Agency Agreement Template (Free Sample)
An agency agreement is a contract in which one party (the principal) appoints another (the agent) to act for it, most often to find customers, negotiate or close deals in return for a commission or fee. In US business practice the most common form is the independent sales representative agreement, but the term also covers talent and booking agents, marketing and advertising agencies, and real estate agency. Below: the main types of agency agreement, how an agent differs from a distributor, an employee and other independent contractors, the clauses to include, the state sales-representative commission laws to check, and a free sample sales agency agreement you can copy into Word.
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Install free in WordLast checked: 23 October 2026. This page is general information about United States law and practice, not legal advice. Agency, commission, worker-classification and non-compete rules vary by state and by industry, and some kinds of agents (such as real estate brokers and talent agents) must be licensed. Have qualified counsel review an agency agreement before it is signed.
What is an agency agreement?
In law, agency is a relationship in which one person (the agent) acts on behalf of and subject to the control of another (the principal), with both parties' consent. What the agent does within its authority can bind the principal: if the agent has authority to sign contracts, the principal is bound by the contracts the agent signs. A principal can also be bound when it leads third parties to reasonably believe the agent has authority it was never actually given (apparent authority). That is why the most important clause in most agency agreements is the one that says exactly what the agent may and may not do in the principal's name.
Many commercial "agents" are not given power to bind at all. A typical independent sales representative solicits orders and passes them to the principal, which decides whether to accept each order. The agreement then is mainly about territory, exclusivity and commission: what sales earn a commission, when it is earned, when it is paid and what happens to commissions after the relationship ends.
Types of agency agreements
| Type | What the agent does | How the agent is usually paid | Points to watch |
|---|---|---|---|
| Sales agent / independent sales representative | Solicits orders for the principal's products in a territory or with named accounts; usually cannot accept orders or sign for the principal | Commission on sales, sometimes with a draw or retainer | Territory, house accounts, when commission is earned, post-termination commissions and state sales-representative statutes |
| Talent or booking agent | Finds and negotiates engagements for performers, speakers, athletes or creators | Percentage of the client's fees | Some states license talent agencies, for example California under the Talent Agencies Act (Labor Code section 1700 and following); union and league rules may also apply |
| Marketing or advertising agency | Plans and buys media, runs campaigns or creates content for a client | Fees, retainers, media commission or a mix | Whether the agency may commit the client to media purchases, who is liable to media sellers if the client does not pay, ownership of creative work and data |
| Real estate agency (listing or buyer agreement) | Markets a property or represents a buyer or tenant | Commission on closing, as agreed in the agreement | Real estate brokers must be licensed, and state law and local practice often prescribe agency disclosures and the content of listing and buyer agreements. Use the forms and advice of a licensed broker or real estate lawyer in that state; the sample below is not for real estate. |
Agent vs distributor vs employee vs independent contractor
The label in the contract does not decide the relationship. Courts and agencies look at what the parties actually do, so pick the structure that matches the business and write the agreement to fit it.
| Sales agent / rep | Distributor or reseller | Employee salesperson | Other independent contractor | |
|---|---|---|---|---|
| Who sells to the customer | The principal; the agent finds the customer | The distributor, in its own name | The employer | Not a seller; provides services to the client |
| Who owns the goods and sets the resale price | The principal | The distributor buys the goods and generally sets its own resale prices (limits on resale pricing raise antitrust questions) | The employer | Not applicable |
| Authority to bind | Actual authority may be express or implied; apparent authority can also bind the principal. Many sales reps are given no authority to bind. | None; it contracts for itself | As the employer authorizes | Usually none |
| How paid | Commission | Margin between its purchase price and resale price | Wages, often with commission, subject to wage-payment laws | Fees for services |
| Credit risk on customers | Mainly the principal (commission is often reduced for unpaid sales) | The distributor | The employer | Not applicable |
| Control over how the work is done | Limited; the agent runs its own business | Limited, subject to the distribution terms | The employer directs the work | Limited; the contractor controls how results are achieved |
| Main legal regimes | Agency law, the contract, state sales-representative statutes | Sales of goods (UCC Article 2), antitrust, and in some industries dealer or franchise laws | Employment, wage-payment and tax withholding laws | Contract law; worker-classification tests |
Worker classification is the biggest risk with individual sales agents. If the principal controls how, when and where the agent works, the agent may be treated as an employee under federal or state tests whatever the contract says. California, for example, applies the "ABC" test for many purposes (Labor Code section 2775 and following), with exceptions. A sales agent that is an established business with its own entity, other principals, its own staff and its own expenses is more clearly independent.
