both parties should retain a copy of the agreement. While it is not required to have the agreement notarized or witnessed, you may decide to do so to limit any later challenges to the validity of either party see
Instructions for Writing a Non-Exclusive Sales Representation Agreement
The first section of a non-exclusive sales representation agreement is the introduction. The introduction includes the name of each party and an indication of each party’s type, such as an individual or corporation. The agreement will include recitals, which report each party’s intent and ability to make the representative a company representative. Next, the agreement will typically state the purpose and appointment. This section will point to the representative as a sales representative for the company. Importantly, the section will state whether the appointment is exclusive or non-exclusive.
This section will also define what products or services the sales representative is responsible for selling. Many agreements will list the products or services to be sold as Exhibit A of the agreement. The next section of the agreement will contain confidential information and a reminder that the representative cannot disclose the company’s confidential information. The next section typically explains the nature of the relationship between the sales representative in the company. This is a critical section because if the sales representative is an independent contractor, the contract must clearly state that relationship. It is essential that the contract does not blur the line between an employee and an independent contractor. This section of the contract complies with the governing state laws regarding independent contractors.
The agreement will also cover the geographical area that the representative is allowed to sell within, the type of customers that the representative should seek, and the sale price of the products. The agreement also needs to include detailed information about the representative’s compensation. It should say whether the representative will have a commission percentage for each sale and how much the percentage should be.
The contract should also include information about the salesperson’s obligations under the agreement, whether there is a conflict of interest, and the company’s warranties and representatives. The agreement will need to set a term, typically six months to one year, and state whether the contract will renew. Finally, it should include what will happen if one or both parties decide to terminate the contract.
Need a Non-Exclusive Sales Representation Agreement? We Can Help
Do you need to draft a non-exclusive or exclusive sales representation agreement? InPrime Legal is here to help. We represent small to medium-sized businesses by offering our affordable prepaid attorney services. In exchange for a monthly fee, we provide clients with excellent legal representation. One of our skilled in-network attorneys can help you draft your legal agreements. Contact InPrime Legal today to schedule your free consultation to learn more about our services.