Agency Agreement Template: What to Include

An agency agreement is the contract that lets one person or company act on behalf of another. A sales agent lands orders for a manufacturer, a booking agent negotiates dates for a performer, a real estate agent represents a seller. In each case, the agent is doing something with legal weight in the principal's name, and the agreement is what defines how far that authority goes.

Get the scope wrong and you create real exposure: an agent who oversteps can commit you to deals you never wanted, and a principal who under-defines commission can end up in a fight over money that was never written down. This guide covers what an agency agreement is, the clauses that actually matter, and how to draft one that holds up.

What Is an Agency Agreement?

An agency agreement is a legally binding contract in which a principal authorizes an agent to act on the principal's behalf in dealings with third parties. The agent represents the principal's interests, and within the authority granted, the agent's actions can bind the principal.

That representation is what sets it apart from a plain service contract. A web developer you hire builds your site but cannot sign deals for you. A sales agent under an agency agreement can take an order that you are then obligated to fulfill. The agent is an extension of the principal, not just a vendor delivering a task.

Agency agreements show up across industries:

• Sales agency, where an agent sells the principal's products or services, usually on commission
• Real estate agency, where an agent represents a buyer or seller in a transaction
• Talent and booking agency, where an agent secures work and negotiates terms for a performer or athlete
• Procurement agency, where an agent buys goods or services on the principal's behalf
• Marketing or advertising agency, though these often run as plain service contracts unless the agency is authorized to commit the client to media buys

The label matters less than the substance. If one party can act in the other's name, you are in agency territory and the agreement needs to treat it that way.

Types of Agency Relationships

Exclusive vs. Non-Exclusive

In an exclusive agency, the principal appoints a single agent for a defined territory, product line, or customer segment and agrees not to use other agents there. Exclusivity is a strong commitment, so principals usually attach performance targets or minimum volumes to it.

In a non-exclusive agency, the principal can appoint several agents who compete for the same business. This keeps the principal flexible but gives each agent less incentive to invest heavily, since another agent might close the deal first.

A middle option, sometimes called a sole agency, lets the principal sell directly but bars them from appointing other agents.

Disclosed vs. Undisclosed

In a disclosed agency, the third party knows the agent is acting for a principal. In an undisclosed agency, the agent appears to be acting on their own account even though a principal stands behind them. Most commercial agreements are disclosed, and the distinction affects who the third party can pursue if something goes wrong.

Scope of Authority

Authority generally falls into three buckets:

• Express authority covers the powers spelled out in the agreement (for example, "the Agent may accept orders up to $25,000")
• Implied authority covers the powers reasonably needed to carry out the express ones
• Apparent authority is what a third party reasonably believes the agent can do based on the principal's conduct, even if the agreement says otherwise

That last category is the trap. A principal who lets an agent appear to have broad power can be bound by the agent's actions even where the written agreement is narrower. The fix is to define authority clearly and, where it matters, communicate the limits to the third parties the agent deals with.

Key Clauses in an Agency Agreement

1. Appointment and Scope of Authority

State exactly what the agent is authorized to do: solicit orders, negotiate prices within a range, sign contracts up to a dollar limit, collect payment, or simply introduce customers. Spell out what the agent cannot do without written approval. This single clause prevents most agency disputes.

2. Territory and Products

Define the geographic territory, the customer segments, and the specific products or services the agency covers. If the agency is exclusive, this clause is where you draw the boundary of that exclusivity. Vague territory language ("the East Coast") invites arguments; name states, regions, or named accounts.

3. Commission and Payment

This is where money disputes start, so be precise:

• The commission rate (a flat percentage, a tiered schedule, or a fee per transaction)
• When commission is earned, whether at order acceptance, at delivery, or only when the customer pays
• How cancellations, returns, and bad debt affect commission already credited
• Payment timing and the statement the principal will provide showing how commission was calculated
• Whether the agent earns on repeat orders from customers they originally introduced, and for how long after the agreement ends (the "trailing commission" question)

A worked example shows why the timing words matter. Say the rate is 10% and an agent books a $40,000 order in March. The customer pays in June and returns $10,000 of goods in July. If commission is earned "at order," the agent is owed $4,000 in March and you have to claw back $1,000 after the return. If it is earned "at payment net of returns," the agent is owed $3,000 once in June and the return question never comes up. Same deal, very different cash flow, and the only thing that decided it was one phrase in the contract.

4. Duties of the Agent

Agents owe a duty of loyalty and good faith. Common obligations include using reasonable efforts to promote the principal's products, following the principal's pricing and policies, keeping records, not representing competing products, and passing customer information to the principal.