What to include in an agency agreement: clause checklist
- Appointment and scope: the products or services the agent represents, and the activities it may carry out (soliciting orders, negotiating, promoting).
- Authority to bind: whether the agent may accept orders, quote prices, give warranties, sign contracts or collect payment. If not, say so and require the agent to tell customers that orders are subject to the principal's acceptance.
- Exclusivity and territory: whether the appointment is exclusive or non-exclusive, the territory or accounts covered, house accounts the principal keeps, and whether the agent earns commission on direct sales in its territory.
- Commission calculation: the rate, the base (usually net invoice amount, defined to exclude shipping, taxes, returns and discounts), split commissions where two agents are involved, and chargebacks for returned goods or unpaid invoices.
- When commission is earned and paid: earned on order acceptance, shipment, invoice or customer payment, and paid by a set date with a commission statement. State statutes may set payment deadlines (see below).
- Post-termination commissions: which orders still earn commission after termination (for example, orders accepted before termination, or orders received within a set period afterwards) and when they are paid. If the contract is silent, courts in some states have applied a "procuring cause" approach that can extend commissions to sales the agent generated, so it is better to decide the rule in the contract.
- Expenses: whether the agent bears its own travel, samples and office costs, and any expenses the principal will reimburse with prior approval.
- Term and termination: the initial term, renewal, termination for convenience on notice, termination for cause, and what each party must do on termination (return samples, materials and confidential information).
- Non-compete and non-solicitation: whether the agent may represent competing lines during the term, and any restriction after it ends. Enforceability depends heavily on state law. In California, Business and Professions Code section 16600 makes contracts that restrain anyone from a lawful profession, trade or business void to that extent, subject to statutory exceptions such as certain sales of a business, and the California Supreme Court has judged restraints in contracts between businesses under a reasonableness standard (Ixchel Pharma v. Biogen, 2020). Many other states enforce reasonable restrictions only, and some limit them by statute.
- Intellectual property: a limited license for the agent to use the principal's trademarks and marketing materials in the territory, ending on termination; for marketing agencies, who owns the creative work, campaign data and accounts.
- Confidentiality: pricing, customer lists, product plans and other business information, during the term and afterwards.
- Compliance: anti-bribery laws (including the FCPA where foreign officials are involved), export controls and sanctions, product claims and advertising rules, and data protection.
- Indemnity and liability: each party's indemnity for its own breaches and misconduct, product liability staying with the principal, the agent's responsibility for unauthorized statements, and any cap on liability.
- Governing law and disputes: the governing law, the courts or arbitration forum, and attorney fees. Some state sales-representative statutes override choice-of-law or venue clauses or cannot be waived, so check the states where the agent works.
- Independent contractor status, notices, assignment, entire agreement, amendment in writing, counterparts and electronic signatures.
