Free Agency Agreement Template

Date: _________________

By:__________________________________________

Name:

Title:

Date: _________________

By:__________________________________________

Name:

Title:

How-to guides, articles, and any other content appearing on this page are for informational purposes only, do not constitute legal advice, and are no substitute for the advice of an attorney.

Agency agreement: How-to guide

Hiring an agent or agency to represent your company is an easy and cost-effective way to grow your business without hiring additional employees. In addition to the obvious expenses of salaries, bonuses, and other compensation, employees can cost a company in more subtle ways, requiring further investment in benefits, payroll taxes, insurance premiums, office space, and equipment. Such additional costs aren’t required for agents.

Companies can use such resources for specific tasks according to business needs and can avoid the legal minefields of hiring and firing staff according to the ebb and flow of the market. Organizations can select experts to perform work when needed and can avoid the cost and hassle of providing additional education or training to current employees.

Key points to note while creating agency agreements

Legal relationship between the parties

An agency agreement is a contract that creates a “fiduciary” relationship between two parties. In an agency contract, party A (sometimes called the “principal”) agrees that the actions of party B (sometimes called the “agent”) can bind party A to an agreement with a third party. In other words, the principal authorizes the agent to act on the principal’s behalf through an agency agreement.

Agency agreements: Why it’s required

An agency agreement is designed to protect the parties’ rights during the contract term. It strengthens the agency partnership by clearly outlining the terms and conditions that the parties involved should follow during the course of the arrangement.

Principal and agent’s responsibilities

In the agreement, you must include a description of the agent’s obligations, the amount to be paid, the terms of payment, deadlines for completion, and the specific end products expected (if any). Clarify the terms and conditions the principal has to follow from the arrangement.

Time to review the agency agreement

After the parties agree with the terms, draft the agreement and provide copies to the principal and the agent for review. Once they review and clarify their doubts only then proceed to the next steps.

Signing and post-signing requirements

A written agreement is only the first step in establishing an individual’s or company’s agency status. Once signed, both parties must follow its terms exactly to make sure that status is maintained.

The involved parties should sign two copies of the agreement. One copy is for the principal, and the other is for the agent.

At the end of the agreement’s term, you and the other party can revisit its provisions and consider whether to renew.

Depending on the nature of its terms, you may decide to have your agreement witnessed or notarized. This will limit later challenges to the validity of a party’s signature.

If you feel your agreement is complex, always seek the help of an attorney to draft your document.

Important elements of an agency agreement

The following instructions will help you understand the terms of your agreement.

Introduction of parties

Start the agreement by identifying the parties and, if applicable, what type of organization(s) they are. Throughout the agreement, the company hiring the agent or agency is called the “principal,” and the agent is called the “agent.”

In this section, you must provide the effective date on which the agreement will become valid (the effective date is often the date on which it is signed).

Recitals

The “whereas” clauses, referred to as recitals, define the world of the agreement and offer key background information about the parties. Provide a brief description of the principal’s business and the general reason the agent is being retained.

If your agency agreement has the word “exclusive” in the clause, it means that the parties agree not to appoint other agents. If it’s a non-exclusive agency agreement, then the company will be able to appoint and use other agents.

Purpose; appointment

This part clarifies that the agent is appointed as the principal’s representative.

Term

It indicates how long the initial agreement term will last. The parties can choose from the two provisions under this. In the first, the term will continue until all work under the agreement has been performed. It can be opted when the services provided by the agent have a clear finish date (e.g., selling 100 widgets. The contract term ends once the agent is able to sell 100 widgets).

The second option is when the principal and the agent can continue their relationship by renewing the agreement at agreed-upon dates. It can be one-year renewals, or if you want longer terms, you can do so accordingly.

Having a term allows the parties to set a deadline by which all services must be finished or all extensions must end.

Responsibilities; scope of authority

It allows the parties to limit the extent to which the agent can bind the principal. If there are areas in which you don’t want the agent to act, or if there are specific services you don’t want the agent to perform, list those restrictions here.

Territory

This section delimits the geographical area where the agent’s efforts should be focused. If there are no geographical restrictions on the agent’s activities, you need to mention that here.

If there are limitations, describe in detail what those limitations will be. Give the agent exclusivity within a specific geographic area. If you want the agent to be the sole representative of the company in the area described, mention those details as well.

Compensation

This part provides the details about the agreed-upon compensation. It outlines:

The payment terms
The amount received by the agent for the services performed
Payout method and a clear payment schedule

List down the compensation provisions (e.g., with some options below):

The compensation can be paid in connection with the agent’s earnings. When the agent’s efforts bring in money, the agent will receive a percentage of that money. Give the exact percentage the agent will receive.
The agent receives a flat fee for its services, unrelated to any sales or purchases that it makes. Provide the amount the agent will be paid (as a total sum, a monthly rate, or otherwise) and explain how these payments will be made (e.g., weekly, monthly, according to milestones met, etc.).

Taxes

This section clarifies that the agent is not an employee of the principal and will be responsible for paying its own taxes. Add relevant subsections like:

(a) The agent will be solely responsible for any taxes that may arise due to its payment under the agreement.

