Ask The Expert

What tips can you offer as I review my agent contract? Is it important to go over it at a certain time every year? Is there any way I can negotiate for more money or perks?


Dear Anonymous,

Let me state the obvious the most important thing you can do when you review your agent agreement for the first time is to read the entire agreement very carefully. Ask yourself if there is any other way another person could interpret the various terms and conditions. If there is more than one possible interpretation of any of the terms and conditions, then you should work with the other party to change the language so that there is only one interpretation.

Its a good idea to create a term sheet that summarizes or lists the most important aspects of the transaction. With a summary of the agreement you can easily reference the salient points during the term. I create term sheets for my clients listing the following information: the agreement commencement and termination dates; whether the agreement renews automatically (and what is required to terminate prior to renewal); the notice requirements (i.e., 30 days prior written notice); whether there is an evergreen clause (under what conditions and length of time it will be paid); what constitutes a default (and whether you lose evergreen by defaulting); and the commission rates and territory.

As long as you understand what is required of both parties under the agreement, it isnt necessary to review the agreement at a certain time every year. Normally, an agent agreement has a term of a set number of years and the countdown on the term begins when the agreement commences; therefore, if you have more than one agent agreement, they could renew at different times of the year (or even in different years). However, it is imperative that you know when the agreement will automatically renew. Normally, you will have 30, 60 or 90 days prior to the renewal date to terminate the agreement by providing written notice of your intent not to renew. Before this notice is required to be given, you can give notice of your desire to renegotiate the agreement.

You can always attempt to renegotiate an agreement during the term, but you usually do not have any leverage to entice the other party to renegotiate. The leverage you will have right before the end of the term is the threat that you will terminate the agreement. It is very important to know what you can lose if the other party doesnt want to renegotiate the agreement, and you are forced to terminate. Under most agreements you cannot move a customer, and if you do so then you risk losing your evergreen payments (and this restriction usually survives the termination of the agreement). Therefore, make sure you are willing to take the risk that the agreement will be terminated.

A couple of months before you need to give notice of your intent not to renew the agreement, you should contact the other party and have a conversation about possibly renegotiating the agreement. If they are amenable to doing so, then you should follow up with a letter stating that you are confirming your conversation whereby both of you have decided to renegotiate the agreement, and if a new agreement cannot be negotiated within some time period (i.e., 30 days), then the agreement will terminate at the end of the term. If the other party indicates that they are not willing to renegotiate, and you do not want the original agreement to terminate assuming your agreement requires written notice of your intent not to renew and you have not provided such notice then the agreement should automatically renew pursuant to its terms without any further action on your part.

In conclusion, it is important for the parties to understand their exact responsibilities and agreement requirements and make sure these are set forth in clear language in the agreement. Pay particular attention to the termination or renewal dates and the requirements necessary to terminate or renew the agreement.

This advice is quite general due to the general nature of the question, and you should not hesitate to contact an attorney when dealing with your own agent agreements. Every agent agreement is different, and a little legal help at the beginning can save you a lot of money and hassle in the future.

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