State sales representative commission laws
Many US states have statutes protecting independent sales representatives who solicit wholesale orders and are paid by commission. They differ in scope and detail, but commonly require a written contract that explains how commissions are calculated and paid, set deadlines for paying commissions after the relationship ends, and give the representative enhanced damages and attorney fees if the principal does not pay. Many of these statutes cannot be waived by contract. Some examples:
- California (Civil Code sections 1738.10 to 1738.17): when a manufacturer, jobber or distributor doing business in California uses a nonemployee representative to solicit wholesale orders at least partly in California for commission, a written contract is required. It must specify the commission rate and calculation, payment timing, assigned territory, territory and customer exceptions, and chargebacks. Each party must receive a signed copy, and the representative must sign an acknowledgment of receipt. A principal that willfully fails to enter into the required written contract or willfully fails to pay commissions as it provides can be liable for treble damages, and the prevailing party recovers reasonable attorney fees and costs.
- New York (Labor Law sections 191-a to 191-c): covered wholesale sales representative contracts must be written and explain commission calculation and payment. Give the representative a signed copy and obtain a signed receipt. During the relationship, pay according to the agreed terms, no later than five business days after commissions are earned. At termination, earned commissions already due must be paid within five business days; earned commissions becoming due later must be paid within five business days of their due date. Failure to meet section 191-c's payment requirements triggers double damages, and the prevailing party is entitled to reasonable attorney fees, court costs and disbursements.
- Texas (Business and Commerce Code chapter 54): a contract under which a sales representative solicits wholesale orders in Texas must be in writing or in a computer-based medium and state how commissions are computed and paid; a clause setting venue in another state is void. A principal that breaks the contract's commission terms or fails to pay commissions as required can be liable for three times the unpaid commission plus reasonable attorney fees and costs.
- Illinois (Sales Representative Act, 820 ILCS 120): commissions due at termination must be paid within 13 days of termination, and commissions that become due later within 13 days of their due date. A principal that fails to comply can be liable for exemplary damages of up to three times the commissions owed, plus attorney fees and costs.
Other states have their own versions with different coverage, deadlines and penalties. Check the law of every state where the representative lives or solicits orders, and where the principal is based, before relying on a governing-law clause.
Commercial agents in the UK and EU
If the agent sells or negotiates the sale or purchase of goods in Great Britain or the European Union, mandatory rules for self-employed commercial agents apply: the Commercial Agents (Council Directive) Regulations 1993 in Great Britain, and the national laws implementing Directive 86/653/EEC in EU member states. Among other things, they give the agent a right to compensation or an indemnity when the agency ends in most circumstances, set minimum notice periods, and limit post-termination restraints. In Great Britain, the agent loses the right to compensation or indemnity if it does not notify the principal that it intends to pursue a claim within one year after termination. A US governing-law clause may not displace these rules for an agent working in those territories. See the commercial agency agreement review guide for the UK.
Free agency agreement template (sample text)
Copy the text below into Word and fill in the brackets. It is an original, general US sample of a commission-only sales agency (independent sales representative) agreement for a business principal selling products to business customers, where the agent has no authority to bind the principal. It is a starting point, not a finished agreement: it is not tailored to any state or industry, it is not suitable for real estate, talent, insurance, securities or other licensed agency, and some state laws will add to or override its terms. Have qualified counsel review it before use.
Sample: sales agency agreement (fill-in template)
SALES AGENCY AGREEMENT
This Sales Agency Agreement (this "Agreement") is made as of [date] (the "Effective Date") between [Company legal name], a [State] [entity type] ("Company"), and [Agent legal name], a [State] [entity type] ("Agent").
1. Appointment. Company appoints Agent as its [exclusive / non-exclusive] sales agent to solicit orders for the products listed in Schedule A (the "Products") from customers in the territory described in Schedule A (the "Territory"), excluding the house accounts listed in Schedule A (the "House Accounts"). Agent accepts the appointment. [If exclusive: During the Term, Company will not appoint another sales agent for the Products in the Territory.] Company may sell the Products directly to any customer, including in the Territory, and Section 4 states whether Agent earns commission on those sales.
2. No Authority to Bind. Agent has no authority to accept orders, sign contracts, make commitments, grant credit, collect payment, give warranties or make representations about the Products on behalf of Company, except as Company authorizes in writing. Agent will tell customers that all orders are subject to acceptance by Company. Company may accept or reject any order in its sole discretion and sets all prices and terms of sale.
