Free Commission Agreement Template
Establish clear commission arrangements with a professionally drafted agreement covering commission rates, earning triggers, payment schedules, clawback provisions, and termination terms under English law.
(1) Horizon Technologies Ltd (company number 12345678) of 200 Victoria Street, London, SW1E 5NE (the "Principal"); and
(2) Reynolds Sales Ltd (Limited Company), VAT GB987654321 of 15 Station Road, Birmingham, B1 2JT (the "Agent").
The Principal wishes to appoint the Agent to negotiate and/or conclude the sale of the Principal's Products/Services within the Territory, and the parties intend the Agent to act as a "commercial agent" within the meaning of regulation 2(1) of the Commercial Agents (Council Directive) Regulations 1993, on the terms of this Agreement.
Status: Commercial Agent (within Regulations). The parties acknowledge that the Agent has continuing authority to negotiate the sale of the Products on behalf of the Principal and is therefore a commercial agent within the meaning of reg 2(1) of the Commercial Agents (Council Directive) Regulations 1993 (SI 1993/3053). The mandatory provisions of the 1993 Regulations shall apply and no provision of this Agreement shall derogate from them to the detriment of the Agent (reg 5, reg 19).
The Agent is an independent contractor and not an employee, worker (Employment Rights Act 1996 s.230) or partner of the Principal, and shall not hold itself out as such. The Agent shall be solely responsible for its income tax, National Insurance and (if registered) VAT.
Entitlement. The Agent shall be entitled to commission on commercial transactions concluded during the period covered by the agency contract: (i) where the transaction has been concluded as a result of the Agent's action; or (ii) where the transaction is concluded with a third party whom the Agent has previously acquired as a customer for transactions of the same kind; or (iii) where the Agent has an exclusive right to a specific geographical area or group of customers and the transaction has been entered into with a customer belonging to that area or group — in each case as provided by regulation 7 of the Commercial Agents Regulations 1993.
Timing. Commission shall become due: On receipt of payment from customer, consistent with reg 10 of the 1993 Regulations (not later than the last day of the month following the quarter in which it became due, unless otherwise agreed). Commission shall be paid Monthly in arrears.
VAT. The Commission rate stated is exclusive of VAT. Where the Agent is VAT-registered, VAT at the prevailing rate shall be added on a valid VAT invoice in accordance with the Value Added Tax Act 1994 s.6.
The Principal shall supply the Agent, not later than the last day of the month following the quarter in which commission became due, with a statement of the commission due setting out the main components used in calculating the amount, in accordance with regulation 12(1) of the 1993 Regulations. The Agent shall be entitled to demand all information available to the Principal and necessary to check the amount of commission due, including extracts from the books (reg 12(2)-(3)).
Bonus / accelerator: Increased rate above target threshold. Any accelerated rate shall apply to commissionable value above the threshold only, unless expressly stated otherwise.
The parties acknowledge that under Peter Long and Partners v Burns [1956] 1 WLR 413 the Agent's entitlement to commission is determined by the true construction of this Agreement as a whole.
Reporting. Principal provides monthly commission statement. The Agent may at any time demand that the Principal supply a statement under reg 12(1) and/or the information required to check commission under reg 12(2), which shall be provided within a reasonable period.
Either party may terminate immediately by written notice where the other: (a) commits a material breach not remedied within 14 days; (b) becomes insolvent within the meaning of the Insolvency Act 1986; or (c) engages in any conduct which would justify summary termination at common law or under regulation 16 of the 1993 Regulations (immediate termination for fundamental breach).
Compensation (reg 17(6)-(7)). The Agent shall be entitled to compensation for the damage he suffers as a result of the termination of his relations with the Principal. Such damage shall be deemed to occur in particular where the termination takes place in circumstances: (a) depriving the Agent of commission which proper performance of the agency contract would have procured, whilst providing the Principal with substantial benefits linked to the activities of the Agent; or (b) which have not enabled the Agent to amortise the costs and expenses incurred for the performance of the agency contract on the advice of the Principal. In accordance with Lonsdale v Howard and Hallam Ltd [2007] UKHL 32, compensation shall be assessed by reference to the value of the agency at the date of termination — broadly, the price a hypothetical willing buyer would pay for the agency on a going-concern basis.
Notice of claim (reg 17(9)). The Agent loses the entitlement to indemnity or compensation if, within one year following termination, the Agent has not notified the Principal that it intends pursuing its entitlement.
What Is a Commission Agreement?
