Sales agency agreement, Fernleigh Timber Works and Kovacs Trade Agencies

Sales agency agreement with a commission ladder and a named territory

A sales agency agreement has to answer two questions before anything else: what the agent is allowed to promise on your behalf, and exactly how the commission is worked out. This finished example answers both on the page, with a four band ladder from 6.0 to 10.5 per cent, a worked example on $520,000 of sales, and a table of six decisions the agent may and may not make.

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Sales agency agreement

Fernleigh Timber Works and Kovacs Trade Agencies

Commission ladder, territory and authority limits for the Eastern Uplands region

Fernleigh Timber Works Limited
Term starting 1 March 2027
Sales agency agreement · Fernleigh Timber Works and A. Kovacs · AG-2027-11Page 2 of 7
Sales agency agreement · Fernleigh Timber Works and A. Kovacs · AG-2027-11Page 3 of 7
Sales agency agreement · Fernleigh Timber Works and A. Kovacs · AG-2027-11Page 4 of 7
Sales agency agreement · Fernleigh Timber Works and A. Kovacs · AG-2027-11Page 5 of 7
Sales agency agreement · Fernleigh Timber Works and A. Kovacs · AG-2027-11Page 6 of 7
Sales agency agreement · Fernleigh Timber Works and A. Kovacs · AG-2027-11Page 7 of 7
Parties

This sales agency agreement is made on 12 February 2027 between Fernleigh Timber Works Limited, of 4 Sawmill Lane, Ashcombe, called the Maker, which builds solid timber furniture, and Adrienne Kovacs, trading as Kovacs Trade Agencies, of 61 Brereton Street, Marden, called the Agent.