5. Duties of the Principal

The principal typically agrees to supply product information and samples, honor orders the agent properly secures, pay commission on time, and not undercut the agent by selling directly into an exclusive territory without compensation.

6. Term and Termination

Set an initial term and say what happens at the end: automatic renewal, conversion to month-to-month, or expiry. Include termination for cause (breach, insolvency, fraud) and, often, termination for convenience with a notice period. Address what the agent is owed for deals in the pipeline at termination.

7. Indemnification and Liability

Because the agent acts in the principal's name, allocate who bears responsibility when something goes wrong. A principal usually wants the agent to indemnify against claims arising from the agent exceeding their authority or making unauthorized promises. A capable agent will push back and ask the principal to cover claims tied to defective products or false marketing material the principal supplied. That back-and-forth is normal, and the fair landing is that each side covers the risks it actually controls.

8. Confidentiality and Non-Solicitation

Agents see customer lists, pricing, and strategy. A confidentiality clause protects that information, and a non-solicitation clause can stop a departing agent from poaching the accounts they handled. If you need to restrict where an agent can work afterward, that is a separate non-compete question with its own enforceability rules.

9. Governing Law

Name the state whose law applies and where disputes are resolved. For cross-border agencies, this matters even more, since some jurisdictions give commercial agents statutory compensation rights on termination that you cannot contract away.

How to Write an Agency Agreement: Step-by-Step

Step 1: Identify the parties. Use full legal names and entity types. State clearly who is the principal and who is the agent.

Step 2: Define the appointment. Describe the agency, whether it is exclusive or non-exclusive, and the territory and products it covers.

Step 3: Set the scope of authority. List what the agent can do and, just as important, what requires the principal's sign-off. Add dollar thresholds where they apply.

Step 4: Build the commission structure. State the rate, when commission is earned, how it is paid, and how cancellations and trailing orders are handled.

Step 5: Lay out both parties' duties. Agent obligations on one side, principal obligations on the other. Balance matters; a one-sided agreement is harder to enforce and harder to keep a good agent under.

Step 6: Add term, termination, and notice. Pick an initial term, decide on renewal, and write clear exit provisions including pipeline commission.

Step 7: Cover the protective clauses. Confidentiality, non-solicitation, indemnification, and governing law.

Step 8: Sign with authority. For companies, the person signing must have authority to bind the entity. Date it, and keep a signed copy for each side.

Common Mistakes to Avoid

Leaving authority undefined. "The Agent may act on the Principal's behalf" is not a scope. Without limits, you invite apparent-authority claims and unexpected obligations.

Skipping the "when is commission earned" question. An agent who thinks they earn at order and a principal who thinks they pay at customer payment are heading for a fight. Write it down.

Ignoring trailing commissions. If you do not say what happens to repeat orders after the relationship ends, you leave the most contentious money question unanswered.

Confusing exclusivity with a blank check. Granting exclusivity without performance targets can lock you into a non-performing agent for years. Tie exclusivity to minimums.

Treating it like a generic service contract. Agency carries representation and liability that ordinary service work does not. A boilerplate template that ignores authority and indemnification leaves the principal exposed.

Agency Agreement vs. Related Contracts

It is easy to reach for the wrong document. An agency agreement is not the only way to structure a sales or representation relationship, and picking the right one saves trouble later.

• A sales commission agreement focuses on how a salesperson is paid, often within an employment or contractor relationship, rather than on granting authority to bind the company.
• An independent sales rep agreement is a close cousin, used when the rep is a self-employed contractor selling on commission with territory protection.
• A referral agreement is lighter still: the referrer only introduces leads and earns a fee, with no authority to negotiate or close.
• A distribution agreement is different in kind. A distributor buys goods and resells them on their own account, taking title and margin, whereas an agent never owns the goods and earns commission.

If the person will act in your name, use an agency agreement. If they will only introduce, refer, or buy and resell, one of the alternatives fits better.

Related guides

• Buyer Broker Agreement Template: A Buyer's Guide
• Hiring a Marketing Agency for Your Roofing Business: Contract Essentials
• Digital Marketing Agency Agreement: Retainers and Scope of Work
• Hiring Through a Staffing Agency: Contract Terms for Employers
• Hiring Your First Marketing Agency: Service Agreement Essentials

Generate Your Agency Agreement with Contractable

A solid agency agreement comes down to three things done well: a clearly bounded scope of authority, a commission structure with no gaps, and clean termination terms. Miss any of them and you are negotiating after the fact, usually under pressure. Contractable builds a tailored agency agreement in minutes, with the authority limits, commission terms, and protective clauses set for your situation, so you can appoint an agent with the boundaries already in writing.