What to Know About Using a General Agency Agreement Template
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A general agency contract outlines an important, but often complex relationship. This document references two main parties: the principal who does the hiring and pays for services — and the agent who is responsible for completing the job.
Agency agreements provide much-needed protection in a variety of situations. They're common among real estate agents, investment brokers, marketing firms, and outsourced vendors. In these and other cases, both the principal and the agent require extensive legal protection. This is best provided in the form of a detailed contract.
Not sure how general agency agreements work or what they should include? In this guide, we'll cover:
- Basic details included in a general agency agreement template
- Extra clauses to consider adding
- Mistakes to avoid
Basic Details for a General Agency Contract
General agency agreements can differ based on the type of work required and the risks incurred by both the principal and the agent. Typically, however, these contracts mention the following:
- Scope of services. The contract (or an accompanying document known as an 'exhibit') should detail the specific services that the agent is to provide. This portion of the agreement should also explain that, if any services outside the scope of the contract are required, a new agreement should be signed.
- Compensation. This section should explain how compensation will proceed if the services outlined in the contract are completed to the principal's satisfaction. It may also detail when the invoice will be submitted and when payment can be expected.
- Expenses. While providing the services outlined in the contract, agents may incur various expenses. The agreement should explain how records of these costs should be kept and when invoices should be submitted. This clause may also highlight the need for written consent when a particular expense exceeds a specified amount.
- Relationship of the principal and agent. The contract should clearly explain that its language should never be misconstrued to assume that an employer-employee relationship exists.
Additional Clauses Worth Including
Customization is key for general agency contracts, as specifics can vary between industries and businesses. In addition to the essentials outlined above, your general agency agreement template may include these extra clauses:
- Confidentiality and intellectual property. At times, agents may have access to proprietary information that needs to be protected. The confidentiality section of the contract will prevent the agent from disclosing such information without written permission. It may also detail procedures regarding the return of intellectual property or the destruction of sensitive material. Often, the confidentiality clause will apply indefinitely — even after the agent's services have concluded.
- Termination. If the relationship between the principal and the agent needs to be ended, the general agency contract should explain how this will occur and at what point the agreement will no longer be effective. The contract should also clarify when outstanding balances will be paid if the agreement is terminated based on the principal's breaches of material provisions.
- Dispute resolution. While the primary intention of the general agency agreement is to prevent disputes, the contract should acknowledge the potential for future conflict. Ideally, it will also explain how such disputes will be settled. For example, the agreement may first reference the need for good faith negotiations, followed by mediation or arbitration. A separate section may be included for handling invoice-related disputes. This clause might mention the need for notification, as well as substantiating documentation.
Mistakes to Avoid
While an agency agreement template serves as an excellent starting point, it's still important to examine the final contract carefully. After all, significant liability risks can accompany these agreements.
The following mistakes are commonly seen in general agency agreements that, at first glance, appear to be thorough:
- Vague language. Specifics are crucial in general agency agreements, as vague terminology can lead to confusion or even disputes. Be sure to include figures such deadlines or dollar amounts, which instantly convey the expectations held by both parties.
- Neglecting document security. These days, general agency contracts are often signed digitally. This approach is far more convenient, but it can prompt security concerns worth addressing. Nitro Sign handles these issues by providing a safe and streamlined workflow for eSign.
- Scanning the document. Every detail matters in an agency agreement. Analyze the completed template carefully before signing. Don't add your signature until you feel confident that all included terms are appropriate and fair.
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