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Commission agreement

This form of agreement is designed to be used to regulate the payment of commission by one contracting party to the other party. The obligation to pay commission may arise out of the provision of a service or some other act or event. For instance, it may arise out of the introduction of a customer.

The second party is entitled to a percentage share calculated from an agreed base amount. The performance of the services or other event triggers both parties' primary legal obligations and responsibilities under the agreement.

The document will help the parties by providing a mechanism for identifying entitlement to commission, calculating the percentage and paying the commission. It also expressly covers the assessment of interest where commission payment is overdue. Failure to properly address these types of issue in commission-driven business relationships is a common cause of disputes.

In the event of a dispute, the right to audit can be invoked at the cost of the party requiring the audit, which will be the party entitled to commission. If the result of the audit exposes an underpayment of commission, the party at fault is required to pay the reasonable cost of the audit.

The warranties given by the parties are minimal, as this type of agreement does not usually call for terms containing extensive commitments in respect of particular facts or conditions. Warranties and other terms are sometimes implied into a contract, but this agreement seeks to exclude these to the maximum extent allowed by law.

If the agreement is meant to remain in effect for a given length of time, this should be stated so that there is certainty in respect of when it ends. This may be preferable to having to serve notice and then dealing with disagreements about whether notice was properly served or indeed valid. Certain provisions of the agreement will continue in effect after the agreement has terminated.

It would not be appropriate for an employer to use this form of agreement for the payment of commission to employees. Agreements relating to employment matters will include explicit employment law-related provisions.

This agreement does not deal with confidentiality and non-compete matters in general. Nor does it cover matters of non-solicitation, which may be relevant depending on the nature of the services. We do, however, supply a number of templates covering these matters.

The contract is governed by English law and subject to the jurisdiction of English courts; you should consult a suitably qualified lawyer if it is your intention to change this provision.

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Commission agreement contents

  1. Definitions: definitions.
  2. Term: commencement of term; end of term.
  3. Commission: obligation to pay commission upon trigger event; notification of trigger event; issue of invoice for commission; consequences of failure to notify trigger event.
  4. Interest: interest on late payments.
  5. Audit: right of audit in case of disputed payment; costs of audit; limits on audit right.
  6. Warranties: first party warranty of authority; second party warranty of authority; exclusion of implied warranties and representations.
  7. Termination: termination by either party at will.
  8. Effects of termination: surviving provisions upon termination; termination does not affect accrued rights.
  9. Notices: methods and deemed receipt of contractual notices; contact details for contractual notices; substitute contact details for notices.
  10. General: no waiver; severability; variation written and signed; no assignment without written consent; no third party rights; caveats to limits of liability; entire agreement; governing law; exclusive jurisdiction.
  11. Interpretation: statutory references; section headings not affecting interpretation; calendar month meaning; no ejusdem generis.
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