Residual Commission Agreement

Residual Commission Agreement Template for England and Wales

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Key Requirements PROMPT example:

"I need a Residual Commission Agreement for my software company that will pay our former sales agent 5% commission on renewals from their introduced clients for 2 years after they leave, starting from January 2025."

Document background

A Residual Commission Agreement is essential when establishing long-term commission arrangements where payments continue after the initial sale or beyond the termination of a business relationship. This document, governed by English and Welsh law, is commonly used in sectors with recurring revenue models or where agents maintain ongoing client relationships. The agreement specifically outlines commission rates, calculation methods, payment schedules, and duration of entitlement, while ensuring compliance with relevant commercial agency regulations and contract law principles.

Suggested Sections

1. Parties: Identification and details of contracting parties

2. Background: Context of the agreement and relationship between parties

3. Definitions: Key terms used throughout the agreement

4. Commission Structure: Details of commission rates, calculation methods, and qualifying transactions

5. Payment Terms: Timing and method of commission payments

6. Duration: Period during which residual commission will be payable

7. Reporting and Accounting: Requirements for sales reporting and commission calculations

8. Termination: Circumstances under which the agreement can be terminated

9. General Provisions: Standard contractual provisions including notices, amendments, and governing law

Optional Sections

1. Non-Compete: Restrictions on competitive activities during and after the agreement term

2. Audit Rights: Right to audit sales records and commission calculations for verification purposes

3. International Payments: Provisions for cross-border payments and currency conversion

4. Data Protection: Provisions relating to handling of personal data and compliance with data protection laws

5. Confidentiality: Provisions protecting confidential information exchanged during the relationship

Suggested Schedules

1. Schedule 1 - Commission Rates: Detailed breakdown of commission rates for different products/services

2. Schedule 2 - Calculation Methodology: Detailed explanation of how commission is calculated including formulas and examples

3. Schedule 3 - Reporting Template: Standard format for sales and commission reports

4. Schedule 4 - Product/Service List: List of products/services covered by the agreement

5. Schedule 5 - Territory: Definition of geographical area or market segment covered by the agreement

Authors

Alex Denne

Head of Growth (Open Source Law) @ ��Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

alex.den.21@genieai.co

Relevant legal definitions

Clauses

Relevant Industries

Relevant Teams

Relevant Roles

Industries

Common Law of Contract: Fundamental principles governing contract formation, terms, performance, and remedies in England and Wales

Unfair Contract Terms Act 1977: Legislation regulating unfair terms in contracts, particularly exclusion and limitation clauses

Consumer Rights Act 2015: Law protecting consumer rights and regulating business-to-consumer contracts, if applicable

Contracts (Rights of Third Parties) Act 1999: Legislation governing when third parties can enforce terms of a contract

Commercial Agents (Council Directive) Regulations 1993: Regulations protecting commercial agents, including rights to commission and termination compensation

Partnership Act 1890: Law governing partnership relationships and responsibilities, if relevant to the commission structure

Employment Rights Act 1996: Employment law to consider for avoiding unintended employment relationships through the commission agreement

National Minimum Wage Act 1998: Legislation ensuring payment arrangements comply with minimum wage requirements

Working Time Regulations 1998: Rules governing working hours and conditions if the agreement involves regular work

Financial Services and Markets Act 2000: Regulatory framework for financial services activities and related commission arrangements

UK GDPR: Data protection regulations governing the processing of personal data in the UK

Data Protection Act 2018: UK's implementation of data protection requirements and additional data protection provisions

Limitation Act 1980: Law setting time limits for bringing legal claims related to contract disputes

Competition Act 1998: Legislation preventing anti-competitive practices in business arrangements

Enterprise Act 2002: Law regarding business competition and market regulation

Income Tax Regulations: Tax rules governing the treatment of commission payments for income tax purposes

VAT Regulations: Rules regarding Value Added Tax treatment of commission payments

National Insurance Regulations: Requirements for National Insurance contributions related to commission payments

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Authors

Alex Denne

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