A UK commission agreement is a contract that sets out the terms under which one party (the payee) earns commission payments from another party (the payer) for achieving specified results, typically the introduction of customers, generation of sales, or completion of transactions. It clearly defines what triggers a commission payment, how much is paid, and when payment is due under British contract law.
Commission agreements are widely used across industries including sales, recruitment, real estate, insurance, and financial services. They can be standalone contracts or form part of a broader employment or consultancy agreement. In the UK, commission arrangements for employees are also subject to employment law requirements.
A well-drafted UK commission agreement prevents disputes by precisely defining the commission structure, the circumstances in which commission is earned, the calculation methodology, and any provisions for clawback or adjustment. This clarity protects both the British payer and the payee and helps maintain a productive commercial relationship in England and Wales.
What's Covered in This Template
This commission agreement template includes all the essential provisions for a clear and enforceable commission arrangement.
Party Details
Full names, addresses, and company details of the payer and the commission earner.
Commission Structure
Percentage rates, flat fees, tiered structures, or hybrid commission models clearly defined.
Earning Triggers
Precise definition of the events or milestones that trigger a commission entitlement.
Calculation Method
How commission is calculated, including the base amount, any deductions, and worked examples.
Payment Schedule
When commission is paid, invoicing requirements, and the currency and method of payment.
Territory and Scope
The geographic area, customer segments, or product lines covered by the commission arrangement.
Exclusivity
Whether the commission earner has exclusive rights to the territory or scope, or whether others may also operate.
Clawback Provisions
Circumstances in which commission already paid may be recovered, such as customer cancellation or default.
Reporting and Records
Obligations to provide sales reports, access to records, and audit rights.
Term and Termination
Duration of the agreement, notice periods, and the treatment of commission on pipeline deals after termination.
How to Create a Commission Agreement
Our template guides you through creating a comprehensive commission agreement tailored to your specific commercial arrangement.
- 1
Identify the Parties and Scope
Enter the details of both parties and define the scope of the commission arrangement, including the products or services covered, the target market, and any geographic territory.
- 2
Define the Commission Structure
Specify the commission rate or rates, whether they are flat or tiered, and any minimum thresholds or caps. Include worked examples to avoid ambiguity in how commission is calculated.
- 3
Set Earning Triggers and Payment Terms
Clearly define the events that trigger a commission entitlement (such as a signed contract, payment received, or goods delivered). Set the payment schedule, invoicing requirements, and any holdback or escrow provisions.
- 4
Include Protective Provisions
Add clawback provisions for situations where commission should be returned, such as customer cancellation within a specified period. Include reporting obligations, audit rights, and confidentiality provisions.
- 5
Establish Term and Post-Termination Rights
Set the initial term and any renewal provisions. Define the notice period for termination and, critically, specify how commission on pipeline deals and post-termination sales will be handled.
Legal Considerations
Commission agreements in England and Wales are subject to contract law principles and, in certain circumstances, specific statutory protections.
This template is for informational purposes only and does not constitute legal advice. Consult a qualified solicitor for advice specific to your situation.
Reviewed for England & Wales law
Employment vs Self-Employment
The legal status of the commission earner is critical under UK employment law. If the British commission earner is an employee, they may be entitled to additional protections, including the right not to have unlawful deductions from wages under the UK Employment Rights Act 1996. The commission structure must comply with National Minimum Wage requirements in England and Wales if the earner is a worker.
Commercial Agents Regulations
Where the British commission earner is a commercial agent who negotiates or concludes sales of goods on behalf of a principal, the UK Commercial Agents (Council Directive) Regulations 1993 may apply. These UK regulations provide British agents with rights to commission on transactions concluded during and after the agency period, and to compensation or indemnity on termination in England and Wales.
Unfair Contract Terms
UK commission agreements with consumers or small businesses may be subject to the Unfair Contract Terms Act 1977 and the Consumer Rights Act 2015. Terms that are unreasonable or create a significant imbalance between the parties' rights may be unenforceable under English law. Even in British business-to-business contracts, terms must satisfy the reasonableness test in England and Wales.
Tax and VAT
UK commission payments are subject to income tax and National Insurance contributions if the earner is a British employee. For self-employed commission earners in England and Wales, VAT may be chargeable on commission payments if the earner is UK VAT-registered. Both British parties should ensure the agreement correctly reflects the HMRC tax treatment of commission payments.
Frequently Asked Questions
Set Up Your Commission Agreement Today
Use our professional template to define clear commission terms that protect both parties. Fill in the details, preview your agreement, and download a polished PDF.
Free · Instant PDF · No account required