3. Agent's Duties. Agent will use commercially reasonable efforts to promote and solicit orders for the Products in the Territory, forward all orders and customer inquiries promptly to Company, describe the Products only as stated in Company's current materials, and comply with all applicable laws, including anti-bribery laws. Agent will not offer or pay anything of value to any person to improperly obtain or keep business.
4. Commissions. (a) Rate. Company will pay Agent a commission of [__]% of Net Sales of Products [shipped to / invoiced to] customers in the Territory (other than House Accounts) under orders [solicited by Agent / received from customers in the Territory] [, including direct sales by Company to those customers]. (b) Net Sales means the invoiced price actually charged, less shipping, insurance, taxes, duties, returns, credits, allowances and discounts. (c) Earned. A commission is earned when [Company receives payment from the customer / Company ships the Products]. (d) Payment. Company will pay earned commissions, with a statement showing how each commission was calculated, by the [__] day of the month following the month in which they were earned, or by any earlier date required by applicable law. (e) Adjustments. If Company refunds or credits all or part of an invoice on which a commission was paid, Company may deduct the related commission from later commissions. (f) Records. Agent may, on reasonable notice and not more than once a year, have Company's records relating to its commissions examined by an independent accountant at Agent's cost.
5. Commissions After Termination. Termination does not extinguish commissions already earned under Section 4. Company will also pay commissions under Section 4 on all orders accepted by Company before termination that qualify under Section 4(a), even if shipment, invoicing or customer payment occurs afterward. [Optional additional tail: Company will also pay commissions under Section 4 on qualifying orders received by Company within [__] days after termination from customers Agent solicited before termination and subsequently accepted by Company.] The earning conditions, calculation and adjustments in Section 4 continue to apply. All commissions payable under this Section will be paid within the time required by Section 4 or applicable law, whichever is earlier. Except for those commissions and any commissions required by applicable law, Agent is not entitled to commission on other orders after termination.
6. Expenses. Agent will pay all its own costs of performing this Agreement, including travel, office, staff and communication costs, except expenses Company approves in writing in advance, which Company will reimburse within [30] days after receiving supporting receipts.
7. Independent Contractor. Agent is an independent contractor and not an employee, partner or joint venturer of Company. Agent controls the manner, means and hours of its work, may represent other principals [whose products do not compete with the Products], and is responsible for its own personnel, taxes, insurance and licenses. Company will withhold taxes from commissions only to the extent required by applicable law, including any required backup withholding, and will issue any information returns (such as IRS Form 1099-NEC) required by law. Agent will provide the tax documentation Company reasonably needs to meet those obligations.
8. Term and Termination. This Agreement begins on the Effective Date and continues for [one year], then renews for successive [one-year] periods unless either party gives notice of non-renewal at least [30] days before the end of the current period (together, the "Term"). Either party may terminate this Agreement (a) for convenience on [30] days' written notice, or (b) immediately on written notice if the other party materially breaches this Agreement and does not cure the breach within [15] days after receiving notice of it. On termination, Agent will stop holding itself out as Company's agent and will return all samples, materials and Confidential Information of Company.
9. Confidentiality. Agent will keep confidential, and use only to perform this Agreement, all non-public information of Company, including prices, customer information, product plans and the terms of this Agreement ("Confidential Information"), during the Term and for [three] years after it ends (or, for trade secrets, for as long as they remain trade secrets under applicable law). This does not apply to information that is or becomes public without Agent's fault, was lawfully known to Agent before disclosure, or is lawfully received from a third party without a duty of confidentiality, or to disclosure required by law after notice to Company where lawful.
10. Trademarks and Materials. During the Term, Company grants Agent a non-exclusive, non-transferable license to use Company's trademarks and marketing materials in the Territory only to promote the Products, in accordance with Company's guidelines. All rights in them remain with Company, and the license ends on termination.
