Commission Agreement Template and How to Draft One (2026)

What is a commission agreement? A commission agreement sets out how one party (the agent or representative) will be paid a percentage or fixed fee for generating sales, introducing customers or closing deals on behalf of another party (the principal or company). It answers the questions that cause almost every commission dispute: what triggers commission, how much, when it is paid, and what happens if a deal is refunded, cancelled or the agent leaves. It is used for sales representatives, channel partners, brokers, business-development consultants and introducers. It is not an employment contract; a commission agreement usually governs an independent contractor relationship, though commission can also sit inside an employment contract. This is general information, not legal advice. For high-value or exclusive arrangements, have the final document reviewed by a lawyer. ### Agency law and tax in India A commission agent acting on behalf of a principal is an agent under the Indian Contract Act, 1872 (Chapter X, agency, ss.182 onwards), which sets the baseline duties of principal and agent. Two tax points matter and both are the principal's responsibility to get right: - TDS: commission or brokerage paid to a resident attracts tax deducted at source under section 194H of the Income-tax Act, 1961. Deduct at the rate in force and deposit it. Confirm the current rate and threshold, since these change.

• GST: an agent supplying a service for commission is generally making a taxable supply, so GST may apply on the commission. Confirm registration and rate with your accountant. Rules differ by jurisdiction, so for the UK, Ireland, Singapore, Australia or the US, check local agency and tax rules. Some countries also have commercial-agent protections that affect termination and compensation. ## Commission agreement template ``` COMMISSION AGREEMENT This Agreement is made on [DATE] Between [COMPANY NAME], [address] ("the Company") and [AGENT NAME], [address] ("the Agent"). 1. APPOINTMENT The Company appoints the Agent to [promote and solicit orders for / introduce customers for] the Company's [products/services] in the [Territory], on a [non-exclusive / exclusive] basis. 2. TERM This Agreement runs from [date] for [period], renewable by written agreement, and may be ended under Clause 9. 3. COMMISSION The Company pays the Agent commission of [rate]% of [the net invoice value, excluding GST and freight] on each qualifying sale, OR a fixed fee of Rs. [amount] per [closed deal]. 4. WHEN COMMISSION IS EARNED Commission is earned when [the customer pays the Company in full / the order is accepted]. Commission is payable within [n] days of the end of the month in which it is earned. 5. QUALIFYING SALES Commission is due only on sales [in the Territory] [introduced or closed by the Agent]. Repeat orders from an introduced customer [do / do not] carry commission. 6. CLAWBACK AND ADJUSTMENTS If a sale is cancelled, refunded or the customer does not pay, commission already paid on it is reversed and set off against future commission or repaid within [n] days. 7. TAXES Commission is subject to TDS under section 194H as applicable; GST, if chargeable, is added by the Agent on a valid tax invoice. 8. AGENT'S OBLIGATIONS The Agent shall act in the Company's interests, follow the Company's prices and terms, make no representation beyond the Company's approved materials, and not bind the Company without written authority. 9. TERMINATION Either party may end this Agreement on [n] days' written notice, or immediately for material breach. Commission on sales closed before termination [and paid within [n] days after] remains payable. 10. CONFIDENTIALITY AND NON-SOLICITATION The Agent keeps the Company's customer and pricing information confidential and shall not [solicit the Company's customers for a competing product for [period] after termination]. 11. INDEPENDENT CONTRACTOR The Agent is an independent contractor, not an employee or partner, and bears its own costs and taxes. 12. GOVERNING LAW AND DISPUTES Governed by the laws of India. Disputes go to the courts at [city] or to arbitration seated at [city] under the Arbitration and Conciliation Act, 1996. Signed for the Company: ____________ Witness: ____________ Signed by the Agent: ____________ Witness: ____________

- **Clause 3 (commission):** state the base clearly. "Percentage of net invoice value excluding GST and freight" avoids the common fight over whether tax and shipping count.
- **Clause 4 (when earned):** the single most important choice. Commission on invoice raised rewards the agent before cash arrives; commission on payment received protects the company's cash flow. Pick one and state it plainly.
- **Clause 5 (qualifying sales):** spell out whether repeat and renewal orders carry commission, and for how long after an introduction. This is where long-running disputes start.
- **Clause 6 (clawback):** protect the company against paying commission on a sale that later unwinds. A clear set-off mechanism is fairer than a vague "we may adjust".
- **Clause 9 (termination):** address the tail. Does the agent earn commission on deals in the pipeline at termination? Define a cut-off so both sides know.
- **Clause 10 (non-solicitation):** keep any post-termination restraint reasonable in time and scope. Indian courts are wary of restraints that operate as a blanket bar on trade after the contract ends. ## Setting the commission rate There is no legal standard rate; it depends on margin, deal size and how much the agent actually drives the sale. Tiered rates (a higher percentage above a target) reward performance. Whatever you choose, tie it to a clear base and a clear trigger, because rate disputes almost always turn on definition, not number. ## Where a contract workspace helps A commission agreement gets messy across a sales team: knowing which deals qualify, applying clawbacks when a sale unwinds, remembering the commission tail after an agent leaves, and keeping every amended rate card straight. Drafting, reviewing, tracking and governing a commission agreement can live in one AI workspace tuned to how your company sells, with an unclear earning trigger or a missing clawback flagged, a version history of every rate change kept, and payment and termination dates in view. [Adira](https://adiralaw.com) is one tool built around that single-workspace idea for sales contracts like a commission agreement. This template alone is enough to document one arrangement well.