US Independent Sales Representative Agreement template

Overview

An independent sales representative agreement governs a company's engagement of an outside salesperson or firm to solicit orders on its behalf, typically for a commission. This is a materially different — and materially more actively involved — relationship than a referral or finder's fee arrangement, and US law treats it differently. CRITICAL DIFFERENCE FROM THE EU/UK: this is one of the largest legal contrasts between the United States and commercial agency law in France, Spain, Germany, Italy, and the UK. Those jurisdictions implement the EU Commercial Agents Directive (or, for the UK, its retained equivalent), which gives a terminated commercial agent a mandatory statutory right to termination compensation or indemnity, calculated by formula, regardless of what the contract says, and which cannot be waived in advance. There is NO federal equivalent of this in the United States. A US independent sales representative generally has NO statutory right to any termination compensation when the relationship ends, unless (a) a specific state sales representative statute applies and grants a narrower protection (typically just prompt payment of commissions already earned, not a termination indemnity), or (b) the contract itself affirmatively provides for severance or termination pay, which is uncommon and must be negotiated, not assumed. Many states do have sales representative statutes, but they are narrower than the EU model: they typically require a written agreement, prohibit unreasonable forfeiture of earned commissions upon termination, and impose specific deadlines for paying out commissions after termination, with statutory penalties (sometimes double or treble damages, plus attorney's fees) for late or withheld payment. California's Independent Wholesale Sales Representative Act (Cal. Civ. Code §1738.10 et seq.) is a leading example. These statutes protect the timing and certainty of commission payment — they do not create a right to be paid for the loss of the relationship itself, which is the core protection under the EU commercial agent model. When to use it: for an independent contractor or firm engaged to actively solicit and close sales on the company's behalf for commission, as distinct from a mere referral source. Key clauses: territory and product scope; commission structure and calculation; when a commission is deemed "earned" (a critical drafting point, since state statutes generally protect only commissions already earned under the contract's own definition); payment timing after termination, tracking the applicable state statute's deadline where one exists; independent contractor status; exclusivity (if any); non-solicitation and confidentiality; term and termination, including notice period; and an express statement of the parties' understanding that no termination indemnity or severance applies unless separately negotiated. Pitfalls to avoid: assuming any US state grants an EU-style termination indemnity — none does, and drafting as if one exists creates false expectations; defining "earned" commissions too narrowly in a way that could be challenged as an unreasonable forfeiture under an applicable state statute; and missing the specific commission payment deadline required by the applicable state's sales representative statute, which can expose the company to statutory penalty damages far exceeding the commission itself.