11. [Optional: Restrictions. During the Term, Agent will not represent products that compete with the Products in the Territory without Company's written consent. [For [__] months after the Term ends, Agent will not use Company's Confidential Information to solicit Company's customers.] This Section applies only to the extent permitted by applicable law and does not apply where the law of the state where Agent works makes such a restriction void.]
12. Indemnity. Each party will defend and indemnify the other against third-party claims, and related losses and reasonable legal fees, to the extent arising from its own breach of this Agreement, negligence or willful misconduct. Company will also indemnify Agent against third-party claims that the Products are defective or infringe third-party rights, except to the extent caused by Agent's unauthorized statements about the Products. The indemnified party must give prompt notice of the claim, reasonable cooperation and control of the defense to the indemnifying party, which may not settle a claim in a way that admits fault by the indemnified party without its consent.
13. Limitation of Liability. To the extent permitted by applicable law, neither party is liable for indirect, special or consequential damages or lost profits under this Agreement, except for breach of Section 9, its indemnity obligations, or its gross negligence or willful misconduct. This Section does not limit commissions payable under Sections 4 and 5 or any damages or remedies that applicable law does not allow to be limited.
14. General. (a) Governing law. This Agreement is governed by the laws of the State of [State], without regard to its conflict of laws rules, except where the law of another state applies to it mandatorily. (b) Disputes. [The parties submit to the jurisdiction of the state and federal courts located in [county, State], except where applicable law requires a different venue.] (c) Notices. Notices must be in writing and delivered to the addresses in Schedule A, and are effective on receipt. (d) Assignment. Agent may not assign this Agreement without Company's written consent. (e) Entire agreement and amendment. This Agreement, including Schedule A, is the entire agreement of the parties about its subject and may be amended only in a writing signed by both parties. (f) Severability. If any provision is unenforceable, it will be enforced to the maximum extent permitted and the rest of this Agreement will remain in effect. (g) Counterparts and electronic signatures. This Agreement may be signed in counterparts and by electronic signature, each of which is an original. Each party will retain a signed copy of this Agreement. Company will give Agent its signed copy, and Agent will sign an acknowledgment of receipt where applicable law requires one.
Schedule A. Products: [list]. Territory: [states, regions or named accounts]. House Accounts: [list]. Commission rate: [__]% [list any different rates by product or account]. Commission payment date: [__] day of the following month. Notice addresses: [Company] / [Agent].
[COMPANY LEGAL NAME] By: ______________________________ Name: [__________] Title: [__________] Date: [______]
[AGENT LEGAL NAME] By: ______________________________ Name: [__________] Title: [__________] Date: [______]
Not legal advice. This sample is not tailored to any state, industry or transaction. State sales-representative statutes may require specific contract terms, payment deadlines and signed copies, non-compete and worker-classification rules vary by state, and agents outside the US may have mandatory rights. Have qualified counsel review the agreement before use.
Common mistakes in agency agreements
- Unclear authority. If the agreement does not say the agent cannot bind the principal, and the principal lets the agent act as if it can, the principal may be bound by the agent's promises.
- Not saying when commission is earned. "Commission on sales" leaves open whether it is earned on order, shipment, invoice or payment, and that is where most commission disputes start.
- No rule for post-termination commissions. Leaving it open invites a dispute over sales the agent says it generated before termination.
- Treating an individual agent like an employee. Set hours, required territory routines and close supervision can turn a contractor into an employee for wage and tax purposes.
- Copying a non-compete across states. A restriction that is enforceable in one state may be void in another, such as California.
- Ignoring the agent's location. State sales-representative statutes, and UK or EU commercial agent rules, can apply whatever the governing-law clause says.
How to draft or review an agency agreement in Word with LexDraft
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 agency agreement stays in the document you are already editing.
Describe the agency
Open LexDraft in Word and describe the arrangement in plain English: the principal and the agent, the products or services, the territory and exclusivity, the commission and when it is earned, the term, and the governing law. LexDraft asks a few clarifying questions, then writes a first draft into your document as editable Word text.