Eastern Uplands
Territory
6.0%
Opening rate
10.5%
Top band rate
60 days
Notice either way
1. Appointment and territory
1.1
The appointment
The Maker appoints the Agent as its exclusive sales agent for the Products in the Territory. The Agent introduces retailers, presents the ranges and takes orders. It never buys, resells or holds title to the Products.
1.2
The Territory
The Territory is the four trading districts below. The Maker will not appoint another agent in them, and passes any enquiry it receives from a retailer there to the Agent within five business days.
District
Main trading towns
Retail accounts at start
Ashcombe Valley
Ashcombe, Norbury, Little Fenn
14
Marden Plains
Marden, Copperfield, Wray
9
Harrowgate Coast
Harrowgate, Selby Point
11
Upper Brendon
Brendon, Kilnhurst
6
1.3
The Products, and other principals
The Products are the dining, bedroom and occasional ranges in the current trade price list. The Agent may carry other principals, but not a solid timber range at a comparable price point in the Territory, and tells the Maker within 10 business days of taking one on.
2. What the Agent may and may not promise
2.1
The Agent does not conclude contracts
Every order is an offer to the Maker, and a sale exists only when the Maker confirms it in writing. The Agent says so to any retailer that asks and never describes itself as a branch or an employee of the Maker.
2.2
The limits on the Agent’s authority
The table below is the whole of the Agent’s authority. Anything outside it needs the Maker’s written approval before it is said to a retailer.
Decision
What the Agent may do
Price
Sell at the trade price list, with a discount of up to 7.5 per cent
Order size
Take an order up to $40,000 without prior approval
Payment terms
Quote the standard 30 day account, and nothing longer
Lead time
Quote the current published lead time, not a promised date
Warranty
Hand over the printed warranty and add nothing to it
Credit
Nothing. The Maker sets every credit limit
A promise made outside these limits is the Agent’s to carry
If the Agent promises a delivery date, a discount or a warranty term the Maker has not approved, the Maker supplies on its own published terms and the Agent bears the cost of the difference, capped at the commission on that order.
3. Commission
3.1
The commission ladder
Commission is paid on the net invoice value of accepted orders from the Territory, excluding freight, packaging and tax. Each band applies only to the part of the year that falls inside it. The year runs 1 March to 28 February.
Band
Net sales in the year
Commission rate
A
The first $150,000
6.0%
B
$150,001 to $400,000
7.5%
C
$400,001 to $750,000
9.0%
D
Above $750,000
10.5%
H
The four house accounts in schedule 1
3.0%
Worked example for a $520,000 year
Band A pays $9,000 on the first $150,000, band B pays $18,750 on the next $250,000, and band C pays $10,800 on the remaining $120,000. The commission for the year is $38,550, an average of 7.4 per cent.
3.2
When commission is earned
Commission is earned when the Maker is paid, not when the order is taken. An invoice unpaid after 90 days comes out of the running total until it is paid, and goes back in at the band it falls in on the day payment arrives.
3.3
When commission is paid
The Maker issues a statement on the 10th of each month for the month before, showing each invoice, its payment date, its band and the commission on it. Payment follows within five business days of the statement.
3.4
Returns, credits and house accounts
Commission already paid on a return or a credit note is deducted from the next statement. The four house accounts in schedule 1 pay 3.0 per cent, count towards the bands, and move to the full ladder if the Agent doubles their annual net sales.
4. Orders and samples
4.1
Order handling and complaints
The Agent sends each order on the Maker’s form within two business days, and the Maker accepts or declines in writing within three, with a reason. A complaint about a delivery or a finish goes to the Maker on the day the Agent hears it.
4.2
The sample set
The Maker lends one sample of each range, listed in schedule 2 at $11,400. The samples stay the Maker’s property, are insured by the Agent, and come back within 14 days of the end date allowing for showroom wear.
5. Reporting and reviews
5.1
The monthly report
By the fifth business day of each month the Agent sends a short written report for the month just ended. It is a working document, not a formality, and it carries five things.
1.
Retailers visited, with the date of each visit.
2.
Orders taken, their value, and orders lost with the reason given.
3.
New accounts opened and accounts that stopped ordering.
4.
Stock, display and pricing problems seen in the Territory.
5.
Competing ranges seen on the floor, and at what price.
5.2
Reviews and minimum activity
The parties meet each quarter to set a target for the next one. A target is a shared expectation, not a term. The Agent visits each active account once a quarter and makes eight prospecting calls a month, and missing either for two quarters is a matter for clause 7.3.
6. Customer records and confidentiality
6.1
The customer list belongs to the Maker
Names, contacts, order histories and credit information for retailers in the Territory are the Maker’s confidential information, whether the Agent found the retailer or inherited it, and are used for this agreement and nothing else.
6.2
What stays confidential
Trade prices, discount structures, production costs, drawings and lead times, during the term and for three years after it ends. The obligation does not apply to anything already public through no act of the Agent.
7. Term, notice and the end of the appointment
7.1
Term
This agreement starts on 1 March 2027 and runs for 12 months, then continues until one party ends it. Either party may end it on 14 days of notice during the first three months, which is a settling in period.
7.2
Sixty days of notice
After the first 12 months either party may end this agreement by giving 60 days of written notice, for any reason or none. The Agent works the Territory through the notice period and is paid on every order accepted in it.
7.3
Ending it for cause
Either party may end this agreement immediately, in writing, if the other becomes insolvent, commits fraud, or breaches a term and does not fix it within 21 days of being told about it in writing.
7.4
Commission after the end
The Agent is paid full commission on any order the Maker accepts within 90 days of the end date from a retailer the Agent introduced or serviced in the previous 12 months. A final statement is issued 120 days after the end date and any balance is paid with it.
7.5
What comes back
Within 14 days of the end date the Agent returns the sample set in schedule 2, every price list, and all customer records in any form, and confirms in writing that no copy has been kept.
8. General
8.1
The Agent is an independent business
Nothing here makes the Agent an employee, a partner or a joint venturer. The Agent sets its own hours and route, carries its own vehicle and insurance, and pays its own tax and any staff it engages.
8.2
Whole agreement, disputes and signing
This document with schedules 1 and 2 is the whole agreement and replaces anything said before it. A change needs both signatures. A dispute goes to a meeting within 10 business days, then to mediation, before either party starts a proceeding.
8.3
Notices
A notice under this agreement is in writing and sent by email to the addresses on this page, with a copy by post for a notice under clause 7. A notice sent after 5pm on a business day is taken to be received on the next business day.

Signed as an agreement on the dates below. Each person signing confirms they have read it, including the authority limits in clause 2 and the commission ladder in clause 3.

For Fernleigh Timber Works Limited
Name
:
Position
:
Date
:
Adrienne Kovacs, Kovacs Trade Agencies
Name
:
Date
:

Section by section

What each section is for, so you can keep the ones you need and drop the rest.

