How to review an independent sales representative agreement

An independent sales representative agreement appoints a commissioned rep (an individual or a rep firm) to sell a company's products in a territory. Most disputes come down to one question: what commission is owed, and when, especially after the agreement ends. Many states have statutes that answer part of that question for the parties. This checklist covers the clauses that matter and how to review the agreement in Word.

Last checked: 17 October 2026. The law changes; check the current position before relying on this page.

Clause checklist

• Appointment and exclusivity. Is the rep exclusive in the territory? Are house accounts, online sales or national accounts carved out? Can the company sell directly in the territory without paying commission?
• Territory and products. Define both precisely. Check whether the company can change either unilaterally, and on what notice.
• Commission rate and base. Is commission calculated on gross or net sales? What deductions apply (returns, discounts, freight, bad debt)? Are split commissions addressed when two reps are involved?
• When commission is earned. On order, shipment, invoice or payment? This single definition drives most post-termination disputes.
• Payment timing and statements. Monthly statements, a right to inspect records, and a dispute process help both sides.
• Post-termination commissions. Check whether orders placed before termination but shipped or paid after it earn commission, and for how long. Some agreements add a sunset period for repeat orders from accounts the rep opened.
• Chargebacks. Check when commission already paid can be clawed back, and whether clawbacks survive termination.
• Termination. Notice period, termination for cause, and what happens to pending orders.
• Expenses. Usually the rep's, but check samples, trade shows and travel.
• Independent contractor status. Avoid control over hours and methods that undercuts contractor status. Classification depends on the facts and the test the relevant agency or court applies, not the label.
• Non-compete and non-solicitation. Reps often carry other lines. Check whether competing lines are prohibited during the term, and whether any post-term restriction is enforceable in the governing state. See our non-compete review guide.
• Indemnities and product claims. The company usually indemnifies the rep for product liability. The rep usually indemnifies for its own misrepresentations.
• Governing law and venue. Some state sales rep statutes apply regardless of a choice of another state's law. Check before relying on the clause.

State sales representative statutes

Many states have statutes protecting commissioned sales representatives who solicit wholesale orders. They vary, but common features include a written contract requirement, deadlines for paying commissions after termination, and penalties or attorney fees when commissions are paid late. Examples include the California statute in Civil Code section 2751 et seq., the Illinois Sales Representative Act, Texas Business and Commerce Code chapter 54, and New York Labor Law sections 191-a to 191-c. Coverage, deadlines and penalties differ, so check the statute in the rep's state and the principal's state.

What to agree up front

• A clear definition of when commission is earned.
• A written schedule of rates, deductions and house accounts.
• A post-termination commission rule that both sides understand.

A sales rep agreement review workflow in Word

LexDraft is a Word add-in from Microsoft AppSource. It opens as a side panel in Word 365 (Windows and Mac), Word 2021 and Word on the web, so the agreement never leaves the tool you already draft in.

1. Open the agreement in Word and open LexDraft in the side panel.
2. Pick the governing law. Select the state named in the governing law clause so LexDraft looks for state-specific red flags.
3. Run the review. LexDraft has four built-in playbooks (NDA, SaaS MSA, DPA and services agreement) and no dedicated sales representative agreement playbook, so this runs as a general review against the governing law you chose. Use the checklist on this page to direct your own read.
4. Triage by severity. Findings are graded Critical, High, Medium or Low, and LexDraft flags standard terms that are missing.
5. Run the quick checks. The defined-term and cross-reference checks are rule-based and run without AI.
6. Accept or reject each redline. Accepted changes land as native Word tracked changes.
7. Verify and sign off. You check every output before it goes to the client or the other side.

What LexDraft does not do

LexDraft does not give legal advice, calculate commissions, or decide classification questions. Nothing changes in your contract until you accept a redline.

This guide is general information, not legal advice. LexDraft does not give legal advice; qualified counsel must review every draft. Spotted something out of date? Email support@lexdraft.ai and we will fix it.