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Commission Based Contract Template for United States

A comprehensive legal agreement governed by United States law that establishes a commission-based compensation structure between a company and an individual or entity performing sales or revenue-generating activities. The contract defines the terms of commission calculation, payment schedules, performance expectations, and territorial rights while ensuring compliance with federal and state employment laws, including the Fair Labor Standards Act and state-specific commission regulations. It includes provisions for commission rates, payment terms, performance standards, and post-termination arrangements.

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What is a Commission Based Contract?

The Commission Based Contract serves as a foundational document for establishing performance-based compensation relationships in the United States. It is primarily used when engaging sales professionals, agents, or representatives whose compensation will be partially or fully based on their sales performance or revenue generation. This contract type is essential for businesses operating in industries where commission-based compensation is standard practice, ensuring compliance with both federal and state employment laws while protecting the interests of both parties. The document typically includes detailed commission structures, territory assignments, performance metrics, and payment terms, and can be customized to accommodate various industry-specific requirements and commission models. It is particularly important in ensuring transparency in compensation arrangements and preventing future disputes regarding commission calculations and payments.

What sections should be included in a Commission Based Contract?

1. Parties: Identifies and defines the contracting parties - typically the company/employer and the commissioned individual/contractor

2. Background: Sets out the context of the agreement and the parties' intentions

3. Definitions: Defines key terms used throughout the agreement, including 'Commission', 'Gross Sales', 'Territory', etc.

4. Appointment and Scope: Defines the role, territory, and scope of authority granted to the commissioned party

5. Commission Structure: Details the basic commission rates, calculation methods, and payment terms

6. Payment Terms: Specifies when and how commissions will be paid, including any minimum thresholds

7. Performance Standards: Outlines expected performance levels and any sales targets

8. Term and Termination: Specifies the duration of the agreement and conditions for termination

9. Post-Termination Provisions: Addresses commission payments after contract termination

10. Confidentiality: Protects confidential information and trade secrets

11. General Provisions: Standard boilerplate clauses including governing law, notices, and amendments

What sections are optional to include in a Commission Based Contract?

1. Non-Compete Clause: Restricts the commissioned party from competing during and after the agreement - include when protecting market position is crucial

2. Training Requirements: Specifies required training or certifications - include when specific qualifications are needed

3. Expense Reimbursement: Details which expenses are reimbursable - include when travel or other expenses are part of the role

4. Benefits: Outlines any benefits provided - include when offering benefits to commissioned employees

5. Intellectual Property: Addresses ownership of created materials - include when the role involves content creation

6. Insurance Requirements: Specifies required insurance coverage - include for high-risk or regulated industries

7. Dispute Resolution: Details mediation/arbitration procedures - include when preferred over court litigation

What schedules should be included in a Commission Based Contract?

1. Schedule A - Commission Rates: Detailed breakdown of commission rates, tiers, and any bonus structures

2. Schedule B - Territory Definition: Detailed description of geographical or customer territory assignments

3. Schedule C - Product/Service List: List of products/services covered by the commission agreement

4. Schedule D - Sales Targets: Specific sales targets and any associated bonus structures

5. Schedule E - Reporting Requirements: Templates and requirements for sales reporting

6. Appendix 1 - Commission Calculation Examples: Examples showing how commissions are calculated in various scenarios

7. Appendix 2 - Required Forms: Standard forms for expense claims, commission reports, etc.

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok成人版 | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

United States

Sector

Sales

Cost

Free to use

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