(b) The principal will not be responsible for deducting any taxes from the payments made to the agent.

Together, these subsections reiterate the status of the parties.

Expenses

This part allows for reimbursement of any unusual expenses that the agent incurs in performing its duties under the agreement.

Note that this doesn’t include ordinary business expenses. If the principal begins reimbursing the agent for such everyday costs, it becomes an employer-employee relationship.

There is an optional clause here that allows the parties to designate specific additional expenses that will not be reimbursed.

Records

An optional section allows the principal the opportunity to review the agent’s records about its performance under the agreement. Essentially, this paragraph gives the principal audit rights, the right to question any invoice or claim made by the agent about its work.

Insurance

This section requires the agent to maintain insurance. You can determine what types of insurance will be required, which will be based on your industry, the agent, and your specific needs.

Termination

The termination clause explains that certain actions or events, including written notice or material breach, will cause an early termination of the agreement (i.e., before the services are completed or the end of the term, if any). Write in the notice period a party must give of its intent to terminate or to notify the other of a breach.

There is an additional provision that allows you to identify the agent’s failure to maintain its licenses as a material breach of the agreement.

Amendments

It indicates that all changes to the agreement must be in writing and signed by the parties.

Parties’ representations and warranties

In this section, each party enters into the agreement based on the other party’s statement that the items in this part are true. The listed representations are that each can enter into the agreement and will follow all applicable laws. If there are additional representations and warranties that you want to add, you can also do that.

Indemnification

This provision allocates responsibilities between the parties if problems arise in the future and protects each party from the financial consequences of the other’s illegal or harmful conduct.

Use of trademarks

It states the agent will not inappropriately use the principal’s trademark, intellectual property, or confidential information or acquire a trademark of its own that is similar to the principal’s. For example, an agent for XYZ company can’t apply for a trademark on XYZ. This section also states that the agent may not continue to use the principal’s proprietary information after the agreement terminates.

Relationship of the parties

This section clarifies that the agent is only an independent contractor and not an employee or partner of the principal. As noted above, this distinction is important for legal reasons, including insurance coverage requirements, liability, and taxes. The agreement seeks to emphasize this divide, but both parties should take care not to blur the line between an independent contractor and an employee in the performance of their duties.

Assignment

Explains that each party must obtain the other’s written permission before assigning its obligations and interests.

Successors and assigns

States that the parties’ rights and obligations will be passed on to heirs or, in the case of companies, successor organizations or organizations to which rights and obligations have been permissibly assigned.

No implied waiver

This explains that if either party allows the other to ignore or break an obligation under the agreement, it does not mean that the party waives any future rights and obligations.

Notice

It lists the addresses to which all official or legal correspondence should be delivered. Give the mailing address for both the principal and the agent.

Governing law

This section allows the parties to choose the state laws that will be used to interpret the document.

Counterparts; electronic signatures

This provision says that even if the parties sign the agreement in different locations, or use electronic devices to transmit signatures (e.g., fax machines or computers), all of the separate pieces will be considered part of the same agreement.

Severability

It protects the terms of the agreement as a whole, even if one part is later invalidated. For example, if a state law is passed prohibiting any of the clauses mentioned in the agreement, it will not undo the entire agreement. Instead, only the section dealing with the clause would be invalidated, leaving the remainder of the contract enforceable.

Entire agreement

The parties’ agreement that the document they’re signing is “the agreement” about the issues involved.

Headings

This segment explains that the headings at the beginning of each section are meant to organize the document and should not be considered operational parts of the agreement.

Create a professional agreement with an agency agreement template

There are risks, of course, for businesses using agents or agencies, the most dangerous of which is that individual representatives will be reclassified as employees. If this happens, the company using the agents will be required to reimburse the IRS or state tax authority for delinquent employment taxes, interest, and penalties.

Although a business cannot insulate itself absolutely from reclassifications or contract audits, a written agency agreement can offer a certain amount of protection from such charges.

An agency agreement template can provide a good starting point for your agency arrangement. With LegalZoom, you would get a comprehensive template that you can use from anywhere on any device. Fill out the required answers for the questions provided, complete the form, and download the agency agreement for free.

You and the agent or agency must continue to discuss the terms of your agreement and settle questions about work parameters, payment, and responsibilities. Once you have agreed on contract terms and have signed the agency contract, each party can focus on its area of expertise. The company on the development of its business and the agent on proper representation of the company.

Frequently asked questions

What’s an agency agreement?

If your business needs more staff, you can hire or go through an agency to grow your team without hiring directly. Employees can cost in more ways than salary and benefits, requiring higher insurance premiums, additional workspace, and more. Using an agency agreement, an agency or agent can provide the talent you need without the extra expenses.

What key details would you need to fill out agency partnership agreements?

Here's the information you'll need to have handy to complete your agency agreement:

Who the principal is: Keep the name and contact information of the principal ready.
Who the agent is: Have the name and contact details of the agent.
How the agent will be paid: Know if it's a flat fee or a percentage of the principal's revenue.




Date: _________________	By:__________________________________________
	Name: Title:



Date: _________________	By:__________________________________________
	Name: Title: