A Commission Agreement – A Guarantee for Efficient Business Relations

When a party commissions another party to advertise, sell, or distribute its products or services for a specified period of time, the agreement they conclude is called a commission agreement. As part of the commissioning services, the party that is the advertiser, seller, or distributor of the other party’s products or services is entitled to a percentage of the profits that are achieved by means of its activity.

A commission agreement has a number of clauses that can be customized to suit the conditions and circumstances of the two companies, the commissioning party and the recipient party, and the business peculiarities related to the advertising, selling, or distribution of the products or services of the former. The parties to the agreement for commissioning typically specify the exact type of the products or services that are the object of the activity and the business relations between them, the term for which the agreement shall be valid, the exact amount of the percentage to be received by the party advertising, selling, or distributing the products or services of the other party. Other important details to be specified in the document which is signed with respect to the commissioning include the date of payment of the percentage of the profits achieved, and a non competition clause to govern the relationships of the parties.

The parties that agree to advertise, sell, or distribute products or services on behalf of other parties are typically small businesses, and such documents are also signed by other entities which strive to compensate some of their employees in that manner, i.e. on a commissioning basis. Companies which choose to commission their employees to distribute, sell, or advertise the company products or services draft the specific agreement to govern the commissioning relations between them and their employees, and to include all the details of their work relationship.

A commission agreement should be signed before the first day of the activity that the party to distribute the other party’s products or services is due to implement. It provides good guarantees to both parties. Companies that commission employees as advertisers, sellers, or distributors, can protect their business and their confidential information by means of such agreements. Employees, on the other hand, are also adequately protected by signing such an agreement, because in the event that they have some misunderstandings with their employers, they will be protected by the commission agreement with respect to the term, the amount of the percentage, and the other important details that are related to the business relations and are duly included in the commissioning document.

Other terms that are used to denote this type of document stipulating business relations with respect to the advertising, distributing, or selling of products or services, are “commission contract”, or “sales commissioning agreement”, although the latter term is not as wide in meaning as the generally used term ” commission agreement “, because it narrows down the scope of types of business relations with respect to the products or services which are the subject of such agreements.