Cover
Contract cover page naming both parties, the region and the start date.
Parties
The maker, the agent, and a stats strip with the territory, both end rates and the notice period.
1. Appointment and territory
Exclusive appointment, the four trading districts as a table, the products and other principals.
2. What the Agent may and may not promise
No authority to conclude contracts, a six row table of decisions, and who carries an unapproved promise.
3. Commission
The four band ladder, a worked example on $520,000, when commission is earned and paid, returns and house accounts.
4. Orders and samples
Two day order turnaround, three day acceptance, and the $11,400 sample set on loan.
5. Reporting and reviews
A five item monthly report by the fifth business day, quarterly targets and minimum activity.
6. Customer records and confidentiality
The customer list belongs to the maker, and what stays confidential for three years.
7. Term, notice and the end of the appointment
Twelve months then rolling, 60 days notice either way, cause, trailing commission and what comes back.
8. General
Independent business, whole agreement, disputes, notices and the signing page for both parties.

How to adapt this document

For a non exclusive agency, delete the sentence in clause 1.2 promising not to appoint another agent and replace the district table with a list of named accounts, because a non exclusive agent is paid on customers rather than on a map. For a services agency where there is no stock, drop the sample set in clause 4.2 and the returns wording in clause 3.4, and change the trigger in clause 3.2 from when the maker is paid to when the customer accepts the service, since there is nothing to send back. For a higher volume, lower margin range, flatten the ladder to two bands and lift the base rate: a four band ladder rewards a long build, while two bands suit a product that sells itself and where the agent is really being paid for coverage. Whatever you change, keep the worked example under the table and recalculate it, because it is the part a reader checks first.

What makes this document work

The commission ladder is a table with a worked example under it

Band A pays 6.0 per cent on the first $150,000, B pays 7.5, C pays 9.0 and D pays 10.5. The callout under the table then runs a $520,000 year through it: $9,000, then $18,750, then $10,800, for $38,550 and an average of 7.4 per cent. Nobody has to argue about whether the rate applies to the whole year.

The agent's authority is six rows, not an adjective

Discount up to 7.5 per cent, orders up to $40,000 without approval, the standard 30 day account and nothing longer, the published lead time rather than a promised date, the printed warranty with nothing added, and no credit decisions at all. Clause 2.2 says that table is the whole of the authority.

Commission follows the money, not the order

Clause 3.2 says commission is earned when the maker is paid. An invoice unpaid after 90 days comes out of the running total until it is paid, then goes back in at whichever band it falls in on the day payment arrives. That one sentence removes the most common argument in an agency relationship.

Questions people ask

What is the difference between a sales agent and a distributor?

An agent introduces customers and passes orders to you, never owning the stock. A distributor buys from you and resells at its own price and risk. This agreement is the first kind, and clause 1.1 says so in terms: the agent does not buy or resell the products and never holds title to them.

Should a sales agency agreement give an exclusive territory?

Only if you can live with it. Exclusivity is what persuades a good agent to invest in your range, and here it buys a commitment to visit every active account quarterly. Exclusive arrangements can raise competition questions where a supplier has market power, so keep the territory to what the agent can actually cover.

How is a commission ladder different from a flat rate?

A flat rate pays the same on the first sale as on the five hundredth. A ladder raises the rate as the year builds, so the agent keeps selling in month ten. The key wording is that each band applies only to the part of the year that falls inside it, which is why the worked example lands at 7.4 per cent rather than 9.

What are house accounts, and should they pay commission?

House accounts are customers you already had before the agent arrived. Paying nothing on them can sour a relationship, and paying full commission rewards work nobody did. This agreement pays 3.0 per cent, counts their value towards the bands, and moves an account to the full ladder if the agent doubles its annual sales.

Can the agent sign contracts on the supplier's behalf?

Not under this agreement. Clause 2.1 says every order is an offer to the maker and a sale only exists when the maker confirms it in writing. That matters because a promise an agent makes with apparent authority can still bind you, which is why the warning callout puts the cost of an unapproved promise on the agent.

What happens to commission after the agreement ends?

Clause 7.4 pays full commission on any order accepted within 90 days of the end date from a retailer the agent introduced or serviced in the previous 12 months, with a final statement at 120 days. Without a trailing clause an agent loses the orders they seeded in their last month, and that is what sours an exit.

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