Review it against the governing law
To review an agency agreement you drafted, or one the other side sent you, pick the governing state and run a review. LexDraft has four built-in playbooks (NDA, SaaS MSA, DPA and services agreement) and no dedicated agency playbook, so an agency agreement runs as a general review. Findings are graded Critical, High, Medium or Low, and LexDraft flags standard terms that are missing.
Check and accept the redlines
Run the defined-term and cross-reference checks, which are rule-based and run without AI. Accept or reject each proposed redline; accepted changes land as native Word tracked changes. Nothing changes in your document until you accept a redline.
For a quick read of a single clause, such as a post-termination commission clause, a non-compete or an indemnity, paste it into the free clause risk checker.
What LexDraft does not do: it does not give legal advice, decide whether an agent is an employee or an independent contractor, check whether an agent is licensed, or calculate commissions. You check every output before the agreement is signed.
Frequently Asked Questions About Agency Agreements
What is an agency agreement?
An agency agreement is a contract in which a principal appoints an agent to act on its behalf, usually to find customers, negotiate or close deals, in return for a commission or fee. It sets out what the agent may do, whether it can bind the principal, the territory and exclusivity, how the agent is paid, and how the relationship ends.
What is the difference between an agent and a distributor?
An agent finds customers for the principal, and the principal sells to them and pays the agent a commission. A distributor buys the goods itself and resells them in its own name, earning a margin and taking the risk that its customers do not pay. The distinction matters for pricing control, liability, tax and which laws apply.
Can a sales agent sign contracts for the principal?
Only if the principal gives it authority to do so. Many sales agency agreements say the agent has no authority to bind the principal and that all orders are subject to the principal's acceptance. A principal can still be bound if it leads customers to reasonably believe the agent has authority, so the agreement and the principal's conduct should match.
Does a sales representative agreement have to be in writing?
In several US states, yes, for independent sales representatives who solicit wholesale orders and are paid by commission. California, New York and Texas, for example, require a written contract that states how commissions are computed and paid, and impose enhanced damages and attorney fees if the principal fails to pay commissions as required. Even where it is not required, a written agreement avoids most commission disputes.
Is a sales agent owed commissions after termination?
It depends on the agreement and on state law. A well-drafted agreement says which orders still earn commission after termination and when they are paid. Some state statutes set deadlines for paying commissions after termination, such as five business days in New York and 13 days in Illinois, and courts in some states have applied a procuring cause approach where the contract is silent.
Can an agency agreement include a non-compete?
Sometimes. Many agreements restrict the agent from representing competing products during the term. Post-termination restrictions depend on state law: California generally treats contracts that restrain anyone from a lawful profession, trade or business as void under Business and Professions Code section 16600, subject to statutory exceptions, while many other states enforce only reasonable restrictions. Have counsel check the law of the state where the agent works.
Is a sales agent an employee or an independent contractor?
It depends on the facts, not the label. An agent that runs its own business, controls how and when it works, pays its own expenses and represents other principals is more likely an independent contractor. If the principal controls the agent's work, the agent may be an employee under federal or state tests, such as the ABC test used for many purposes in California.
Do UK and EU commercial agents have extra rights?
Yes. Self-employed commercial agents who negotiate the sale or purchase of goods in Great Britain or the EU have mandatory rights, including minimum notice periods and, in most cases, a right to compensation or an indemnity when the agency ends. In Great Britain the agent must notify the principal of a claim within one year after termination.
Draft and review an agency agreement in Word
Describe the agency, get a first draft in your document, then review it with tracked-change redlines. You stay in Word, and you decide what changes.
Install LexDraft for WordThis page is general information, not legal advice. LexDraft does not give legal advice; have qualified counsel check every agency agreement against the law that governs it. Spotted something out of date? Email support@lexdraft.ai and we will fix it.